Member Info for Banburyboy

Hi Beach - im not sure the rise this morning is the financing RNS more general positive sentiment on travel.

Today is a major refinancing : At present they have
- £250m bond repayable in May 24 which pays 3.375% interest
- £70m bank loan which will be a high rate - I need to find out

They intend to
- Raise a new bond of £250m. I think they will do well to get 3.375% as a coupon rate given the high risk profile and debt. Use proceeds to
- pay up to £100m off old bond
- clear £70m overdraft
- use £80m + for general corporate purposes.

I don't like the last bit it implies they are not comfortable on cash generation but it could be precautionary
Not sure why we don't repay the whole bond as we still have the issue of £150 to pay in May 24. Can kicked down road.

The company is worth £7 for sure but that announcement makes me think some of the optimistic assessments on here of £10 plus are a high bar.

Hope its in lay man terms
Banbury

Well done all holders 444 to sell (my prediction for after the Trading update)
Really pleased with todays action.

Hi Peturbed - all the properties for sale have to be reclassified as part of the accounting rules. The total for sale valuation of all properies shown in the accounts was £16.9m and they took a book loss of $4.5m in the revalauation to the accounts.

How much of this is Folkstone we don't know but clearly not an eye watering amount. Good news though
- any cash realised goes straight to bottom line as no mortgage
- saving of I think circa £1.5m on rates and the NCP lease we had (that's in the sale documents)
- probably bigger saving on utilities and facilities management contributing I am assuming to the uptick in insurance margins
To be clear on Tour - i'm OK with River cruises in Europe. iIs the far flung destination stuff - I cant see any value in it.

Gordon - quite a few banking covenant restrictions on dividends - see the RNS
Charles - cheap rates !! Yes in a macro economic sense but rates depend on risk profile be interesting to see what the nat west / Barclays event reveals but I think the risk profile of the company will mean we pay more than 3.375 on current bonds.

As with sale of tour , time will tell on the proposed bond rates.
Main thing is market looks good today and I am optimistic on Saga (its worth £7 I think) but cautious

Gordon at a more strategic level I think Elliot and the lad from the insurance company who tried to buy us out at 33p had it right in terms of breaking up the company. to create shareholder value. That opportunity in the main has now gone.

Al we seem to do is burn good insurance money, raise money from rights and bonds just to keep the travel part of the business afloat. Yes it might make a little bit going forward but lifetime its cost the company a fortune.
Insurance on its own we would be £9 a share now.
Cruise I concur wont go and is here for the long haul (excuse the pun) but the maths does not lie on tour and I see the new boss and this announcement rather as part of a strategy to disinvest. Destinology went and we took a £40m loss why not do similer on Titan £80m for corporate purposes !!
The share price would fly on that announcement.
Time will tell :)

Gordon - not sure on this need to research more but as I see it :
We will pay a fortune in fee's the rates are usurious we paid £10m for the rights issue and this will be the same ballpark.
What matters is sequencing here so :
- First its the new term loan at £250m. Anything lower than the current rate of 3.375% is a result but my bet is similer or higher due to our risk profile particularly on travel.
- Proceeds to purchase back (at coupon or lower hopefully) up to £100m of exiting term loan
- £70m to pay back bank facility - I guess this will be a high rate but need to find out by looking at accounts past RNS's
- the bit I really don't like is the rest will be for general corporate purposes that's at least £80m. It implies to me they are still nervous about cash flow - Tour is still burning cash and more to come !.
This does leave us is May 24 with a need to re-finance £150m of bonds and a degree of can kicking and hope for the best
I would be massively happier if they had redeemed in full the old bond.

Sorry its not what others what to hear but its important to be objective

Does go to show how uncertain Travel is.
The recent TU said they had "booked" the cruise fares from June / July from restricted cash flow to unrestricted. This means 3/8 of what they have booked will need repaying . As Jo says short term only

Anwick

I owe you an apology I realise you meant £14.28 not £14-28. The hypen you put in makes all the difference.

