David Talbot spoke at the London South East-Red Cloud Securities Global Mining Special. Watch the full video here.
London South East prides itself on its community spirit, and in order to keep the chat section problem free, we ask all members to follow these simple rules. In these rules, we refer to ourselves as "we", "us", "our". The user of the website is referred to as "you" and "your".
By posting on our share chat boards you are agreeing to the following:
The IP address of all posts is recorded to aid in enforcing these conditions. As a user you agree to any information you have entered being stored in a database. You agree that we have the right to remove, edit, move or close any topic or board at any time should we see fit. You agree that we have the right to remove any post without notice. You agree that we have the right to suspend your account without notice.
Please note some users may not behave properly and may post content that is misleading, untrue or offensive.
It is not possible for us to fully monitor all content all of the time but where we have actually received notice of any content that is potentially misleading, untrue, offensive, unlawful, infringes third party rights or is potentially in breach of these terms and conditions, then we will review such content, decide whether to remove it from this website and act accordingly.
Premium Members are members that have a premium subscription with London South East and have access to Premium Chat. You can subscribe here.
London South East does not endorse such members, and posts should not be construed as advice and represent the opinions of the authors, not those of London South East Ltd, or its affiliates.
@BitterestPill - I disagree with your assessment but either-way I think we can agree that the significant bulk of the departures happened a number of years ago.
If I understand your original point correctly, I think it was how do they replace the revenue from these departed fee earners. I would contend the revenue reduction from these fee earner departures in FY2019 or FY2020 has already been lapped by subsequent full year accounts/ trading updates. In the LP you highlighted previously, we can see that membership has been stable over the last 12 months. We can also see that groups headline revenue numbers reported at 31.03.21 and 31.03.22 (from recent trading update) were (roughly) the same. So unless we are seeing a significant net decline in fee earners since 31.03.22 I cannot see the current/ go forward revenue hole that you can see.
That's not correct. Those legacy Ince partners who stayed were all appointed to the LLP on 31 December 2018, at the time of the liquidation, as is clearly shown on Companies House. The 34 are all people who have quit Ince/Gordon Dadds under the current management. Those are the facts.
@CaneToad. .... all the best to you. We will get the next financial snapshot from the company in September so that will give you the opportunity to get the confirmation you need to either buy back in or pat yourself on the back for dodging the bullet.
Found it, thank you for this. With you number have gone right back to the founding of the LP i 2015 to get those numbers. So for this LP as you can see the vast majority of that number left/were let go, when it went in to receivership (prior to the takeover) and a handful more during the COVID lock down period (the company announced a round of redundancies then). Part of the stated strategy during the takeover was to reduce the number of unprofitable partners and clearly this was a big part of why the "Old"Ince was not profitable and hence why it went in to receivership.
If you look over the last year it is 6 departures and 6 appointments so it is stable for this LP and appear to be expanding for others.
@erratum. You have grossly misrepresented what I said. Your version of my statements are materially different to the words that I used.
What I said were the following. They can be easily checked from my recent posting history. Your words are made up!
1) "I wondered if the dividend was prudent or even legal".
I said that, because they had announced that they had maxed their RCF. I don't consider it prudent for company with limited cash to be paying a dividend. According to the Companies Act 2006 a dividend be paid only if there are sufficient distributable profits. It's difficult to determine, hence my use of the word 'wondered'.
2) "Arden itself never being very profitable"
This is a true statement. It is very different to what you claimed that I said.
3) "Trying to be 'right' is lethal in investing"
Go and read a few investment books, e.g. Minervini, where you'll read precisely what I said.
No, I mean partners. Ince in the UK is made up of various Limited Liability Partnerships. Ince Gordon Dadds AP LLP , for example, has been 35 of 84 partners resign.
Not partners but these 7 new fee earners were also announced last week
"We are pleased to share that we are growing our Piraeus office with the addition of three shipping litigators, three ship finance experts, and an additional mariner to the admiralty team.
To learn more, click here: https://fal.cn/3p66G
Welcome Ioanna Gavriiloglou, Henry Stockley, Christos Palimeris, Anthi Kekatou, Io - Georgia Papadimitriou, Domniki Symeonoglou and Michel Farach to the team! "
As I say partners come and go, below is the announcement of one arriving 5 days ago (posted on their linkedin page)
"We are pleased to announce that Stephen Chan, a seasoned commercial litigator, has joined Ince as a new Partner in our Hong Kong office.
Stephen's appointment highlights our commitment to further expand our dispute resolution practice across the region."
@bitterstPill ...... I think you mean directors not partners ? Companies House only records directors and there have been a number of changes to the board over the last 6 months. That said Partners come and go, it is a normal part of running a legal practice.
A law firm's revenue is generated by its partners, and Ince has seen a number of significant partner departures in recent months (all on Companies House, for the doubters). As an investor I would be asking how Ince are going to replace, let alone increase, the lost revenue, with the business model they have.
@HumpyDumpy - Yes, it is very tedious I know and I thank you for your patience. As you stay time will tell !
@Canetoad you said "Kindly point out a single comment that I have made about Ince, which is not 100% fact, reported on the public record, either by Ince or by reliable sources." Here is a few just from your posts today that strike me as opinion.
