Small Cap Catch-Up: Cinemas, Tissues, Pubs And Chocolates

Everyman Media Group (LON:EMAN) – ‘Insiders’ Buying More

I always like to see Directors and Management increasing their share stakes in the companies in which they are involved.

So, following the Interim Results announced a month ago by this independent premium cinema group, it is encouraging to note the recent purchases by its CEO @ 52.9p a share, which was a month after the Finance Director bought in at 59p.

More interesting though have been the additional purchases of 500,000 shares @ 53.5p, earlier this month, then followed up by a chunky 2.5m shares @ 55p each last week, by Blue Coast Private Equity, taking its holding up to 20.9m shares, representing 22.9% of the equity.

One of the group’s Non-Executive Directors, Michael Rosehill, is a Director of Blue Coast, so it is therefore considered to be an ‘insider’ deal.

It is in this half-year to 28 December that the group, the fourth largest cinema chain in the UK, will reflect the takings boost from blockbusters like ‘Barbie’ and ‘Oppenheimer’, along with other major high-quality second half releases.

Current market forecasts for the year are for revenues of £94.4m and adjusted EBITDA of £17.2m.

Remaining confident in the group’s prospects CEO Alex Scrimgeour is noted as having stated that:

“The recent and resounding Box Office success of Barbie and Oppenheimer drove exceptional performance throughout July and August, highlighting the value of high-quality original content.

Everyman’s strong year to date performance underpins our confidence in meeting market expectations for the full year, whilst equally demonstrating that the UK cinema sector is as vibrant as ever.

We remain confident in our prospects as we continue to be supported by a slate of high-quality second half releases, a carefully expanded estate and new banking facilities which ensure we are well configured to take advantage of future opportunities.”

Analyst Mark Photiades at Canaccord Genuity Capital Markets currently has a Buy rating out on the group’s shares, looking for a Price Objective of 200p.

His estimates for the continually expanding group are for £94.4m (£78.8m) takings, helping to reduce losses to £0.9m (£1.3m).

For the 2024 year he goes for £114.5m revenues and only a £0.7m pre-tax loss.

He sees the pay offs coming from 2025 onwards, that year with a possible £139.9m in turnover and breaking into a useful £2.6m adjusted pre-tax profit, generating 1.96p per share in earnings.

The broker considers that the £53m capitalised group has a robust balance sheet and has significant expansion potential, which is why he is so bullish about the shares, which closed on Friday night at only 58p.

A very strong hold.

(Profile 23.08.23 @ 59p set a Target Price of 73.5p)

Accrol Group Holdings (LON:ACRL) – A Meaningful Stake Change

This company is a leading tissue converter and supplier of toilet tissues, kitchen rolls, facial tissues, and wet wipes to many of the UK’s leading discounters and grocery retailers across the UK.

The group, which is holding its AGM in Blackburn on Tuesday morning, operates from six manufacturing sites, including four in Lancashire.

It supplies around 21.5% of the UK tissue market, which is valued at over £2.5bn at retail sales value.

Analyst Rachel Birkett at Zeus Capital has reflected upon the group’s acceleration in its margin recovery and has recently upgraded her current year estimates.

She is looking for the year to end April 2024 to show £205m (£241.9m) revenues, while seeking £11.5m (£6.5m) in adjusted pre-tax profits, lifting earnings up 50% to 2.7p (1.8p) per share.

For the coming year she goes for £211.1m sales, £16.7m profits and 3.1p earnings.

The analyst puts out a DCF value of 46.7p per share, which offers investors a useful upside from the current 29.40p, at which the group is valued at only £95m.

So, it makes me wonder why Schroders have reduced their holding by 2% to 10.08% and why NorthEdge Capital last week disposed of 7.81% of the shares, leaving it with only 0.81%.

Whilst Lombard Odier Asset Management (Europe) which held just 16.04% in mid-August, has been adding to its holdings of late.

