30 April 2020
Appreciate Group – Trading Update
Share Price 44p
Mkt Cap £82m
Conflict Disclosure: No Holding
- Update Trading “broadly” in line for the year to March. Gift cards for high street stores are significantly down with the high street closed. 80 staff furloughed, £0.5m redundancy costs, intangible write downs of £2-£3m and demand c 70% below prior year for cards. 10 below last year in Christmas savings. £1.5m hit from lower base rates.
- Valuation £16.7m NAV and £82m mkt cap is not cheap on an assets basis. The £11.7m forecast PBT for March 20 will be £11.5m. If this profitability can be restored the shares are cheap.
- Conclusion Given some of the other bargains around the valuation is full while the recovery of the high street could be slow.
31 March 2020
Appreciate Group – Trading and COVID 19 Update
Share Price 35p
Mkt Cap £65m
Conflict Disclosure:No Holding
- Update –11 months to February was in line with expectations. However, running a voucher business when the shops are closed is “uncertain”. £30m free cash. The company makes the point that a reduction in billings means an increase in available cash. While medium term it accelerates the move to digital. Dividend cancelled, bonuses reviewed, discretionary spend cut.
- Balance Sheet – March 19 NAV was £16.7m with cash of £37m, some of which may have been restricted.
- Valuation Last year’s EPS was 4.8p. 13.5X prior to Giftly.
- Conclusion The uncertainty over Giftly traction is now replaced by a new set of uncertainties. This could get cheaper before the focus turns back to the potential success of the new product.
27 November 2019
Appreciate Plc – H1 Results
Share Price 48p
Mkt Cap £89m
Conflict Disclosure: I Hold
- Results Billings increase of 9.3% in corporate and 12.5% in consumer is strong relative to recent years. Revenue growth of 23.8% is also strong while cash balances are flat at £211.8m. Cost guidance remains at £2m for the current year for implementing the new strategy. In terms of the 4 pillars of the strategy it seems the investment is going in, the hampers have been separated, technology investment is going in and the new product is being trialled.
- Estimates A reduction in profits to £11.7m is expected for the current year followed by 15% growth in 2021.
- Valuation PER 9.4X Yield 6.7%.
- Conclusion I had been really hopeful that the new product launch across such a strong platform with an embedded customer base could be transformational. The new product is a gift card which appeals to millennials which enables a personal story to be shared with the recipient. Perhaps that explains the name change from Park Group. I doubt very much this will excite investors, as millennials are not the major force in investment markets. At least the shares are very cheap and trading is strong.
30 April 2019
Park Group – Trading Update
Share Price 75p
Mkt Cap £141m
Disclosure: I hold
- Update Begins with trading ahead of expectations but because of IFRS 15 deferring profit into the March 2020 year proft will be below expectations. There is also the write down of an office lease which will result in a £1.25m exceptional. Going forward an extra £2m of costs will be incurred to implement the new strategic plan and the new product continues to be developed
- Estimates PAT is expected to be £10.4m in the current year. This looks like a c. 10% downgrade
- Valuation PER 12.1 yield 4.5% before downgrades
- Conclusion I can’t help but feel the extra costs for the strategic review should have been detailed at the time of the strategic review. And we still don’t know what this elusive new product is. Disappointing. I expect the shares may fall 10% plus.
4 December 2018
Park Group – H1 Results and Strategy
Share Price 78p
Mkt Cap £145m
- Results – Billings were up 3% and revenue reduces 10% to £27.4m in H1 as a number of low margin customers departed. Pre tax losses were reduced from £1.9m to £1.5m after interest receivable increased a little to £0.8m from £0.7m. Cash balances were £212m (2017 £199.6m). Dividend increased 5% and results are said to be in line with expectations. The new four pronged strategy will be revealed at todays investor day but the four prongs are around focus, ease of use, efficiency and a new product launch.
- Estimates – Estimates to March 2019 look for a 1% revenue increase and a 4% PBT increase for the year to March 2019.
- Valuation – PER is 12.7 and yield 4.3%
- Conclusion – This is a well invested platform which has weathered the headwind of falling rates for 10 years. It now looks like those headwinds will become tailwinds just as they are launching a new product about which there is little detail in the results. Were interest rates to increase by 0.5% this could add c 8% to earnings by my calculations. And if the new product gets traction the shares could be re rated. With the well invested technology and the virtual card it could potentially get a technology type of rating. This could be an inflection point.
25 September 2018
Park Group – AGM Statement
Share Price 67p
Mkt Cap £125m
· StatementThe statement says that cash balances are ahead of last year reflecting growth in the business and the management are optimistic about future opportunities. New customers have been signed and new management have been appointed
· Valuation The shares have drifted from 87p to 67p over the course of this year. At this price the shares are on 11.3X March 19 and yield 4.8%.
· Conclusion The shares are priced not to grow. The future opportunities are significant while the underlying business is strong and cash generative. This is an opportunity to own the stock ahead of the future opportunities becoming clearer and priced into the valuation.