Alnwick - that's one of a hell of a rose tinted summary. £14-28 !

- £28 a share is a market cap of £3.9bn To get a 10 PE after tax (I think you mean before) post tax profit would need to be £390m grossing up for tax at the new 35% rate would be £600m before tax. Sorry but that is not going to happen .
Even £14 is an unlikely stretch, as it requires £300m before tax profit which we are miles away from.
- Cruise has a cash contribution of about £25m per annum from both ships and profits are constrained for the next nine years whilst the debt is cleared. After nine years there are no debt repayments or interest and they are really profitable cash contribution £70m but what will our lovely ships look like after nine years. Will anyone want to sail on them.
- Tour is a dog, wafer thin margins , negative balance sheet value , prone to unforeseen risks and hopefully up for sale
- Insurance is doing well but we do have an up and coming FCA review which might restrict our three year fixes which are the mainstay of the insurance turnaround .
I'm glad you liked my observations and comparisions on Hastings but you have used them very selectively . I pulled them out for a poster called value wise who was rather negative (too much so) on insurance. I used them to demonstrate there was no chance of a goodwill write down in the 2021 final accounts which proved to be the case and I had a side bet with Rogue . The companies central scenario in the 2021 accounts for Insurance valuation is £934m £6-7 a share .

In terms of the maths on your post. Insurance pre tax profits are £140m. Travel I agree £60m might be possible if no volcanoes , TUI bankruptcies, new virus so £200m before tax. 35% tax = £130 post tax applying your ratio of 10 x earning = £1.3bn 140m shares. £9 a share - I think is possible but at the higher end of my range of fair value which is £7-9.

I think this share has some real milage yet but am in a different space to you on valuations .

Marcus I put about 100k in shares over the years, stupidly mostly on AIM. I got down to my last 22k and after studing for ever but the lot into SAGA ). Average about £1.70 after averaging down so 150% up. £5-75 to £6 and I have all my money back so i'm not leaving until then

Ice
A consortium led by Banbury and Beach has offered a notional £1 for Tour. Our broker Dofus Winchmore provided a virtual briefing on the proposed acquisition and only Numis attended.
The proposed acquisition (of which there can be no certainty) and will be subject to due diligence was clearly well received.
Banbury and Beach have negotiated a banking facility of up to £250m with a leading high street consortium should as expected any future events cause the future costs and income of the acquired Tour business to be volatile

Its actually in the broker ratings in this site but didn't come through the news button as normal so well under the radar. £5.85 !!! Clearly haven't realised we have a Tour Arm (sorry couldn't resist). Seriously great upgrade.

Sheltie - good post didn't know about Numis.
I think we have traction up to £5 in particular resumption of cruising and I think bookings will go crazy if they can dock in amber list countries and re-admission into FTSE250.
My thoughts on selling are before the interims etc where I might top slice if its over £5

£4.30 to sell - looking great.
Hopefully some new investors

£4.22 to sell anyone any idea's

Rox - where you been ? Just need to find Dofus now.
You have to date done well with sneaky feelings will it come to an end ? I really cant see any thing positive with Tour.

Intersting article from BBC news. For those that don't follow US Politic's Ron De Santas is the favourite to succeed the world biggest ego should he ever decide to stand down as republican leader. I think death or jail are the only two events that might cause that. De Santas is crippling his own state (Florida) biggest employer to please Mr T. And others think the UK has problems :) https://www.bbc.co.uk/news/business-57482017

Hi Beach all fair questions.
The more I get my teeth into Tour the more gristle and bone I feel - at present it's unpalatable
There is limited information on travel insurance profitability. Other broking is hugely profitable £29m contribution from 232k of policies. Margin of £125 a pop. Travel is in there but is it the mainstay of £29m ? How much ?
The interims said Travel loss from pandemic was £3.3m for four months so £10m for a year.
In good times they have 161k of tour passengers (from accounts) and 40k of cruise (Banbury guess assuming 80% two ships and a two week average cruise)
The ask is to link the other brokering profitability through to the 161k tour passengers. Hard to do but intuitively not enough in here £2-3m max to change my mind.
If we can sweeten any deal to divest Tour by including travel insurance I would say bring it on

