July 2021 Portfolio Update

After a rocky period my portfolio managed to finally reverse the trend with a 3.1% gain taking me up to 12.5% YTD. This is decent given that I've probably given back 8-10% of performance as my largest holdings hit pockets of turbulence. Obviously I wish that I'd sold at the top but I've never been very good at timing - although I am considering a more active top-slicing strategy when holdings become overweight.

Anyway the stand-out performer in July was Belvoir as investors digested its trading update and realised that the gravy train was still rolling. Other risers seemed to be less news driven and more a reaction to general good news across the market in spite of known headwinds.

On the downside Boohoo found itself on the rack (again!) as negative press articles continued to appear along with the fact that the founder will have to appear in front of a US court. I still don't think Boohoo's customers care though. Sylvania also fell sharply on a weaker than expected Q4 production report as the Rhodium price retraced and civil unrest increased in South Africa.

Risers: BLV 27%, GMR 23%, KNOS 19%, TM17 15%, MNZS 15%, SDG 13%, FXPO 12%, SCT 10%, CCC 9%, STAF 8%, AFX 7%, GAMA 7%, CAML 6%, CLG 5%, DX. 5%, BUR 4%, RWS 3%, GAW 3%, CMCL 2%, TND 2%

Fallers: CLX -1%, G4M -3%, LUCE -4%, VLX -5%, UPGS -5%, CER -7%, GAN -7%, SPSY -8%, BOTB -9%, DRV -12%, BOO -13%, SLP -17%


UP Global Sourcing Bought at 209p

In June UPGS announced that they were buying Salter Brands for £34m and raising £15m to partially fund the acquisition. A quick back of the envelope calculation suggested to me that the purchase would significantly enhance earnings - as indicated by the board - and make the shares even better value at current levels. In addition this would remove any risk around the licensed Salter brand, along with eliminating royalty payments, while materially improving the brand portfolio of the group. In other words this purchase was bang in line with the group buy and build strategy. Unfortunately I was unable to take part in the placing and decided to wait for a pullback over the summer. This subsequently happened with the price dipping to the £2 level but I wasn't looking to be greedy as anywhere in the 200-220p range is good value in my view.

Boohoo Group Bought at 296p

There's no point going over the old ground around how much of a pariah Boohoo is for institutional investors. They're just not interested despite an excellent track record of double-digit growth. I guess that their caution could be rewarded if Boohoo turns out to be a giant fraud but there's no doubt that this is a real business with a growing customer base. So I'm taking the opposite side of the trade and have picked up a few more shares below the £3 mark. Personally I see a huge and unwarranted discount being applied here that's at odds with a P/E rating heading below 20 (and that's without any expectations being beaten which Boohoo have achieved multiple times). I'm sure that I'll have to deal with short-term volatility but I can deal with that for the long-term prize.

Belvoir Group Bought at 239p

I listened in to an investor webinar in July where the Belvoir management talked about trading and how it was still going very well. Right in the middle of the call I took another look at the share price and was surprised to see a fair amount of recent weakness. This pullback seemed directly opposed to the narrative that I was hearing so I took the opportunity to add to my already large position. With the share price forming a base at around 240p and a positive trading update due before the end of the month I figured that my downside was limited.

DX Group Bought at 32p

The investor reaction to this month's trading update was lukewarm to say the least which I find perplexing. The business is expanding like crazy, it's bringing in more revenue than management expected and the board are hugely invested in its success. Perhaps there's a persistent seller out there capping the share price but sooner or later these shares will break out. Anyway I decided to add to my holding to make it a 5% position in my portfolio. This is as high as I'm willing to go with my purchasing but if all goes well the shares will grow to the maximum weighting of 10% that is my limit for any position.

John Menzies Bought at 269p

On a Monday in late July the market, for some reason, took fright with various small and mid-cap shares plummeting 10-20% for no reason. This was a bit alarming to say the least and it would have been useful to have some cash lying around to take advantage of the opportunity. Unfortunately I only got the chance to buy one share and that was John Menzies. The price on offer was absurd, given the recent trading update, and I bought as many shares as I could at this level. A reasonable morning's work given that the market bounced nicely on Tuesday.


