Portfolio Update (31/08/2019)

AU Portfolio


On Monday Shaver Shop Group Ltd (ASX:SSG) released its FY 2019 results delivering a fairly flat performance at the profit line on both a normalised and statutory basis as expected. It is good to see that same store sales are up 9.5% so far in FY 2020 and that despite planned investment in marketing, EBITDA is forecast to improve in the coming year. The transition to AASB 16 will make for a messy set of comparatives in FY 2020 although there will be no change on a cash flow basis. Roughly $38 million of lease liabilities will be recognised (mostly offset by right of use assets) and there could be a minor impact on the income statement as occupancy expenses are replaced by higher depreciation and finance costs. I'm happy to continue holding SSG as I think it is a well run, low growth business that is pessimistically priced.

On Wednesday Joyce Corporation Ltd (ASX:JYC) and Southern Cross Electrical Engineer Ltd (ASX:SXE) reported. Both companies delivered revenue and underlying earnings per share growth, have positive outlooks and trade on high fully franked dividend yields (8.4% and 6.1% respectively based on closing prices prior to results). I will continue holding both stocks in the absence of better opportunities (as always).

Lycopodium Limited (ASX:LYL) also reported on Wednesday. The result was broadly in line with guidance issued in May with revenue coming in around 10% lower at $154 million and net profit after tax slightly higher at $16.5 million. The company is forecasting similar profits for FY 2020. One reason why I own Lycopodium is because it has a strong track record of delivering gold projects and I expect it to benefit from the rising gold price. It is unclear how much of the company's revenue is derived from gold and so the effect may not be as pronounced as I hope. Despite this, I continue to hold because the valuation is reasonable and I have no other exposure to gold in the AU Portfolio right now.

United Overseas Australia Limited (ASX:UOS) released a typically agreeable set of results on Thursday. Cash flow was excellent, other revenues increased 20% and the balance sheet got even stronger.

UCW Ltd (ASX:UCW) reported on Friday. Second half performance was very strong, particularly cash flow, and there is evidence of a competent management team here. Growth should continue in FY 2020. International student customers are well diversified by origin, providing protection from the US/China trade war.

Ashley Services Group Ltd (ASX:ASH) delivered a tidy set of results on Friday. There was a slight fall in profitability in the labour hire business, but this was more than offset by recovery in the training division. It would appear that there is plenty of scope for further growth for the latter as it continues its recovery post the VET FEE-HELP scandal. In addition, management announced a reasonably priced acquisition and has recently settled the shareholder class action that was hanging over the company.

Chant West Holdings Ltd (ASX:CWL) was the last of my stocks to report. The results were in keeping with July's market update. Revenue increased by 11.7% with both divisions showing improvement over the year. Cash flow exceeded profit mainly due to a build in contract liabilities which will be recognised as revenue in future periods. This bodes well for FY 2020.


I sold Acrow Formwork and Construction Srvc Ltd (ASX:ACF) following the release of its results. In May's guidance, the company stated "the 2H19 EBITDA result is budgeted to fall slightly below 1H19". In fact, statutory EBITDA was $6.3 million for the first half of 2019 and $4.3 million for the second half - 30% lower! Management presented underlying figures which excluded share based payments, acquisition related costs and financial restructuring charges. I do not agree that these items should be excluded and so think that statutory NPAT of $4.9 million gives a truer reflection of company performance. This figure was well below my expectation of $7 million.

Management needed to achieve EBITDA of at least $11 million in FY 2019 as part of the criteria for 12.4 million performance rights to convert into shares. Underlying EBITDA was $11.6 million, but statutory EBITDA was $10.7 million and both figures were boosted by the acquisition of Natform at the end of August 2018 which generated EBITDA of $3.8 million in FY 2018. Natform was acquired after the conditions for the performance rights were set and capex was a whopping $9.6 million in FY 2019. It will be interesting to see if the performance rights vest.


AKG - 4.69%
ANO - 3.57%
ASH - 5.31%
CGL - 5.02%
CWL - 3.45%
EAS - 3.38%
EZL - 3.53%
FID - 3.69%
GAP - 3.53%
HIT - 3.79%
ICS - 4.12%
JYC - 3.48%
KME - 6.68%
LBL - 5.87%
LYL - 4.33%
RXP - 4.39%
SSG - 4.78%
SXE - 4.29%
UCW - 4.90%
UOS - 4.11%
WEB - 4.07%

Cash - 9.01%

UK Portfolio




I swapped Character Group plc (LON:CCT) for Arcontech Group PLC (LON:ARC) as disclosed earlier this week


AFM - 4.79%
ARC - 5.00%
AVON - 5.97%
BKS - 5.80%
BGO - 4.89%
CRL - 11.33%
D4T4 - 6.13%
ECSC - 4.80%
EYE - 4.83%
JDG - 5.49%
MGNS - 5.14%
OXB - 4.28%
RFX - 5.36%
SDI - 4.65%
VTC - 4.39%
WINK - 4.51%
WJG - 4.48%
XPP - 5.69%

Cash - 2.47%