Cube UK Report (9 Feb 2021) – Tandem cycling to success

Cube UK Report (9 Feb 2021) – Tandem cycling to success

Good morning!

Today I’m interested in:

  • Tandem
  • Ocado
  • Joules
  • Numis

I’m also planning to say a few words about Tesla’s bitcoin purchase, but will save that for later!

Finished at 2.20pm.


  • Stock data should display here.
Market cap £27.5 million
RNS Trading Update and Notice of Results
Writer disclosure Long TND.

This is a company I’ve criticised for its investor relations.

Since then, it has become more transparent – giving investors more information, offering them a tour of the company’s showroom, and setting aside time for a Q&A with the Board.

These little touches make a big difference, and I now consider Tandem to have a “normal” relationship with its shareholders.

Coincidentally, the arrival of Covid and the cycling craze has made a big difference to Tandem’s results.

I’d like to think that it’s the combination of both (good results and improved investor relations) that has seen the share price increase from around 170p in late 2019 to 540p today.

And I’m pleased that I’ve been able to participate in this rally.

Will I be a long-term shareholder? I’m not sure. I’ve held my current tranche of shares since H1 2019, so I’ve been involved for nearly two years now (I was also involved from 2015 to 2017). It’s possible that I’ll sell my Tandem shares at some point this year.

But for now, let’s enjoy the good results while they are rolling:

…Quarter 4 revenue was approximately 6% ahead of the prior year which recovered some of the reduction in Quarter 3.  As a result, unaudited Group revenue for the full year was approximately £37.1 million. 

Revenue in FY 2019 was £38.8 million. So we are down by 4.4%, overall.

It turns out that domestic toy sales were up 40%, but this was offset by the decline in retailer import orders (“FOB” or “Free on Board” orders).

I’m reassured to hear that so many of the company’s own brands – Kickmaster, Hedstrom, Ben Sayers, Squish, etc. – have performed well. Obviously, the economic environment of staycations and staying at home was very favourable!

Now here comes the really good news:

Gross profit margins continued to be stronger due to the increased proportion of domestic sales in our wheeled toy business where margin is traditionally higher than from FOB, coupled with higher bicycle, golf and B2C revenues.

Group operating expenses reduced by approximately 11% in the year principally as a result of the COVID-19 impact, with reduced exhibition costs and travel for much of the year. 

More toy sales and lower costs means significantly higher profits. Investing can be easy sometimes! I find it funny that so many companies have found they are more profitable when they don’t send their executives away on sales missions.

As a result of the above, gross profit will be “materially ahead of the prior year“.

Some calculations:

  • For reference, gross profit in FY 2019 was £11.8 million, and operating expenses were £8.8 million.
  • So operating expenses in FY 2020 should be around £7.8 million (down 11%).
  • Operating profit before exceptional costs should therefore be £4 million plus the material increase in gross profit compared to the prior year. Could it be £5 million? More?

Pension–  there will be a 5% increase in the contributions to the pension deficit. The company is determined to pay out progressive dividends to shareholders while it can afford to do so and despite a provision which states that it can’t pay out more in dividends than it contributes to its pension deficit.

The deficit of its pension schemes was £2.5 million as of December 2019. Hopefully this will be kept under control.


I must applaud the company for the detailed outlook statement. A range of possible earnings figures would be nice but I suppose we can’t have everything!

The key takeaway is that there has been an “encouraging” start to 2021, despite Covid posing a variety of challenges.

The weak US dollar is good for Tandem (which buys in dollars from Chinese suppliers). However with the Renminbi strengthening, I don’t think it’s going to enjoy a free lunch over these.

Revenue in January was up 75% compared to the same period last year, “with back orders fulfilled as stock was received.  Our forward order book across all parts of the Group is also substantially ahead of last year which is encouraging.”

There are big freight/logistics challenges, but Tandem is evidently rising to meet them.

My view

I have been following this company for years, believing from time to time that it has been severely undervalued.

The value I believed in is finally shining through, both in terms of the share price and the company performance.

And if pre-exceptional operating profit rises to £5 million+ for 2020, with more growth pencilled in for 2021, it’s easy to imagine that the current market cap of £27.5 million still doesn’t do it justice.

For a company which has significantly improved its balance sheet (I look forward to seeing confirmation of this for FY 2020), which is experiencing very strong growth, and which owns intellectual property in the form of recognised consumer brands, should the market be giving it a better multiple than this?

I suppose you could argue that the strong performance might fade, if foreign holidays and normal life makes a comeback. The demand for bikes and garden toys will vary from year to year.

But I note the 75% increase in January revenues vs. January 2020, i.e. versus pre-pandemic, pre-lockdown revenues.

So I haven’t quite managed to sell this one yet. I haven’t yet decided what I’m going to do. For today, I am curious to follow the story a little longer!

PS: In a late RNS, it was revealed that investor Simon Bragg has upped his stake to over 11% of the company. Interesting!



  • Stock data should display here.
Market cap £20.2 billion
RNS Final Results
Writer disclosure No position.

As usual, I will check the short interest here. This is a company where I heavily favour the bears, so I’m curious to see what they’re doing.

There are currently just two companies with disclosed short positions (because they shorted more than 0.5% of the shares).

But the share price is now significantly higher than it was back in 2016-2017, when up to 20% of this company was sold short. It has approximately ten-bagged since then.

So even if only about 1% of the company has been sold short today, that’s equivalent in market cap to 10% back in 2016.

Perhaps there are quite a few funds with less than 0.5% of the company sold short, who don’t need to disclose?

Bear in mind that 0.5% of Ocado is worth £100 million!


The results are bad, but there’s nothing new about that.

Revenue improves to £2.3 billion. Looking forward to FY 2021, the company is forecast to make sales of £2.7 billion. So we have a price to sales multiple of around 7.5x.

There is a small EBITDA profit of £73 million for FY 2020, and a pre-tax loss.


The company is as ambitious as ever. Capex of £700 million is planned. Revenue growth should be excellent, but Ocado says the UK retailing revenue will be “highly dependent” on Covid-19 restriction.

My view

I’ve been wanting to short this one for years, but thankfully stayed away and dodged a ten-bagger. I should have just closed my eyes and bought it!

Looking forward, I’m starting to think that a good shorting opportunity could be coming into view. Net cash at period-end was £671.6 million, and the planned capex spending could wipe it out.

For now, it is easy for a company like this to raise new equity. At some point, that will change. When it does, I hope I have my finger ready to push the button.



Acquisition of Garden Trading – this looks strange to me. Joules is supposed to be about clothing and footwear, right?

But at least it’s a small deal relatives to the Joules market cap. £9 million upfront, plus £3 million of deferred consideration, in a mixture of cash and shares.

We are delighted to announce the acquisition of Garden Trading, which is a fast-growing and highly complementary brand to Joules in the attractive home, garden & outdoor category. The acquisition will help to increase the Joules customer base, broaden our product offering and strengthen our digital platform, which are three of the Group’s key strategic growth pillars.



AGM Trading Update – Numis shares are bid higher today as FY September 2021 gets off to a good start. Revenues up 50% vs. the prior year.

Interesting to note how strong the investment banking side of the business is. Some big deals despite Covid:

Investment Banking revenues have continued to be strong despite the absence of COVID-related fund raising activity in the period.  Average deal fees have increased due to a number of high value Capital Markets transactions, both public and private, in the Technology and Digital Consumer sectors where Numis benefits from a strong client base and a network of international growth investors. Advisory revenues are ahead of the comparative period and the outlook for further UK M&A activity appears positive




All done for this report, cheers!

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