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"Phoenix's behaviour on Hornby demonstrates"
Lets hope that isn't the case, Horby hasn't made a profit in years. I think it made a small loss in '15, ever since it's lost money.
Let's be reasonable and say 3 and a bit rather than 4 year. It's going to require a sustained high level of growth to reach your £30m in just over 3 years.
The sort of growth speeds that aren't what you'd expect from a mature business that's changed hands almost countless times over the last few decades.
When they have reached high levels of turnover it's been in the past at the cost of profit.
So lets imagine that's going to be the same this time. In 2015 turnover was 56m and profits 3m, on that basis you'd be eroding that debt at a much slower rate than your assumptions.
I'd find that less than comforting.
They win both ways, the share price matters less to Pheonix, they even say that in their literature, where's you can only win (or loose) from it. They can also profit from the debt.
Their position is hedged against a slower recovery. That's why they hold the mix of equity and debt.
It's true to say losses are slowing, but so has turnover decreased, in fact the only thing that's growing has been the debt. Their hedge. So Shareholders have seen no material increase since collapse in 2015, in fact the equity price has slowly declined and now appears quagmired. Where as, as you point out, the debt holders are seeing their toggle increase by 5% per anum.
Any falter in the growth, given the level of debt (as you point out 1:1 on turnover) (and loss making) suggests the caution the share price indicates is warranted.
As I've said, I dont believe Pheonix are in a rush, they are getting more of the business each year just from the debt, hence I see no reason to be in a hurry to buy. It's a hold as best. I reiterate, these things take years to turn around and there's going to be plenty of opporunity to potentially pick them up at a lower price.
As mentioned before, the issue of SG's debt was raised at the recent AGM, and the impression was given that it would be rolled over as necessary in the future. Certainly Phoenix's behaviour on Hornby demonstrates that they are a long term investor who is not in the habit of calling in a debt. The CEO even stood up and said Phoenix was a long term supporter of SG and had no intention of changing their support. In line with this, they have also granted other credit lines to SG beyond the original 2018 agreement, so it would certainly appear they are on side. Of course the share price reflects the current debt level, but I am pretty sure it will begin to sink in soon that this debt is less of a millstone around SG's neck than it may at first appear. Currently, interest on the debt is allowed to roll over at a rate of 5% per annum as per the 2017 /18 agreements when Phoenix acquired their 58% stake. Theoretically, that is due for repayment in 2023 - four years away. If things go well the turnover will be £14m by 1st April 2020, £18m by 1st April 2021, £23m by 1st April 2022, and perhaps £28m - £30m by 2023. That assumes that turnover increases each year around 25% - 33%, but current management is really on the case on this, so who knows?
It is one thing owing £12m and having turnover of just £11m; and another thing entirely having debt of say £14m and turnover of £30m. As you can see, it is very unlikely that shareholders will have to wait for so long as 2023 before these shares jolt forward if the above turnover increases start to materialise in the interim, especially if they do manage to keep profit margins at 45%.
Interesting comments as usual Devon. For me whilst I accept without issue that the debt is of vital importance and cannot be just left to rise uncontrolled, what is more important now at the current stage of this company is that it rebuilds its turnover. Turnover of £11m per year for a group employing 62 staff was too low. It looks to me as though a very concerted drive to increase turnover is now taking fruit and we should see turnover for the full year come in around £14m. If they can keep the turnover increasing, and the shop refit and other initiatives should keep things bubbling especially the 2020 stamp events, then £20m turnover is a likely possibility within a couple of years - i.e. by 2022. That then gives SG a fighting chance of making real inroads on the debt as their margins are around 45% and costs / fixed costs have now been cut to the bone.
"I'm expecting the usual 3 small trades here. Business as usual."
I think the debt plays a big part in it. Until you get a sense of how the redemption is going to happen in 2023 (that's from memory) it's a BIG question mark. I believe the interest is being rolled over and added to the capital, so it just gets bigger.
I couldn't find the detail of the debt, so my concern would be what happens if it becomes obvious they aren't going to be abe to pay it pay anytime soon. They've got less tan 3 years and it will keep growing if they can't make payments.
As the debt is owned by the majority shareholder that's a potential big red flag.
And we know what happens when you can't satisfy a deby call don't we.
I may be wrong on that, it's not one I'm looking at in any depth, but I'd like to hear fron anyone if I've got the principal of that wrong.
Devon, it's time for you to get something wrong for once!
I predict heavier trading once we get out of this 2.5p level. Don't know why its taking so long.
"I'm expecting the usual 3 small trades here. Business as usual."
Bang on the money: just 3 again. LOL
In the upcoming premier sale, there are several high value english coins for sale at between £10 and 90 k with 2 over £100 k and one with an estimate of £450 k. If they all sell which i doubt it , that should be very good news !!!
"Presumably any Tory victory tomorrow will lead to the shares rising decently "
I'm expecting the usual 3 small trades here. Business as usual. AA were up 16% today. I own the bonds, they were up 5% on the day with an 11% yield. Slightly greater than spread if you buy SGI :)
Of course no yield to be found here. Pundits are talking up a 10% gain if Bojo gets over a 30 seat majority. I'm not holding out much hope for that rise on this one.
Presumably any Tory victory tomorrow will lead to the shares rising decently given that uncertainty is out of the way and everyone can now make larger spending decisions with more understanding of the future.
I certainly hope we get a Conservative win tomorrow. No doubt Labour would bring in a tax on stamp collectors as the stamps would be seen as untaxed assets by them!