7:59 cut – SHOE, MPAC

Shoe Zone (SHOE) – FY Results

Shoe Zone was hit by a mild profits warning in August which chimed with the general investment perception of doom and gloom on the high street leading to large initial share-price falls and subsequent drifting. However the trading update in October suggested trading had stabilised and I chose this moment to buy back in. Post-period there was concern over the impact of political uncertainty but some optimism following Next’s January update.

Today’s results are for the 53-week period to 5th October 2019 versus a 52-week period in 2018. The reported 0.9% increase in revenue to £162.0m actually represents a 1% per-week fall on last year, but is in line with August forecasts and not surprising given the retail environment and their proactive approach to managing store numbers.

However, of most immediate concern is that both EPS and dividend have apparently significantly missed forecasts (edit: I was only looking at the final dividend – the total dividend has beaten expectations).

The EPS miss can be explained by them choosing not to adjust for the previously identified non-cash write-down of £2.9m on freehold property. This comes to 5.8p (edit: before tax) a share and adding this to the reported 11.4p puts them ahead of forecasts and really very close to the pre profits warning forecasts.

The ongoing development of their “Big Box” strategy is interesting, but time does permit a discussion here.

The outlook statement is relatively strong and this is reinforced by them choosing to (edit: entirely) look through the one-off factors this year and pay a dividend above their normal pay-out ratio.

There is potential for the decision not to cite adjusted EPS in the financial highlights to cause confusion at the open – if so I will be a buyer.

Mpac Group (MPAC) – FY Trading Update

Much has been talked about political uncertainty and the effect on business over the last few months. There has been general concern in particular that consumers and businesses may have been deferring purchases in calendar Q4 of 2019.

With strong results and associated commentary from Next (and, above, Shoe Zone), the focus moved away from the impact on small-ticket consumer purchases towards that on bigger commitments, in particular by businesses.

If there is an effect then MPAC has avoided it. Today they report business above previously raised expectations and a strong intake in Q4.

The business continues its fantastic transformation under CEO Tony Steels. I have been consistently too pessimistic on this one but will attempt to buy today.

Small Caps Live

This Friday at 11am will mark the very first Small Caps Live event where Mark Simpson and I will be covering both of the above companies.

Join us at: https://discord.gg/vBQjDaZ

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