Payment of the dividend was probably illegal - its not
Arden has never been profitable - look at its last set of accounts
Trying to be 'right' is lethal in investing - my experience is it beats being wrong
Canetoad/erratum - The tension between you guys is sizzling! Brings back memories of Kylie and Jason. I’m sure you’re both decent blokes with better things to do with your time than bicker. Time will tell who is right. Nothing else.
@erratum: You'll do better sticking to facts rather than opinion and hope. Trying to be 'right' is lethal in investing.
Kindly point out a single comment that I have made about Ince, which is not 100% fact, reported on the public record, either by Ince or by reliable sources. FYI: that is the purpose of this channel. I'm interested in hearing FACTS about Ince, whether they be good or bad. You seem to be fixated on reporting your own calculations and opinion and are very touchy when anybody says anything which doesn't fit with your own view. I have my own opinion why that is.
FYI. The fact that the share price is not rising means that your opinion is wrong.
@CaneToad. I am keenly aware there are many people on the board that know the company very well, but as you demonstrate with almost every post, you are not one of them.
As you have concluded yourself this is not a stock for "old-fashioned" investors. Best of luck to you and thanks for your shares, I will sell them back to you when you decide to get back in.
@erratum: I couldn't help returning your 'as I have explained to you numerous times' line. That's good!
Do you even realise that there are people here other than yourself that know something about this company?
@erratum. I'm old-fashioned. I like to see a balance sheet and/or trading update which gives actual levels of cash and/or borrowing headroom. To my knowledge, there has been no such update for months. I never said there had been any breach of any debt covenant. What I said was that they had (many months ago) used up almost all borrowing capacity on their RCF. Do you have proof about the levels of cash they have or is just your opinion?
As I have explained to you numerous times, I don't hold onto falling knives. I get out before a loss becomes significant. As they say, 'you can always get back in'. I would do that after seeing financial results rather than predictions from experts on a bulletin board...
@ canetoad. ... Yes you are right Gordon Dadds bought Ince out of receivership. This was 3 years ago and a significant amount of equity was injected in to the business at the time.
As has been explained to you numerous times already the business cash flows are highly weighted to the second half of the year, the last snapshot we had was at the end of the first half (September 2021). Secondly, on an operating basis the business has been strongly cash flow positive both in 2020 and in the first half of 2021. The cash flow pressure has been due to the lumpiness of the payments of (contingent) deferred compensation to the "old" Ince partners, this pressure has now peaked and from September of this year becomes de minimus. Finally, If there had been any breach of debt covenants this would need to be RNSed and we there has been no RNS to this effect. All of this is before the net cash received from the Arden deal.
Anyway not clear to me how you will recoup your losses on this one as you have sold.
@erratum: "Why would the business be headed for insolvency?"
Ince has been insolvent before - just a few years ago ... They were £34m in debt and the partners refused to bail it out. They didn't want to contribute anything and creditors got back ~20p in the pound. Banks tend to remember things like that:
What has changed? The 'new Ince' has maxed out its RCF and has limited cash available, while it seems that they're still a low-margin business that's generating lots of bad press. It's crazy that they paid a dividend. I was a shareholder at the time and I wondered if the dividend was prudent or even legal. With Arden itself never being very profitable and their main business now torpedoed due to losing NOMAD status, it's going to be interesting to watch closely. It would be interesting to know what clients they've kept.
I'm hoping that the business shows some signs of growth and recovery so I can recoup some of my (significant) losses on this firm.
My guess is that Arden will struggle to breakeven now that the Nomad business is gone and they might even need to be subsidised.
I'll keep an eye on it and will consider a new investment after seeing solid financial results. They've kicked a lot of own-goals in the past 6m and I'll need to see some strong evidence that a recovery is in play before touching it again.
@CaneToad, Why would the business be headed for insolvency ?
1) in FY21 (and on similar revenue they have reported for FY22) on operating basis, they made a profit and were cashflow positive, given they have further reduced overheads during that period why would they now be loss making to the point of insolvency ? As a reminder for FY2021 Gross Profit was + 44.3 million, Ebitda was +18.2 million, net Income was +6.1 million
2) Also based on the first half figures we have for FY22 we also know on an operating basis they were profitable and cash flow positive . Gross Profit was +21 million, Ebitda was 7.5 million and Net Income was 1.6 million. We also know because of the seasonality in the business that the second half of the financial year is better than the first half.
3) Since the end of the financial year we have added @5 million of net cash from the Arden acquisition
So based on the above it is easy to see that the business on an operating basis is profitable, cash flow generative. As for the the non operating cashflows and accounting treatment which have had such a distorting effect and primarily relate to the deferred compensation due to the Ince partners at the time of acquisition, that impact has now peaked and will drop off a cliff from September of this year. From that point onwards operating and reported numbers will much more close align.
Better days? I'm not yet 50+% sure there'll be any.
One thing for sure is that the CEO and partners will do extremely well. That's usually the way things go for AIM companies.
The problem with averaging-down is that it lulls you into a false sense of security, because it will usually work. But inevitably and inescapably, it will eventually blow you up in spectacular fashion.
In 99% of the time, it's the sign of somebody that has no risk control and hence mediocre- or poor long-term returns.
With Ince, you just have to look at the price history on any time scale to see utter destruction of shareholder value. I'll wait and re-enter if I see any evidence that there's a profitable business. But I'm starting to wonder if this is headed into insolvency.
Added yesterday and again this morning to average down,.....we will see better days soon enough, I am sure of that.