Mello Feedback

A shorter-than-usual set of news this week. Most of the key contributors on Discord were attending the Mello investing conference in London, which was a triumph, as usual. What marked this conference out from recent ones is the volume of companies willing to come and talk to investors. While the correlation is far from tight, it does seem to bode well for UK markets that so many companies were willing to come out. Many presentations were full and standing room only, so investors were keen to hear as well.

Tristel (TSTL.L)

For Mark, a couple of highlights were seeing Tristel present for the first time in person. We’ve always known that this is a high-quality business with sticky revenue, a beneficial use case for users and a regulatory moat. However, that has always come with a rating that seemed a little bonkers. Now the rating is a still punchy 21x forward earnings, but there is significant growth potential as they aim to sell into the US market. That their partner, Parker Labs, has put 10 FTE’s into sales efforts shows the potential they see. However, the market was distinctly unimpressed with the just £40k they received in royalties in the interim results. All eyes will be on this in the upcoming trading update at the end of July.

Brave Bison (BBSN.L)

Several SCLers were impressed with Brave Bison. The management team clearly have a lot of passion for the business, and the pace at which they are buying businesses and integrating them onto a single platform is impressive. The latest proposed acquisition is Mini-MBA, which just requires them to complete funding. The synergies they see with this and the rest of their businesses are strong, and they have some high-impact changes they plan to implement if this deal completes. Also impressive is that Mark Ritson, founder of Mini-MBA is proposing putting £4m of his own money into Brave Bison at the PLC level as part of the funding of the acquisition. It is perhaps not the sector that many SCLers like to invest in, and they are a company that likes their adjustments, given their acquisitive nature. However, in general, most of us came away with a generally positive view of the lastest proposed deal.

Centaur Media (CAU.L)

On the other side of the Mini-MBA transaction is Centaur Media, where Harwood/Rockwood own 29%. Asked on stage about which holding he was most excited about, Christopher Mills answered Centaur, and that they would be further buyers if they were not already close to the takeover panel limit. The current market cap is £53m, and if the deal completes, they will have £27.8m in cash. Mills obviously feels that The Lawyer and the rest of ‘Xiem’ that isn’t sold to Brave Bison is worth significantly more than the £25.2m EV. We wouldn’t be surprised if things came to a head relatively quickly here once the Mini-MBA deal completes.

Shepheard Neame (SHEP.L)

Leo took the opportunity to catch up with a couple of his larger holdings, such as Shepherd Neame. One of their long-term growth drivers is the improving transport infrastructure in Kent, including the continued rollout of domestic services on HS1, so it was unfortunate that their first session was delayed after they phoned ahead, reporting train troubles. On the bright side, this demonstrates there is still scope for improvement, but even more telling was that in the event they arrived early enough, they could have done their original slot. We are optimistic that this kind of conservatism also applies to their financial guidance!

Anyway, they were rescheduled to take Richard Staveley's slot, who then had his room changed to the Mello Theatre. This was less than ideal, but plenty of investors still came to see Shepherd Neame (or, at least, were too polite to leave when they realised Richard was elsewhere) and were well-engaged with plenty of questions. Regarding the substance of their presentation, they confirmed that the recent good weather has been very beneficial, not just in their country pubs, but also in London, where the feel-good factor is equally important. Many sites are breaking records, not just in inflation-driven revenues, but also in volumes. Given that forecasts have not been updated for several months, this gives Leo further confidence that they are currently trading ahead. They've been, shall we say, "active participants" in the IR circuit of late, so much of what they said wasn't new to me, but they were especially clear that all the industry needs is a lack of further shocks for margins to normalise.

Restore (RST.L)

It wasn’t all current holdings for Leo. Another one of his highlights was Restore, where Charles Skinner has returned as CEO to sort the company out (again). As such, this was a particularly entertaining presentation. Afterwards, Leo had the opportunity to chat to Hannah Crowe, co-founder of Equity Development, who do their PI IR. As Hannah is also an investor in her own right but needs to be very diplomatic, it is especially fun to grill her about the relative merits of her clients: either she particularly rates this one, or she did a great sales job. Leo thinks he probably should have gone to the site visit she organised in March.

Fund Managers

Of course, it isn’t all about the companies. It was great to catch up with old friends, make new ones, and connect with some of the fund managers. Richard Stavely is always a Mello highlight, both for his great knowledge of UK microcaps and his generosity in making time to engage with individual investors in this space.

Mark got the opportunity to meet Alyx Wood, who runs a long-short hedge fund out of Cornwall. He gave a great talk about which companies to avoid. Experienced investors (or readers of Mark’s book ;-) wouldn’t learn that much new from the talk, but in investing, discipline is often the most important thing and being reminded to consider the impact of frauds, fads & failures on one’s portfolio is very valuable. Mark was impressed with Alxy’s clarity of thinking, disciplined execution and return track record, especially on the short side, something that is incredibly hard to do well.

The Investor Summit

Hot on the heels of a successful Mello, comes another high-quality investor event that is part-organised by one of the SCLers, called the Investor Summit.

It will be held in The Brewery on Wednesday, 13 August from 9am -9pm. This is how they describe themselves:

Taking place in the City of London, it offers in-depth market insights, thought-provoking discussions, and unparalleled networking opportunities. Whether you're a long-term private investor, a professional managing client portfolios, or an industry insider seeking fresh perspectives, this summit promises a premium experience tailored to the needs of serious market participants.

