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As noted by others thanks for sharing your response vig. I am a bit perplexed by the claim that 3 of that top 5 holders in SRC have liquidated all their stock. For one - there does not appear to have been any RNS announcements on such significant II reductions; and further it would be one heck of a 'coincidence' that all three chose to exit in the same time period without a trigger. Suggesting investors should look forward to the uplift in activity is all fine and well - but the evidence of the last 18 months suggests otherwise - SRC have now spent/raised £600m and have a market cap less than £400m, price is back to its 2020 placing price, valuation is 3.5 EBITDA, debt is close to covenant ceiling, zero shareholder return from free cash flow. But its OK we managed to produce our legally required accounts on time and Breedon are going to the main market so we might pick up some of their AIM investors. If this is a strategy to deliver shareholder value then quite frankly I expect much better. SB
We know Pershing Sq have a stake in SRC and they are very careful about the resilience of the companies they invest in. I.e ability to withstand turbulence and long term growth prospects.
Many thanks Vigneron, for taking the trouble to write to Sigmaroc and sharing their reply with fellow private investors. Also full marks to Max Vermoken for actually replying in such a detailed way.
Difficult times but the SRC board have been positively active. They have had to raise money with a low share price, though the acquisitions presumably must also be somewhat cheaper as well. Am sure that if Warren Buffet invested in Aim stocks, he would have SRC at or near the top of his shopping list. Just a matter of being patient.
thank you very much for sharing Vigneron
agree with that,bigboyblue. thanks very much Vigneron, for posting and taking up the issue with them.
As you say, reassuring. Good to know too that the company replied promptly and in some detail to a shareholder's enquiry.
I got a very detailed response from Max Vermoken to my question on shareholder value decline.
It seems this is on their radar as something that needs attention.
I will summarise below.
Three major funds (top 5 holders of SRC) ceased to be investors as they shut their funds and liquidated all stock.
A further fund in top 5 sold out to avoid exposure to UK housing, even thought that sector is only 7% of SRC group turnover.
On the back of this there was other selling. This was no doubt compounded by nervousness in the markets over the macro economic climate.
How to resolve was discussed by the board and strategy agreed
1. Deliver good results and ensure our communications for Full Year Numbers was high quality. We worked endlessly with our brokers to deliver this
2. Get on the front foot strategically by executing on a series of transactions which further enhance earnings in order to give potential shareholders both the certainty of further expansion and also a reason not to stay passive: buy the shares today and take part in the uplift of this activity
3. Focus on new non-holders both in the UK and in Europe through roadshows and meetings.
On top of the above we are currently looking at IHT funds which might have to sell their Breedon holding as they move to the main market. If we can convince them to invest in our stock, we should through that stimulate further buying.
Personally I am reassured that they are trying to address the matter.
There is also an offer of a phone call to discuss. If a number of people on this forum wanted this, it may be worth arranging.
Vig - my comment on black rock wasn’t directed at anyone in particular - more we can’t lay the blame for what’s happening here on them alone. The point on using free cash flow for acquisitions rather than further diluting shareholders would be ok if the company had any intention of delivering a return to shareholders in addition to its acquisition trail. FCF of £50m pa sounds great but interest payments are going to eat into that over the coming years. A guess it’s the usual tale of this time next year….only in this case it’s this time in 3-5 years, maybe. Meanwhile we are making a small management team very wealthy. SB
Agree that BlackRock is not responsible for current share price. My comment is more general and related to my distrust of that organisation.
On the point of funding acquisitions, this was a question raised at the institutional investor call.
The CFO said plainly that there would be no need for further funding and that the 5yr acquisition plan was self funding going forward.
I have also been burnt on aim due to dilution due to such funding.
My view is that due to their good cash generation, that they won't need further funding. Just my personal opinion.
I have emailed SRC IR on the question of shareholder value as was suggested on the call. I await the reply with interest.
Blackrock have been playing around at the 10% level for the last six months - and to blame them for the current mess here makes no sense. It is clear that the company intends to plough on purchasing bolt on acquisitions, deferred consideration commitments and secured pipeline regardless of the short/medium term cost to shareholders. The market recognises these purchases need to be made through rights issues, placings - so existing shareholders will continue to be diluted hence the rush to exit. Being a good 'operational' company does not mean it is a good investment - in this regard the last two years have shown this has been a bad investment by those of us who have an interest here. The directors all received their full bonus entitlement in 2022 despite the share price cratering, with share options continuing to accrue and not even a veiled offering to smooth shareholders concerns on the lack of any return. Oh - and remember there is the small issue of the term loan repayments coming on line big time this year. Still, its only investors money. Good old AIM. SB
BlackRock investment is seldom good. They always have alternative agendas.
I was hoping Pershing would up their stake, but I guess as activist investors this may not be welcome, at least at this point in time.
I am happy to hold, but unfortunately at a paper loss for now.
I reckon that the current Ebitda to enterprise value multiple should be at least 7 to give an enterprise value of over £700m. Even that is quite cheap.
With the scale and geography that they are building then they would be looking for a multiple of at least 10 if they were trying to sell.
On current numbers that values the equity at circa £800m or double today’s market cap.
And Ebitda should grow and debt fall to improve it still further.
They have impressively managed the challenges of the last 12 months whilst still growing the company in a disciplined fashion.
Yes I am a fan - based on facts.
Maths is incorrect. It is Ebitda to enterprise value which is just over 5. Could stop growing and pay off debt in 18/24 months and is then on a multiple of 3.5.
Share price is depressed because of continuous sales by Blackrock.
Quality company with quality management who always put their own cash in and don’t just rely on options. A lot more to come here.
The share price here is easy to understand in my view. PI's try to value this looking at market cap alone which is nonsensical when they have £240m of gross debt. Net debt is ~£170m, add the market cap of £375m at 54p and the enterprise value is £545m or 79p a share. That puts this on a current adjusted PE of just under 10x... Plus anything with significant gross debt is going to struggle when SONIA + interest margins reach >6% as they are losing a significant chunk of current & future earnings...
Ok.The EPS was 8p.,but it seems it is predicted to be 7.4p.2023 and back to 8p.2024.Is this why there isn't much movement on the price-or is that a too simple analysis for an excellent expanding company?The P/E should probably be a lot higher,but that is the market ar present?
The call was conducted in the usual confident way
It ap po ears they are doing everything right, but still the shareprice remains depressed.
The broker has 120 target with 100% possible upside.
Hard to understand.
Their acquisition trail continues, with 10 projects in the pipeline.
perhaps it is continuing concerns over the macro, which seems to have been the main driver for the initial decline.just musing,but agree i was expecting at least some modest pick up on these results.perhaps a slow burner?
Brings out stonking results,ahead of targets,and what does the price do-nothing.Anybody explain this?
not been able to go through in detail as yet,but initial view is very impressive.
just due to general market concerns,imo. yesterday's rns was potentially mildly positive,although the amount involved is relatively modest.the fact that it may be subject to appeal also makes its impact less immediate.
Any reason for todays small drop considering the RNS was positive, was this just due to the ftse 100 drop today..
More important what they can do with this cash injection, if not appealed.
The £17m awarded in damages is a little over 2p a share.
Agree. Couldn’t resist a few more based on that RNS. The price is like a 50% discount
In my opinion. Just have to wait until the world gets back to normal again. Could be some time!
positive RNS today.things going on nicely imo.