At the end of August, it picked up another 1.23% which was topped up by another 6.49% early last week, taking it to a very useful 24.76% of the tissue group’s equity.

It has subsequently taken that higher to 81.65m shares, some 25.61% of the company, by far the biggest holding.

That accumulation by Lombard Odier is well worth noting – it is a very big declaration by the 227-year-old investment and banking group, whose mission is to be the private bankers of reference for entrepreneurs and their families.

Is Lombard Odier fronting for investment clients or is it a straightforward investment in an undervalued situation?

In my view the shares, which touched 165p six years ago and early in 2021 were trading at 70p, are now a Buy at just 29.40p.

(Profile 12.03.19 @ 22p set no Target Price)

Fuller Smith & Turner (LON:FSTA) – Rate Relief Ending Is Bad News

You have to commiserate with hospitality sector bosses like Simon Emeny of Fullers.

There will be an imminent jacking up of tax bills due to the ending of relief for business rates.

It will see costs for pub and restaurant operators rising exponentially, with the accompanying prediction that hundreds of private companies will be wiped out, while those in the quoted company sector will fare very badly.

The Government is now being pushed to extend the business rates relief especially for small businesses.

Pub operators are already having to cope with massively increased costs of wages, energy and, of course, food.

It has been pointed out that as a sector it accounts for 0.5% of UK revenue but pays out 2.5% of UK business rates, which appears iniquitous.

Emeny illustrates the hassles by noting that the average pub will face rates rising from £3,900 to £16,900, while restaurants could rise from £5,000 to £21,600.

Fullers has not been as badly affected because its establishments in the wealthier parts of Britain attract more affluent customers.

The £368m capitalised group proudly proclaims that it is the home of great pubs, outstanding hospitality and passionate people, where everyone is welcome and leaves that little bit happier than when they arrived.

It is famous for beautiful and inviting pubs with delicious fresh food, a vibrant and interesting range of drinks, and engaging service from passionate people.

The group has an estate of 207 managed businesses, with 1,030 boutique bedrooms, and 178 Tenanted Inns. 

The premium pubs and hotels business will be reporting it Interim Results to end September on Wednesday 15^th November.

Its shares closed at 575p on Friday night.

(Profile 17.08.20 @ 600p set a Target Price of 700p*)

Hotel Chocolat Group (LON:HOTC) – More Choccy Treats Is Good For Business

Even though a year ago new rules were introduced to restrict the promotion of foods high in fat, sugar and salt, it appears that cake, ice cream and chocolate sales are up year-on-year.

Analytics provider Reapp noted that shoppers bought £257m of chocolate products from supermarkets in the last year, up from £228.5m.

Reapp director James Lamplugh is quoted as stating that:

“With inflation and the cost-of-living crisis being huge factors in our lives, consumers found themselves staying at home more, driving the ‘Big Night In’ trend, where we see shoppers treating themselves to little luxuries, such as chocolate.”

Liberum Capital analyst Wayne Brown is very bullish about the prospects for the recovering direct-to-consumer premium chocolate company.

As I reported at the beginning of last week this unique group is described by the broker’s analyst Wayne Brown as being well positioned for the current year to end June 2024 to see sales lift up £7.0m to £212m, while pre-tax profits could well bounce back from the £0.8m loss in the year to end June 2023, to return £4.2m profits.

For the 2025 year he estimates £223m takings, almost trebling profits to £11.8m, worth 6.4p earnings.

Further ahead his figures for 2026 suggest £234m revenues, £15.2m profits and 8.3p earnings per share.

The £194.6m capitalised group’s shares closed at 142.5p, at which level they would appear to me to be a good medium-term recovery purchase, especially if some profit-taking pulls the price back after the recent recovery rise.

Liberum Capital has a Buy note out looking for 180p a share.

(Profile 21.03.19 @ 340p set a Target Price of 402p*)

(Asterisks * denote that Target Prices have been achieved since Profile publication)