Fonix Mobile Sold at 146p - 15.4% gain

With no news from Fonix and an opportunity to top up UPGS below their recent placing price I decided to make the switch. There's nothing particularly wrong with Fonix but they are a recent IPO and it's surprising how often these new listings disappoint in the first year. It's almost as if the selling shareholders know more about their business than we do and tend to choose a highly opportune moment to cash out! Anyway Fonix is now back on my watchlist and I'll monitor any news-flow with interest.

RWS Holdings Sold at 573p - 15.3% loss

This has been a steady, high quality performer over a good number of years. Sadly the SDL acquisition last year seemed to spook a lot of investors and the share price has been persistently weak since then. This doesn't worry me too much since the RWS board have a consistent track-record of successful integration and I think that they've under-played the benefits of the merger. That said there could be ongoing issues now that we've left the EU and I probably bought more of the shares than was prudent at the time of the acquisition announcement. So with this in mind, and to give myself the opportunity to buy elsewhere (such as with DX Group), I've reduced my position by half. I think that RWS will continue to do very well in the medium term though and will probably increase this position again if trading proves stronger than anticipated.

Sumo Group Sold at 508p - 56.4% gain

Another gaming company and another takeover. Last time, with Codemasters, waiting for a competing offer was the correct strategy even though I held on too long. This time around the 43% premium is healthy, Tencent already hold 9% of the shares and it's clear that they have deep pockets. So I think that we're unlikely to see a heavyweight battle here and that Tencent will walk away with the spoils. Fortuitously this announcement came on the same day that the market decided to play silly buggers so I had no difficulty in hitting that sell button.

Belvoir Group Sold at 281p - 17.3% gain

In a piece of very short-term trading I held these shares for just over two weeks before flipping them. That's not my usual style but the sharp re-rating had pushed my total Belvoir holding up towards my maximum size limit and I decided to reduce my risk exposure rather than be greedy. After all while I was pretty sure that the next trading update would be very positive you can never tell how the market will react. Better to be safe than sorry.



Back in May the directors raised their full year revenue guidance to a range of $103-108m on the back of $27.8m in revenues for Q1. In this half-year update it's clear that the business has moved on with revenues of $34-35m expected to lead to an adjusted EBITDA of $3-7m. Now the latter figure can be whatever management want it to be but the acceleration in sales is significant. As a result FY guidance is being raised again to $125-135m which is excellent news. Why then is the share price so weak? I've no idea since operationally GAN is really delivering. The big driver here was a stronger than expected performance from Coolbet in Latin America and Northern Europe. This is a recent acquisition and it's pleasing to see it making an impact. At the same time the B2B business is performing in-line with expectations and continues to win clients. So I'm happy to look through the depressed share price given the growth potential on offer. (Update)

Caledonia Mining

A short but pleasing operational update for Q2. Record production of 16,710 ounces of gold was achieved which is 24% up on the same quarter last year. The first quarter wasn't so great this year so H1 production is only up 8% to 29,907 ounces. Still the company is on target to hit its full-year target and I remain impressed by the capability of the mining team to keep delivering. (Update)

Central Asia Metals

This update for H1 doesn't contain any financial guidance but we can make some inferences. Copper production from Kounrad came in at 6,214 tonnes which is 6% below the output achieved in 2020. In fact this is the lowest H1 production in the last three years which may be related to Western Dump leaching providing 100% of the metal during the winter period. Fortunately for the bottom-line Copper prices have remained elevated with a solid base forming since a peak was hit in mid-May. This will far more than offset the slight production fall. It's a similar story at Sasa with Zinc and Lead production down by ~8% due to a Q1 mill shutdown and additional ground support work. It's possible that full-year guidance for these metals may just be met but it'll be a stretch. Fortunately the prices of both commodities are strong especially when compared to H1 2020. As a result Central Asia Metals is generating a lot of free-cash and will have no net debt by the end of the year. This is very supportive for the high dividend yield and perhaps we'll get a special dividend thrown in? (Update)

