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Trend seems to be positive again. Hopefully an ongoing controlled rise as confidence / sentiment returns
Nice 5% rise today, with a little buying at above the published offer price, which bodes well.
I note that REAT will be presenting at MelloLondon on Thursday November 17th - which hopefully should attract further interest:
Https://melloevents.com/mello-london-tickets/
I've been away on family hols for nigh on three weeks, so pleasing to see the upbeat year end trading update here, especially the Q4 upturn which has continued into this year.
Singer have a 2.5p target price, and state the year just ended should show 0.1p EPS and a £0.8m adjusted PBT.
This year is now forecast to bring 0.15p EPS and £2.2m adjusted PBT (incluDing a full year of LaddersFree of course).
At 0.89p that's a P/E of only 5.9.
Master Investor have issued this update on REAT - note that their EPS figures are rounded up substantially so are not to be entirely trusted!
Https://masterinvestor.co.uk/equities/sysgroup-centralnic-and-nine-other-interesting-small-cap-stocks/
"React Group (LON:REAT) – ready to double in price
Last Wednesday this leading specialist cleaning, hygiene and decontamination company announced a trading update in respect of the year ended 30 September.
Trading in the last three months of the year ended 30 September 2022, and into the current financial year, has been especially strong across the group, with all divisions continuing to win a broad spread of business providing the positive margin contribution and cash generation we are seeking. This positive start underpins the company’s optimistic outlook for the current financial year.
Shaun Doak, CEO stated that:
“Q4 performance has shown good growth which has continued so far in the current financial year.
The nature of these contracts provides us with both recurring income and potential to provide ancillary services. Despite the volatile macro-economic domestic and international background, the markets we are addressing are large and fragmented, providing significant opportunities for growth.
We remain confident that the high-quality services the Group provides will continue to be very much in demand and that we will meet our growth expectations for the current year.”
Analyst Greg Poulton at Singer Capital Markets rates the group’s shares as a Buy, with a price objective of 2.5p.
His estimates for the last year were for £13.6m revenues against £7.7m previously, with adjusted pre-tax profits of £0.8m (£0.5m) and earnings of 0.1p (0.1p) per share.
For the current year he sees £19.7m sales, £2.2m profits and 0.2p per share in earnings.
In June last year this group’s shares hit 3.65p each, since when they have been down to 0.72p.
Currently at only 0.80p I would suggest that these shares now have an upward path to travel, they could easily double again."
Hi Test,
I am not an executive of the company so this is not a discussion I need to have with the CEO.
I am posting here as I understand the sector well and have followed REACT for a long time.
It’s also basic business 101 stuff not to acquire EBITDA eroding assets.
The latest update (see RNS) states expected £13m of revenue vs an ADJUSTED EBITDA of £1m.
This is a 7.7% net profit, comparable companies in the sector generate 15%, some 20%.
The RNS also confirms the reduction in high margin activities, which the core of the business was founded on - not good.
Turnover is vanity, profit is sanity!
Boom;
'From someone that knows the CEO and the company I can tell you that the dilution of GP margin due to buying a contract cleaning company and a window cleaning company is a huge strategic blunder from the board.'
Hi Boom, you have obviously told the CEO of this fail, what was his reply?
ladders is high margin
tp .45p
From someone that knows the CEO and the company I can tell you that the dilution of GP margin due to buying a contract cleaning company and a window cleaning company is a huge strategic blunder from the board.
REACT should have focused all M&A on acquiring other specialist cleaning companies which have 40% plus GP margins rather than the 10%-15% GP type businesses.
I know that the Chairman will say it’s repeat and for a stable revenues BUT look at the EBITDA drop in terms of percentage and whole numbers - it’s been a disaster.
Unfortunately REACT are trying to play in the big league of becoming a general FM provider rather than expand their core, high margin specialist activities.
Can only see the SP going in one direction, especially as the PE ratio is now X22 which is hugely overvalued at the current SP.
Market PE for this type of company is circa x7 so expect the SP to drift to 30p unless something happens to pull the results up significantly.
