12 October 2016 Initiation of Coverage Sandal Plc Electronic & Electrical Equipment sand (isdx) Upside 90. 0 Buy Price 34. 5p
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- Y/e 31st May (£) 2015 2016 2017e 2018e
- Total Revenue 3,338,525 3,295,765 3,900,000
- Total Gross Profit 1,342,863 1,140,718 1,505,000
- Total (1,659,871) (1,365,697) (1,360,000)
- Operating Profit/(Loss) (317,008) (224,979) 145,000
- Pre Tax Profit/(Loss) (327,373) (267,539) 105,164
- Profit after Tax (304,807) (81,894) 105,164
- EPS (p) - diluted -1.7 -0.5 0.6 2.8
- Table 7. Sandal plc Balance Sheet
- As at May 31st (£) 2015 2016
- Total intangible assets 30,258 99,932
- Total 284,367 315,222
- Total 1,790,869 1,953,552
- Total creditors (944,929) (1,067,764)
- Total creditors > 1 year (131,479) (260,702)
- Net assets 998,828 940,308
- Disruption to the Supply Chain
- Company Code Disclosure
Balance Sheet We show Sandal’s balance sheet as at 31st May 2015 and 2016 in Table 7. The key points are as follows: Cash ~ at 31st May 2016, Sandal held cash of £343,203 (2015: £347,535); Loans & Overdrafts ~ at 31st May 2016, bank loans & overdrafts totalled £299,242 (2015: £128,704), of which £80,494 was due within 12 months (2015: £66,858) and £218,748 was longer term (2015: £61,846). The loans were secured by a floating charge on the Company's assets and by a personal guarantee from director Alan Tadd. One of the loans for £231,922 was also secured by a personal guarantee from director Oliver Tadd; Net cash ~ Sandal’s net cash position at 31st May 2016 was therefore £43,961 (2015: £218,831). Intangible assets ~ Sandal capitalises Goodwill, Patents and certain R&D Development Costs. Goodwill is amortised at 10% p.a. and Development Costs are amortised at 20% p.a.
Risk Factors Key risk factors include: Key man risk The loss of a key individual or inability to attract suitably qualified staff could adversely impact upon the business. The Board aims to ensure that Directors and any key employees are appropriately incentivised. Competition Potential competitors with greater resources than the Company may establish themselves or enter into co-operative relationships among themselves or with third parties to enhance their services. Accordingly it is possible that new competitors or alliances may emerge and rapidly acquire significant market share. Foreign Exchange The Company makes purchases in US$ and makes sales in both US$ and sterling. A significant adverse movement in the US$ exchange rate would adversely impact the Company’s profits unless and until such change could be passed on to customers. Patent Protection If the Company’s patents are infringed the Company will need to set aside funds to protect its position which may adversely impact of the Company’s short term profits and cash flow. Disruption to the Supply Chain The Company’s products are manufactured in the Far East. Disruption or loss of manufacturing or transport capacity may affect the Company’s ability to source its products in a timely fashion or at the same prices. Nature of ISDX It may be difficult for an investor to sell his Ordinary Shares and he may receive less than the amount paid for them. Investment in shares traded on ISDX often carries a higher degree of risk than an investment in shares quoted on the Official List. The Ordinary Shares will not be quoted on the Official List. Disclosure Checklist
The Daniel Stewart recommendation structure is based on relative upside/downside to target price. The target price is set on a rolling 12 month view. Upside or downside of 10% or more is categorised as Buy or Sell respectively, and less than 10% a Hold. Our Distribution of Recommendation statistics table can be viewed at http://www.danielstewart.co.uk/Footers/Legal__Regulatory/default.aspx We aim to cover company’s results or major events, but we do not guarantee to do so and coverage may cease at any time. Although reasonable care has been taken by Daniel Stewart & Co plc to ensure the facts stated and opinions given and projections made in this document are fair and accurate, Daniel Stewart & Co plc has not independently verified all the information given in this document. The contents of this document have been prepared by, and are the sole responsibility of and have been issued by Daniel Stewart & Company Plc for the purpose of section 21 of the Financial Services and Markets Act 2000 and is intended only for investors who are professional clients and eligible counterparties as defined by the FCA, and may not be distributed to retail clients as defined by FCA. In the event that any such person should come into possession of this document, it is recommended that they should seek independent advice from a suitably qualified professional advisor before taking any decisions in relation to the investments detailed herein. The investments mentioned in this document may not be suitable for all recipients or be appropriate for their personal circumstances. The information in this document is believed to be correct but cannot be guaranteed. Opinions constitute our judgement as of this date and are subject to change without warning. The views expressed in this report accurately reflect the personal views of the author as at the date of the report. The author did not receive compensation or other payments in connection with the specific recommendations or views expressed herein. This document is not intended as an offer or solicitation to buy or sell securities. Daniel Stewart & Company, its officers and employees may have positions in the securities mentioned herein. Past performance is not necessarily indicative of future performance and the value of investments may fall as well as rise and the income from them may fluctuate and is not guaranteed. Clients may not recover the amount invested. Some securities carry a higher degree of risk than others. The levels and basis of taxation can change. When we comment on AIM or ISDX Markets shares you should be aware that because the rules for these markets are less demanding than those of the Official List of the London Stock Exchange the risks are higher. There is a higher risk of losing the money you have invested. Furthermore, the marketability of these shares is often restricted, you may have difficulty in selling your shares and there is often a big difference between the buying and selling price so that if you have to sell them immediately after purchase you may get back much less than you paid for them. If you are in any doubt, you should consult your investment advisor. Owing to its size and structure and analysts’ involvement with existing and prospective clients, Daniel Stewart does not hold its research out as being impartial. As non-independent research, it is classified as a marketing communication under FCA rules and has not been prepared in accordance with the legal requirements designed to promote the independence of investment research; and it is not subject to any prohibition on dealing ahead of the dissemination of investment research. Daniel Stewart & Co plc may actually or may seek to do business with companies covered in its research reports. The firm’s policy on managing actual or potential conflicts of interest and other relevant disclosures can be viewed at http://www.danielstewart.co.uk/Footers/Legal__Regulatory/default.aspx Daniel Stewart & Company Plc may distribute research in reliance on Rule 15a-6(a)(2) of the Securities and Exchange Act 1934 to persons that are major US Institutional investors, however, transactions in any securities must be effected through a US registered broker-dealer. Any failure to comply with this restriction may constitute a violation of the relevant country’s laws for which Daniel Stewart & Company Plc does not accept responsibility. Daniel Stewart & Company is a limited company registered in England No. 2354159 Registered Office: 33 Creechurch Lane, London, EC3A 5EB Authorised and regulated by the Financial Conduct Authority. Member of the London Stock Exchange Recommendation History
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