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Jolly, in which case CD&R might buy us out at a premium. Win win!
turnarounds have pretty poor odds, prof....have you actually studied the real world of turnarounds in any detail??
your zealous overconfidence is plain weird...
The buyout theory requires a vote - if other than at value plus a premium it will be rejected. As I see it, in the scenario put forward there would be CD and R on the one side, and IKO and the rest of us all lining up behind IKO. Union says all CD and R need to do to 'pick the company off' is to 'get IKO's shares off them.' I look at the feasibility of that. The first reference I find easily for IKO is this :-
"Canadian trade buyer builds stake in SIG
Insulation and roofing group SIG was a talking point as the FTSE 100 jumped 2.6pc, its biggest one-day gain since April 24.
Ben Harrington
15 July 2009 • 7:49pm
Traders toyed with the idea that Canadian company IKO Group, which is backed by the wealthy Koschitzky family, could eventually be tempted into making an offer for SIG after declaring it has built a 3.1pc stake in the company...."
If you look at the charts, it is in my opinion clear that IKO paid a minimum of 90p for their first shares, and the same for the balance before the final purchase of 30p in the offer. Should CD and R acquire IKO's shares, then if they bid within the following 12 months the bid would have to be for all shares at that price.
IKO have pretty much doubled their shareholding https://www.sigplc.com/investors/information-for-shareholders/information-on-major-shareholders
I do not seek to be definitive, and cannot, and for the purpose of this post it does not matter, but what shall we say - IKO has an average of 60p? Something like that?
IKO know their position, CD and R's position, and the market and potential well. They are not daft, nor are the other major shareholders.
I think there is plenty of room to include a potential buyout situation, alongside a recovery situation, in our thoughts as we move along.
In the meantime, if CD and R really wish to improve their position, and cheaply, they may consider buying now. In which case we shall see notifications.
Ian.B -- Some of the years you mention they actually made profits. For example, in 2019, their underlying profits before tax was £43m before tax. It was only after accounting entries such as "goodwill impairment" of £90m that they appeared to make a loss. Goodwill will "return" once covid subsides, Brexit gets sorted and and the macro environment improves.
However, no-one denies that this company has issues. That's why they ousted their CEO and CFO in February. Importantly for us, these issues can buy us a share for just 22p (from 100 or 200 they used to go for).
Sig will restructure, improve and recover. They will improve their margins too. That will not happen in 3 months and it won't happen in 6 months. But when it does happen, people will be kicking themselves for not getting on board for just 22p.
Good luck whatever you decide
The bottom line prof is it doesnt matter how big your revenue is, if you are not making Any money And racking up losses then the company is not going to be worth very much..
2016 - loss £121mil
2017 loss £59mil
2018 £17mil profit
2019 £124mil loss
2020 HY - £53MIL loss - full year will probably be around £100mil + loss based on H1 and covid on-going
I’m No longer in here and no plan to go long or short. I hope they can turn the continual losses around. It seems crazy that should a large supplier to the building trade constantly makes a big loss. Margins clearly are not right.
So...
I'm not speculating on what is and what isn't.
I'm making a straight up finger in the air guess that this will touch below 20p next week. At which point I'm going to load up ready for...
A) the recovery to 25, 30, 35+
Or
B) the buy out at 25, 30, 35+
Simples.
Take care everyone. Stay sane
I can see nothing to dispute in the Prof's post. It is an alternative view to Union's, and unless I see CD and R picking up more shares or somethIng else happens it is status quo. That is not to deny Union's view as to what is possibly conceivable.
Incidentally, has anybody any idea of IKO's average, to put some context into Union's post. Union?
Union -- the important thing is that we both agree that this share will go up. It can only go up. As you very rightly say, such a low capitalisation for a company with revenue of billions is absurd. Perhaps you're right and CD&R will make a bid for this. I personally wouldn't bet on it but...
...as Wilmsy rightly said I've made mistakes before. I was mistaken about covid which accelerated fast just before SIGs results and destroyed the macroeconomic climate. And I was also mistaken about SIGs results. The results they were indeed better than expected but not as better as I had expected.
Wilmsy, I hope that my mistake was just a mistake about timing, not the long-term direction of the sp. It will go to 40 and 60p. It will just take a little more waiting. In the stockmarket, paper losses are not real losses unless you sell. Time is our friend here.
I do need a beer Deb... great idea, thanks!
Prof - Do you honestly think CD&R strategy is just join a recovery.....? They have created the 25p floor - and rather uni spring news makes the share drop below that.....yesterday and a further -8% today. They have got it bang on, and Francis needed their cash.....and the raise. This whole enterprise value is only £262m......for a business that takes £600m per quarter in revenue - If they lifted that to 2% nett profit on revenue that is £12m profit per quarter or £50m annual. Which FTSE250 Market leader company do you know do that is valued at 5x EBIT.....NONE. CD&R are circling now and they will pick it off - all they need to do is take IKOs holding from them and they are there with ‘have to bid...’ situation. All PIs as usual would capitulate and take the cash and run- whatever the price was.....Once PE have their claws in your business, just accept its their way or out.....
Quality post!
So, if I got this scenario right...
- Francis is an undercover agent of CD&R.
- His task is to destroy this company, or rather, make it look like this company is destroyed. The ultimate aim is for CD&R to make share holders despair so that CD&R buy SIG very cheaply.
This sounds a little too cinematic for me. And there are logical issues with this line of thinking:
-- Why didn't CD&R buy more of SIG at 25p? Did they exhaust their allowance?
-- Why don't they top up now that the price is even lower?
-- What will be the reaction of other shareholders when they see SIG getting destroyed by Francis? The guy barely managed to get his shameful bonus voted by shareholders and that was was just a few thousand pounds... imagine when he starts showing bad result after bad result. He will be ousted even faster than his predecessors were.
-- Sig is predominantly owned by institutions. IKO, JPM, Pension funds, Goldman Sachs and more. These are not private investors to be bullied into handing over their shares for peanuts.
Well, I certainly hope you're right and someone will come and give me 40, 50 or 60p a share tomorrow but I personally don't see that happening.
I just see a company showing underwhelming results in a very bad climate to show underwhelming results. I see a CEO who presented the results in an even more uninspiring way than they deserved so that his work will shine even brighter in the next trading update (I assure you he'll be more eloquent and shiny then). Who knows, he might even ask for another £300,000 bonus if he makes the SP rise 100% from their lows today in a year from now.
SIG recently started on a path of recovery. This will take years to materialise but we'll get there. They need to try hard to claw back market share, inspire and train their people, sort out their branches and do a million things, small or large, on every level.
From now on, every trading update will be better than the next. They have the money to reshape and wait out the crisis comfortably. They have the sector knowledge, the branches and a decent name on their field. Soon enough, they'll have macroeconomic tailwinds too. I'll do nothing and wait the trading update (December, I believe?).
Good luck everyone