Hi Pumpky. OMG, do you read tea leaves as well.? I bet your friends and family never tell you anything. How many times have you won the Lottery? Every week? BTW , Outer Mongolia ceased to exist a looong time ago. Stick to tea leaves.
No facilities to phone from overseas? OUTER MONGOLIA?
I messaged the CEO through their Website 'Contact Form' a week or so ago. Not received either an answer or acknowledgement. Not good. It's not as though he is handling thousands of employees. Has anyone tried phoning this guy?. I live overseas and have no facility for International calls.
Looks as though a transfer of 1.25M shares to a SIPP.
The 4M share transaction at 1.05p is undoubtedly a buy since the MMs have kept sp increase, and although at midpoint, a serious buy like that would get a great price on a share with not much liquidity.
Indeed good news. The last month has seen some 'significant' buys for a company of this small size. The odd million here, another odd million there. What it needs now for a significant impact on sp heading N, is a v good RNS.
Jonathan Whitmore has been buying more - he's now up to 30m shares having bought another 3.65m shares:
Https://uk.advfn.com/stock-market/london/react-REAT/share-news/React-Group-PLC-Holdings-in-Company/88810405
Not sure why he's disclosed this to the company though. He's now up to 2.86%, i.e less than the 3% disclosure threshold, and he's not a connected person AFAIK. Oh well, it's good news anyway!
It has been profitable, however, HY result bucked the trend and is v disappointing. Hope the new acquisitions can bring return Co. to profit at FY result. Need some new business RNS to get sp heading N, or further S if no news before year end on Sept 31.
loss making ffs
uninvestible imv until management show that they can manage to turn a decent profit
Reat is a contract cleaning company, and as far as I am aware, are not refuse collectors.
Does anybody know if Reat has good staffing levels. If so what are its ability to take on new contracts? Refuse is becoming an issue in London and councils are claiming contractors don't have staff to maintain services.
Agreed, a loss is a loss. CEO mentions increase in costs due to Fidelis acquisition, surely we should have seen some profit from this company at good margins, as announced during T/O.? Disappointing, and Market not impressed. No mention of stage payments for acquisition of either Fidelis or Ladders Free, so those still to come . Damn.
Win contract or not - loss is loss, just pure numbers in H1 results, but at least not that bad as last time.
REAT had already flagged that contracts won would benefit H2 and that H1 would suffer from the additional investment in preparation for those contracts, so hopefully that's already in the share price.
Confirmation today that trading is in line with expectations for the full year should reassure the market.
Plus there's news today of "three contract wins in the education sector across four sites with a total value of approximately GBP798k" post the 31st March period end.
LaddersFree has also integrated quickly and well, and is set for a "record period of performance".
1/2 year results due end of this month. If they are 'good' maybe that will initiate a few buys. I have never seen a share with so few transactions.
Cheers merlin_andrew - here's the feature on REAT:
""My first pick was cleaning services firm React Group at 1.4p. Small caps can be volatile, with the stock trading above 2p only to close as low as at 1.10p recently. The company raised its market capitalisation in cash for the acquisition of LaddersFree – a capital-light business that the board believes can be integrated into React’s offering then scaled up. Shareholders may be smarting from this, but the board believes this is an incredible opportunity given LaddersFree’s service partner network and its impressive gross margins of more than 50% in the last two trading years.
Chair Mark Braund believes this can even grow – LaddersFree recently won a competitive tender which apparently came in “significantly below” the price of the next competitor. The deal is materially earnings-enhancing and none of the board are taking large six-figure salaries from the company (unlike many Aim shares), instead aiming to be remunerated through their options. Put simply, there is no reason to do this deal unless the board believes in the long term. So while there may be short-term pain, the investment thesis hasn’t changed."
Bought a small holding and i know this is very small and not for widows or orphans. I done my research and they are revenue every year and winning lots of contracts recently and the shareholder register contains a lot of well known fund managers. You pay your money and take a risk. Good Luck everyone and happy investing
REAT is tipped in this week’s MoneyWeek magazine.