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By Steve Moore & Tom Winnifrith | Saturday 21 July 2018
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
We tipped shares in the then Molins, Mpac Group (MPAC) at a 125p offer price in June last year. They recently returned above 200p, but now have been hit by a half-year trading update…
This includes “we continue to grow revenues” and an order book “of higher quality and lower project complexity than previously”. However, also “customers deferring machinery investment decisions” and cost overruns with “two significant, technically challenging legacy projects which will now not be completed until the end of the 2018 financial year”.
It is added that the company has achieved “some significant efficiency gains in the first six months of the financial year”, but even from these “the benefits have been reduced by the time taken to change the location and management in our Mississauga facility in Canada, which has now been completed”. The net result is “profits are currently expected to be around £1.2m below current market expectations”.
Those expectations were previously for circa £2.6 million, with previous results showing net cash of £29.4 million. Having slumped to a current 147.5p, the market cap is sub £30 million. However, there is also a vast pension scheme (actuarial valuation being carried out as at 30th June) - seeing the company paying £1.8 million per annum (increasing at 2.1% per annum) in deficit recovery payments.
Also, having gone from “the company entered 2018 with a stronger order book than a year before… the group's future prospects remain positive” to now “the closing order book will be lower… the business climate has softened considerably as the year progressed attributable in part to general economic as well as Brexit related uncertainty”, the rapid deterioration concerns – as does the blaming on Brexit and general economic uncertainty; there are a large number of companies currently doing just fine!
As such, we apologise for not doing so sooner, but now bank the gains which remain here and sell.
This article first appeared on the Nifty Fifty website which Tom Winnifrith runs with Steve Moore & Lucian Miers. To access the website ahead of the next share tip from Tom & Steve and a new shorting piece from Lucian shortly click HERE
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