Gamma Communications

A positive update with many parts of the business performing slightly ahead of expectations. This is a good result given that sales activities are somewhat restricted in all territories. Particular areas of interest are the UK Direct business which has won some notable new contracts and the performance of newly acquired Mission Labs. Other parts of the business are trading in-line and as a result the full-year should come in at the upper half of market consensus estimates. This is a very solid result that bodes well for the remainder of the year. (Update)

Alpha FX Group

This is a more than impressive update. Since the last announcement in late May, which indicated that expectations would be exceeded, trading has remained strong. As a result the group will further exceed the current expectations. This ability to repeatedly perform better than expected is the hallmark of a quality business. All divisions are trading well but FX Risk Management is storming ahead with the newer offices in Canada and Amsterdam finding their feet. As a result of this success the board are planning to open an office in Milan with three existing employees relocating to kick-start the new team. If these spin-offs continue to deliver growth I can see this approach paying huge dividends in the future. The key here is the corporate culture put in place by Morgan Tillbrook, CEO, with employees given the space and support to perform to the best of their ability. At the same time it's clear, from Glassdoor reviews, that employees are expected to work very hard and take on as much responsibility as they can handle. This won't work for everyone but I suspect that the survivors remain driven to perform. (Update)


Interesting. The company is trading ahead of market expectations and yet the share price hasn't reacted. Usefully the directors have also provided some numbers and it seems that revenue will be at least £220m and adjusted operating profit will breach £39m - which is a 25-30% improvement on last year. So why is the P/E ratio under 20? Well I don't know given broad demand for Luceco products and an ability to protect margins from inflationary pressures on raw material and freight prices. I guess that most obvious explanation is that the shares have really re-rated over the last six months and now they are pausing for breath. I can live with that given that all segments are doing so well with commercial demand continuing to recover. I can well believe the CEO when he says that they expect to deliver another year of record results. (Update)

DX Group

Here's an interesting situation. In mid-May the company stated that DX Freight bought in £10m more in sales for the year than expected. The direct result was that DX would significantly exceed existing market expectations for the current year ending 3 July 2021. This propelled the shares to 36p, led to forecasts being upgraded and probably convinced Lloyd Dunn (CEO) to spend another £1m buying shares in early July. For reference he now has over £20m invested in the group. I think that this update is reiterating the previous update since it's referring to the same period but I'm not wholly clear as it refers to DX Freight chipping in £6m more than expected. Perhaps this is a second out-perform update? Either way the shares have drifted since May to the 31-32p level which feels like a steal given business momentum. Evidence of this comes from the expansion of the depot network with three new depots opened since March and a total of fifteen new depots planned over the next two years. You don't invest in this way if you're not incredibly bullish about business prospects. There's really all to play for here. (Update)

Sanderson Design Group

Things are looking good as the positive trading seen in Q1 has extended into Q2. As a result profits for the half-year will be ahead of Board expectations. Given that the brands are still impacted by pandemic restrictions it's good to see that the period sales are up 1.4% compared to the same period back in 2019 (and up 39.8% against last year's decimated trading). Particular highlights are strength in manufacturing, with sales up 20.5% versus 2019, and licensing income with apparel proving very popular. The new management is clearly being assisted by consumer trends such as increased spending on home interiors, along with a swing back towards maximalism, but equally they have put the group in a good place to benefit. The turnaround is well on track by the looks of it. (Update)


