Newsletter changes
Hello everyone. This is just a quick note to outline some changes I'll be making to Firm Returns going forwards. These include the addition of a new weekly newsletter, and a Firmer tier content and price change. Let's start with the new weekly newsletter.
Bottom Feeding
I started an experiment at the beginning of March wherein I profiled three different companies trading around 52 week lows each week, and posted them on https://www.bottom-feeding.com.
This proved to be an invaluable source of idea generation, so I've decided to send out future posts to members of Firm Returns as a free weekly newsletter, which you'll see in your inbox as Bottom Feeding.
In each edition you can expect to see company profiles structured as follows:
Churchill China (CHH.AIM)
CHH manufactures and sells ceramic and related products in the UK, Europe, US, and further afield, to customers primarily within the hospitality sector.
In the year ended 31 Dec 2023, the company generated total revenue of £82,339k (FY22: £82,528k), operating profit of £10,252k (FY22: £9,689k), and net profit of £7,717k (FY22: £7,895k).
Total equity at 31 Dec 2023 was £59,941k (FY22: £56,648k), and it had net cash excluding lease liabilities of £13,933k (FY22: £9,604k), and £13,256k (FY22: £9,127k) including lease liabilities.
CHH generated net cash flows from operations of £8,475k in FY23 (FY22: £3,973k), and invested £5,407k in capital expenditure (FY22: £4,704k). It generated free cash flow of £4,635k (FY22: £727k), which it used to pay dividends totalling £3,519k (FY22: £3,062k). Note: I’ve used depreciation and amortisation in the FCF calculation, since maintenance capex isn’t disclosed.
Market capitalisation: £51.14m
Valuation: Using the FY23 figures, the shares currently offer an earnings yield of 15.1%, free cash flow yield of 9.1%, dividend yield of 6.9%, and trade at a price to book value of 0.9.
Reason: Downturn in UK and European hospitality sectors (it’s largest markets), causing profit guidance to be downgraded. Labour cost inflation resulting from the UK budget is also likely to have an impact on profits.
Interest level: High - The company is nearly 230 years old and run very conservatively, making it likely it will be able to get through this period of economic weakness intact.
Company Updates
The next item of news relates to company updates. Up until now these have been publicly available as part of the free tier, but going forwards, I will be moving them into the Firmer tier. The reason is simply the time commitment involved in writing them - they often take 20-40 hours to research and write.
With the edition of the new weekly ideas newsletter (Bottom Feeding), I hope free subscribers will still feel they receive plenty of value from their subscription.
For those wondering, the next company update will be on Warner Bros. Discovery (WBD) and should be out in the next few days. After that it will likely be Ecora Resources (ECOR), and possibly Secure Trust Bank (STB), though I may wait until after we get the Supreme Court motor finance ruling in July. Similarly for tinyBuild (TBLD), I'll probably wait until Kingmakers releases, since that's likely to be the most impactful event this year.
Pricing Changes
Finally we come to pricing changes. From the 3rd of May I will be increasing the annual subscription price of the Firmer tier to £100, while maintaining the monthly price at £15.
The increase will help make Firm Returns more sustainable (it's currently a loss-making venture), and I hope, still provide excellent value with 2-3 long-form research reports, and 8+ company updates each year, in addition to notifications whenever I buy or sell a holding in my own portfolio.
I greatly appreciate the support of the 15+ people who have signed up for the Firmer tier since I launched it last year. You have given me the motivation to keep writing each day on top of my already demanding full-time job.
For anyone else who'd like to sign up, you've got until the 3rd of May to lock-in a year at £30 before the price increases.