Zcc
Good point and I did have the same thought. As margins stayed the same I assumed £ not policy count.
They also mention policy deflation and said they did well against it !
With the amount of fixed policies they now have (which acts as a buffer ) as policies and premiums are fixed. Also deflation is lowest in the 65+ group I seem to recollect 2%
They alkso ended the period with more cash £3m than they started with despite Tour buring through £30m.
I agree its not clear cut but enough in there for me to think insurance is doing well as cash generative .

Gordon I am truly stunned by the four month cash burn on tour. Two observations :

Burn on cruise is limited as the staff are from overseas and off payroll
Burn on Tour is two things
1 -Staff - I do not and have raised a number of times understand why were they not furloughed ? What do they do of a day
2 - Sharp practices - Saga up until March 20 were spending tour receipts in advance of customers travelling, when the flow of new customers stopped all their chicken came home to roast. I thought the worst was over and newreceipts are ringfenced but wonder if they are still feeling the impact of rebating tour money received and spent by the company prior to March 20 but relating to travel for the period Ist February to 31st May -- it looks like it. And that will add to burn
Had they ring fenced Tour recipts earlier we would have been in trouble well before the pandemic.

They had Titan up for sale for £100m in Jan 20 -- the pandemic put paid to that. No one could have guessed 15 months later that it would still be mothballed. I think they have kept it alive as clearly in the short term it will do well when normality returns. Beach does not agree but I wonder if the new Chief Executive at Tour is part of a divestment strategy - I really hope so . Tour up and running, market boyant £15m profit on £300m sales might get £50-£100m for it which we can pay dwon debt with.

I hope and pray the management strategy is as above.
Cruise and Insurance are a great fit. Insurance worth I think £9 a share standalone based on this update. Cruise not sure but has value .
Banbury

Two absolute givens from my perspective in the TU

First -The insurance numbers from the Trading Update are outstanding – 2% decline in premiums and expected to be flat based on recent trends. Flat revenues in a period where average policy cost have reduced 14% is excellent. This is underpinned by good customer service and 43% of the book having the brilliant fix

Second – sorry all but Tour is an absolute dog, Two lifts from the TU.

“Through the first four months of the year, the focus has been on ensuring the safe restart of the Travel business, while keeping costs and subsequent cash burn to a minimum. The monthly cash burn for the four months to 31 May 2021 was at the lower end of our previous guidance of £7m-£9m per month.”

“Cruise cash flows are modestly positive for the year to date as a result of the collection of final balances on June and July departures.”

Someone previously commented readying the ships contributed to the increased cash burn – clearly not its all Tour related and truly shocking to me.

Lift from the accounts for year to 31st Jan 2021

“During the year, the Group provided an additional £64.1m of cash to the Tour
Operations business to cover trading cash flows, £46.0m of which was provided in the first half of the year when the business experienced higher cash outflows for customer refunds and overheads.”
During the year, the Cruise business reported a net cash outflow of £36.6m, of which £30.7m related to the first half and £5.9mrelated to the second half. The Group paid £25.7m of trading costs, refunded £8.1m of advance customer receipts, paid restructuring costs of £3.2m and interest costs of £8.6m.

So taking out interest on ships 70% of burn in 2021 was Tour and 100% in 2022. Outstanding.

I have already segmented the income and in good times Tour operates on wafer thin margins (1-3%) and is prone to risks – volcanoes, TC going bust, world events. In bad times they eat cash all of the £28m to £36m burn in the first four months of this year and 70% of last year.

My conclusion holds Insurance and Cruise as standalone make this a £12 a share company --- Tour I think acts as a material drag, low margins, cash eating and too prone to unforeseen risk.

I know others won’t like this but the numbers don’t lie and they are the companies numbers
Banbury