Small Cap Catch-Up: Ramsdens, Gateley and Team Internet
Ramsdens Holdings (LON:RFX) – Record Finals Due In January
Yesterday morning’s Pre-Close Trading Update from this growing, diversified, financial services provider and retailer declared that the group’s second half-year to end September traded very well, enough to anticipate record results when the finals are announced in January next year.
Ramsdens operates in the four core business segments of foreign currency exchange, pawnbroking loans, precious metals buying and selling and retailing of second hand and new jewellery.
The Middlesbrough-based group, which operates from 161 stores within the UK (including 2 franchised stores) and has a growing online presence, does not offer unsecured high-cost short-term credit.
The group’s pawnbroking loan book grew 20% to a record £10.3m at the year end, after its best-ever lending month in August, with the average loan being £174.
The foreign currency side revenue was up 8% and in September it launched its own currency card.
The higher Sterling gold price encouraged a higher consumer demand to realise value in unwanted or damaged jewellery increasing the precious metal buying division’s revenue by some 50%.
The 20% increase in revenues in jewellery retail were aided by both the group’s online side and its enhanced in store proposition.
Peter Kenyon, CEO of Ramsdens commented:
“We are pleased with the Group’s continued delivery against its long-term growth strategy, with good progress made during the Period in each of our diversified income streams.
The group continued to trade well during the second half of the year, benefiting from the strength of its diversified business model.
As a result, the Board anticipates the pre-tax profit for the year to be a record result of more than £10.0m (£8.4m).
The shares touched 272p in June this year, since when they have eased back considerably to 186p earlier this week, before closing last night at a much better 200p, up 12.5p on the day, some 6.6% better.
The shares are rated as a Buy by analysts James Allen and Nick Anderson at Liberum Capital, looking for 290p in due course.
They are going for the last year to show a sales figure of £78.6m (£66.1m), profits of £10.0m (£8.3m), earnings of 23.6p (20.7p) and a 10.4p (9.0p) dividend per share.
For the current year to end September 2024 they estimate £83.2m sales, £10.5m profits, 24.0p earnings and a dividend of 11.0p per share.
The analysts consider that the group’s track record of delivery is still not being reflected in its valuation.
I continue to rate the shares as a strong hold with attractive upside potential.
(Profile 07.11.19 @ 204p set a Target Price at 250p*)
Gateley (Holdings) (LON:GTLY) – AGM Due For Undervalued Group
In early September Chairman Nigel Payne informed shareholders that the legal services group in the year to end April had continued its unbroken record of year-on-year revenue and underlying profit growth.
“This year has been another strong one for Gateley.
Our people have excelled in client delivery, they have continued to overcome every challenge presented to them, and have delivered further strategic progress for the business, combining to generate an excellent set of results.
As we focus on service line enhancing opportunities that meet our clients’ needs and fulfil our strategy to build a broader professional services group, our acquisition pipeline remains strong, trading in the current year is in line with the board’s expectations and we look forward to the immediate future with cautious optimism.”
On Tuesday 17th October he will be standing in front of shareholders at the professional services group’s AGM.
For the current year to end April 2024 analysts James Allen and Nick Anderson at Liberum Capital estimate further record revenues of £177m (£163m), raising pre-tax profits to £26.6m (£25.0m), but with slightly lower earnings at 15.5p (16.3p) and an eased dividend of 9.0p (9.5p) per share.
They do see an increase in the 2025 year – with £192m sales, £28.9m profits, 16.6p earnings and a 9.8p dividend per share.
“Gateley remains one of the most oversold names in our professional services coverage, which we feel is undeserved given its strong track record of delivery since listing in 2015.”
Their price objective for the shares is a mighty 290p, compared to last night’s close of just 144p, at which the group is valued at only £189m.
A positive reaction from the AGM could help to boost interest in the group’s shares.
(Profile 18.05.20 @ 155p set a Target Price of 195p*)
Volution Group (LON:FAN) – Yet Another Successful Year
In early March this year I discussed the merits of chasing the shares of this £755.6m capitalised global ventilation products group ahead of its interim results due a week later.
The share price graph looked very appealing, leading me to suggest an upward break from the then 360p to above the 400p level.
They subsequently touched 456p in June before easing back to the current 343p, from which point I would reckon that they are capable of making another run upwards.
The spur for such a price move could well be the group having declared its finals yesterday.
The year to end July reported a 6.6% increase in revenues to £328.0m (£307.7m), while adjusted pre-tax profits were 6.8% improved to £65.1m (£60.9m), earnings were 7.5% better at 25.8p (24.0p), easily covering a 9.6% higher dividend at 8.0p (7.3p) per share.