Somewhat remarkably Computacenter is set to deliver an adjusted PBT for H1 which is ~50% better than that for last year. What's remarkable is that Computacenter did very well last year so we're hardly looking at a soft comparative. So last year the half-year adjusted PBT was almost £75m (itself up 40% from 2019) which means that we're looking at £110-115m hitting the bottom-line. Given that the full-year PBT in 2020 was just £200m, and that the business is traditionally second-half weighted, I can see PBT for the whole year being in the range £225-250m. This makes a mockery of the analyst forecast of just £218m in 2021 let alone that of £221m in 2022 and £229m in 2023. Frankly these forecasts are embarrassing. Perhaps they're wary of the headwinds from component shortages and a strengthening pound but H1 profitability would have been even better without these factors. I think that management are alluding to this research gap when they say that it is highly likely that 2021 will be another year of substantial progress for the Group. In fact I'm convinced that they are making this point and yet the share price has barely reacted. Crazy. (Update)

John Menzies

I'm not surprised that the Menzies share price has gone nowhere for three decades: over that period EPS has been basically level (which means that it's reduced after accounting for inflation). However a new management team are in charge and they look serious given how much money they've spent buying shares. Right now the business is trading slightly ahead of expectations which is reassuring given how dependent they are on air travel. The key to this success is extremely tight cost management, new business gains and, yes, additional support from government schemes. I certainly won't argue that this support isn't valid given how the airline industry will probably be the last to recover from the pandemic. Commercially the business is really moving ahead with new, and large, contracts being won along with other business opportunities. My feeling is that when all parts of the business are in a position to trade effectively then we'll really see the benefit of the groundwork being laid today. That'll be an exciting day to be an investor in the company. (Update)

Games Workshop

These are excellent results that are fully in-line with expectations that were raised repeatedly during the year. It's worth taking a moment to savour them as profits jumped an astonishing 70% on a 30% increase in turnover. This is the benefit of operational gearing and a relatively fixed cost base. Such success allows the business to invest further in its development studio and it's notable that studio payroll costs will be a higher percentage of revenue in the next financial year. This is good news because it means that even more product lines and new intellectual property will make it's way to the marketplace to generate even more sales. This is a virtuous circle that I can believe in. It's clear from the detailed strategic narrative that the board are wholly focused on creating content that customers will value now and in the years to come. At the same time the board acknowledge that they aren't perfect, which is refreshing, and that they encountered avoidable problems. Most materially these issues impacted distribution and shipping with customers receiving goods either late or not at all in some European cases (leading to £1.2m of refunds). This is clearly disappointing but I'd rather hear about these setbacks now rather than not at all. Looking forward plans are in place to improve the shipping experience and the board are looking to refresh the online store as it is no longer truly fit for purpose; this will be a major project, which adds risk but should also pay back its investment rapidly. On the outlook front no financial guidance is provided but a new Warhammer 40,000 range was released in July 2020 and historically such releases have marked a sales high point. So I can see why analysts are forecasting single-digit earnings growth over the next few years - which should make these forecasts easy to beat. That's why I'm happy to have Games Workshop as my second largest position. (Results)

Staffline Group

Trading has continued to be strong in this half-year and is ahead of expectations in all three core divisions. This is great news and with cost reductions in place the bottom-line should benefit. As a result H1 revenue will be £450m with gross profits up 14% to £39m. In the separate segments GB has won new business in online food distribution with gains more than offsetting challenges due to shortages of drivers. Over in Ireland trading was buoyant with the Republic growing strongly. Finally PeoplePlus has moved from a loss to a profit and seems to be turning around nicely. There remain challenges but things are moving in the right direction. (Update)


In essence positive trends in Q1 suggest that profits will be slightly ahead of current market expectations. Key drivers here are strong demand in Consumer Electricals and EV revenues growing as Volex's position in the sector pays dividends. Medical and Complex Technology are also doing well as customers recover from the pandemic; more a case of delayed orders rather than lost ones. Of course there remain challenges from supply chain shortages, material cost inflation and freight issues but we pay management to deal with such inevitable difficulties. For example they handled the copper price inflation earlier in the year by passing on the cost increases. All in all the business continues to do well. (Update)

Disclaimer: the author holds, or used to hold, all of the shares discussed here

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