This will be a bit different from Mello as it is fully catered with breakfast, lunch and a drinks reception at the end of the day, making the £84 early bird ticket seem great value. So good that Leo has his ticket already!

These are the summaries of a few things we did manage to debate this week on our SCL Discord server:

Anexo (ANX.L) - Final Results

These delayed results are exactly as we would expect. Net debt is up:

Net debt £81.6 million £67.9 million +20.2%

As is receivables:

We would normally calculate Days Sales Outstanding at this point, but in this case, we need Years Sales Outstanding: 1.8.

One SCLer had dealings with the (former) CFO in the past and considered him a very capable individual with a good reputation. His arrival last July made Anexo more interesting, since if someone with his integrity was able to put his name to their balance sheet, things may be better than they seemed. In this SCLer’s opinion, his departure after only 9 months with no audit sign-off seems to leave both reputations intact.

Camelia (CAM.L) - Result of Tender Offer

When we wrote about this tender offer, we said the price looked finely balanced. They were tendering for 350k shares, which is only 12.8% of the equity. But with the trust and directors not selling, we knew there would be much more available. A lot more as it happens:

In total, 215,084 Ordinary Shares were validly tendered, equal to 7.8 per cent. of the shares in issue as at 19 May 2025. As the Tender Offer was not fully subscribed, validly tendered Basic Entitlements and any Individual Excess Tenders will be satisfied in full.

It felt like the controlling trust wasn’t going to support a particularly high price to maximise the discount to book value of their holding. However, if the aim was also to increase the percentage owned, they appear to have failed, as the take-up was less than the total amount.

It seems strange to say this, given the large discount to TBV remains, but those who tendered their stock in full may have got the best deal, as much of that book value is cash that has been earmarked for a 5-6% ROCE agricultural acquisition, according to the recent management call. Given that the outcome of their last agricultural acquisition was to close the business down 3 years later, shareholders may be lucky to get even that paltry return on their investment!

Ramsden’s (RFX.L) - Interim Results

SCLers were in no doubt that the current gold price meant that management here had left something in the tank, and this week we got confirmation of that:

Full year profits expected to exceed £15m following a record first half and reflecting a sustained exceptionally high gold price

They don't say which measure of profits will be over £15m, but we assume PBT, as forecast by PanLib at £13.1m. There is also positive news on the dividend payout:

· Reflecting the Group's positive trading momentum and the Board's confidence in the full year outlook, the Board has approved a 25% increase in the interim dividend to 4.5 pence per share (HY24: 3.6 pence per share).

· In recognition of the exceptional performance of the purchase of precious metals segment in the first half of the year, the Board has approved an interim special dividend of 0.5 pence per share.

This suggests they are conservatively assuming the gold price will fall back, but not all the way, as the smaller special dividend versus the increase in interim ordinary suggests they see current trading slightly exceptional, but not by much.

The increased store openings give the possibility of continued growth in future years, even from today’s increased PBT guidance levels.

Since the period end, the Group has agreed terms on three new stores. Following a planned lower store opening programme in FY25, the Board expects to return to opening six to eight new stores each year from FY26 onwards.

This has been something the market has worried about in the past. Store growth requires capex, though, hence the need for some of this week’s dividend increase to be a special one.

We are particularly pleased that 3/4 of the parts of the business are performing very well:

· Purchase of precious metals segment has continued to perform very strongly with gross profit increasing 53% to £7.6m (HY24: £5.0m), driven largely by the sustained exceptionally high gold price and an increase in the weight of gold purchased.

· Jewellery retail revenue increased by 18% to £20.7m (HY24: £17.5m) with retail gross profit increasing by 18% to £7.9m (HY24: £6.7m).

· Pawnbroking gross profit increased by 11% to £6.2m (HY24: £5.6m), with our new dedicated pawnbroking website launched in November 2024, attracting new customers.

· Foreign currency gross profit was marginally ahead of the prior year at £5.1m (HY24: £5.0m).

FX has the potential to grow with store numbers, plus it should have a seasonal element to it. Good weather in the UK would act as a headwind here, though, if it stays as it is now.

However, we are slightly disappointed by the FY2026 upgrade. As PanLib point out, H1 didn't see the full benefit of the current gold price:

Management believes the average gold price will remain higher in H2 than H1, bearing in mind that the gold price increased by 38% between the end of FY 24 and the end of H1 25, so the average was much lower in H1 than the price now.

But forecasts assume the price will fall (which is especially conservative as gold is in cantango):

Should the gold price fall more than expected there is downside protection...

However, they don't seem to say how much of a fall is assumed. The forecast profit for the gold buying division is rounded to the nearest £m after the upgrade, suggesting that management has directly provided the numbers: up from £14.4m to £17.0m, then falling to £16.0m the following year.

In April, Leo forecasted 36p EPS for FY 2026 at a gold price, which is similar to today. That compares with FY 2025, just upgraded from 29.7p to 34.3p by PanLib, and FY 2026 at 32.0p. So there is scope for FY2026 to be higher than 36p, despite being impacted by the full effect of NI changes. Indeed, the current year could easily reach 36p given the historical conservatism of their guidance. The risk is that investors take the forecast of falling profits in FY2026 at face value, and/or take profits after the 65% yoy share price rise. It’s nice to have the near-term beat, but it’s actually a situation where conservatism works against them, unless everyone knows they set themselves up to beat those figures.

That’s it for this week. Have a great weekend!