With confidence being expressed for further progress in the year ahead CEO Ronnie George stated that:
“Through continued successful execution of our sustainable growth model, we have delivered a strong set of results in a year of significant headwinds.
The Group’s resilience is underpinned by our strong local brands, our increasingly wide geographic end market diversity and the greater proportion of our revenue generated from the refurbishment market.”
Analysts Charlie Campbell and Edward Prest at Liberum Capital rate the group’s shares as a Buy, looking for 460p as their price objective.
Their current year estimate is for £352m sales, £67.4m profits, 26.0p earnings and 8.3p dividend per share for the year to end July 2024.
The analysts consider that the group has a highly regarded management team, long term structural drivers and a ten-year acquisition track record.
They state that on 13 times price earnings and an 8% FCF yield the rating seriously undervalues the shares.
The shares reacting to the good news with an 11% advance, a 36p gain to 372p, at which level they indicate further price gain potential.
(Profile 23.05.19 @ 174p set a Target Price of 250p*)
(Profile 25.01.21 @ 301.5p set a Target Price of 350p*)
Sanderson Design Group (LON:SDG) – Interims Due Next Week
Next Wednesday morning will see my favourite luxury interior furnishings design group declare its interim results for the half year to end July.
The company which not only designs, manufactures and markets wallpapers, fabrics and paints, but it also derives licensing income from the use of its designs on a wide range of products such as bed and bath collections, rugs, blinds and tableware.
It employs some 600 people, selling its products worldwide and from its showrooms in London, New York, Chicago and Amsterdam.
Its brands include Zoffany, Sanderson, Morris & Co., Harlequin, Clarke & Clarke and Scion.
The company has a strong UK manufacturing base comprising Anstey wallpaper factory in Loughborough and Standfast & Barracks, a fabric printing factory, in Lancaster.
Both of those sites manufacture not only for the company but also for other wallpaper and fabric brands.
The group’s first half profitability was underpinned by a strong performance in its licensing activities, helping to push underlying profits gently ahead of the same period last year.
The full year to end January 2024 is estimated to see sales lifting to £116,0m (£112.0m) while adjusted pre-tax profits could well tread water at around £12.3m (£12.6m), easing earnings fractionally to 13.8p (14.2p) per share.
The group has a strong balance sheet wit some £18.0m cash estimated by the year end, possibly with £16.0m having been shown at the halfway point.
We could well hear that tough UK trading in the first half was balanced out by a good US performance.
With its shares trading at around the 104p level, the company is valued at £75.6m, which is an extremely low rating for such a luxury name.
I see the shares gradually showing their upside potential – if they don’t then I would make it one of my 2024 Takeover Possibles.
(Profile 24.04.23 @ 135p set a Target Price of 168p)
CentralNic / Team Internet Group (LON:TiG) – Slater Adding To Holding
Despite the shares of my favourite global internet services group literally ‘flip-flopping’ all over the place, I remain a keen follower.
So, I was pleased to note that Mark Slater’s Slater Investments has purchased an additional 10% for his holding in the group – now up to 11.07%, representing some 30.23m shares.
His amassing of the stock was in parallel with the group’s own Share Buyback programme continuing apace, now with over 16.5m shares in Treasury.
We should be getting a Q3 Trading Update up to end September from the £350.7m capitalised group within the next few weeks.
The shares, which have recently been up to 137p in the last couple of weeks, fell back to 120p on Wednesday of this week before closing last night a little better at just 122.4p.
Analysts Bob Liao and Carl Smith at Zeus Capital believe Team Internet’s mix of strong growth, high revenue visibility, operating leverage and high cash conversion are undervalued by its shares’ low multiples.
They are estimating the current year’s revenues to end December of $825.3m ($728.2m), while adjusted pre-tax profits could lift up to $79.2m ($70.0m), generating earnings of 21.1c (19.8c) and paying a 1.0c (nil) dividend per share.
A strong Q3 Update Statement will be needed to lift the group’s shares out of the current price range, while identifying the company’s ongoing global growth potential.
(Profile 12.07.21 @ 89p set a Target Price of 110p*)
(Asterisks * denote that Target Prices have been achieved since Profile publication)
Mark, your commentary is not very convincing when in recent weeks you have been saying 130 then 150p for CNIC but now say it will need a very strong trading update to lift them above their current level. So has the market got it wrong or were you previously over egging them? Or is sentiment so bad it’s impossible to make rational assessments with any accuracy, in which case say so and save people wasting their money until the outlook is more certain.