Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
I guess we'll find out in the next few days whether it was Quilter, as they'll have to issue an RNS if they have further reduced their holding.
So they've acquired just under 15% of the shares and waived the 20% condition. I assume this exercise will have flushed out short term traders / less certain holders, so liquidity may be tight for a while and this could underpin the share price. I wonder what their long term aim is - having a 15% stake means they have a reasonable starting point if they were to launch a full offer in the future. What we really need is a period of boring performance that starts to see the discount narrow. I still like the aim of the trust and the portfolio is reasonably diversified, particularly with minimal retail exposure.
I suspect they've struggled to pick up many and that they won't meet the condition of acquiring 20% but may well end up waiving this. As to the issuance of new shares, the problem is that the shares are trading at such a big discount to NAV that existing shareholders won't want to see an issue of new shares to a new shareholder at such a discounted price, diluting NAV per share post issue. This is the conundrum the Board face. They need to establish a better track record and then there is a chance of getting a rights issue away to existing shareholder that would help address the scale issue.
Great company but the valuation and rating is looking toppy to me now. I've sold my last few shares today after being a holder since 2005.
Yes, positive. But I'm slightly puzzled there were no comments on trading,
If you're putting out an RNS with contract win news, why wouldn't you update on trading in July and August at the same time? No doubt there'll be something on outlook in the interims, but still a bit surprising.
Not sure where you get £15m from? Net debt at December 19 was £11.4m and that was £5.4m at the end of June, so I make it £6m inflow in 6 months. Not shoddy by any means, but I'm afraid not £15m.
That was always going to be the case, as the forecast was too conservative. Very impressed by the drop through of incremental revenues to profit and the increased gross margin, but to honest I was expecting a bigger top line number as they said in April that YTD sales then were >40% higher than LY. That implied that March / April were running close to 100% higher as Jan / Feb would only have been modestly up. Overall pleased, and very encouraging for the open today.
Interesting link. It shows what an attractive investment Loop is, as it should deliver strong profit growth on the increased sales. In comparison Q1 sales at slack increased 50% and the operating loss doubled.
I was very pleasantly surprised at the resilience of the business, and to continue paying a dividend is a real sign of confidence. Management have moved decisively to address problem areas over the past couple of years and have responded promptly to covid challenges. This is a good business with good management and its prospects are attractive, with long term infrastructure spending likely to grow and, in the near term, likely stimulus programmes providing some protection against any post covid economic slowdown. Very happy to hold.
For me the most important part of the results was:-
"Cash generative and profitable in the first months of the new financial year".
I've held RNO for a while but sold down some on the way to 8p. My concern was whether they would survive but I'm feeling more optimistic now. If they can generate cash and report a profit over April / May, then I suspect they'll make it through. From a valuation perspective how the pension deficit moves on assets prices / bond yields will be a key factor. Difficult to say at the moment. But I can see this getting back to 20p or so over the next couple of years.
Suspicion borne out of being burnt too many times.
Interesting timing for the RNS on the issue of options to management. Companies usually stick to a similar calendar but the options grant this year is a week earlier than last year. I might be reading a little too much into this, but I wonder whether another trading update might be imminent, on the back of May's trading, that could move the price higher, so management have locked in options at yesterday's price of 110.5p?
I'm in the same ballpark as you for the full year. The real driver for share price appreciation though will be what happens in 2021 and beyond, which is still unclear at this stage. Hard to say whether 2021 will be up, flat or possibly down on 2020 at this stage. I expect that this uncertainty will stop the share price really breaking out until things settle down and a new normal baseline is established. One thing I saw over the weekend was the government in the UK thinking about enshrining a right to work at home in law. This will certainly help in the medium to longer term.
As some semi successful investor once said, in the short term the market is a voting machine but in the long term it's a weighing machine. Expectations can and do drive prices, but ultimately the fundamentals have to deliver.
Personally I think their forecast changes are cautious.
They suggest FY2020 increased sales of £7.7m v 2019. Based upon the RNS I suspect that Loop are up £5.5m through April, and with monthly sales probably running more than double last year at the moment this will probably be >£9m by the end of May. Allowing for some stickability of increased customer numbers and working from home patterns H2 sales must be at least 10% higher than last year. So I'm hoping that their revised forecasts still materially underestimate likely performance.
Hughster, I love your optimism. Whilst it would be great if we get incremental sales dropping through to EBIT at their gross margin of 66% any sense that these levels of activity are sustained will mean some extra overheads will be needed to support the enlarged business. I'll be happy for a drop through of 50%, which is still excellent. And although I think the current events will have a residual benefit of increased home working etc it wouldn't surprise me I revenues are flat / dip slightly in 2021 once the abnormal level of home working recedes. And the competition will enhance their offerings, especially the big players. I do think the prospects are exciting, but don't see a £5 price in the near future. After today's RNS I've tweaked my valuation up to £3 on a 12 - 24 month view. LOOP could also be an attractive M&A target that might spur the price up a bit further, but you can't bank on that.
Yes, very good news and reassuring that there has been a tangible positive impact sufficient to give management the confidence to give the update. Given the timing of the working from home initiative my fag packet maths suggests that April has probably seen revenues more than double last year. I particularly like the overheads broadly in line with expectations, which suggests the drop through to EBIT could be 50% if gross margins have remained stable. So by my estimate >£2.5m more profit than prior YTD. This should flow through into cash next month as the debtors convert into receipts. Obviously this is unlikely to last the full year but another couple of months at these levels and I can see EBITDA of £15m, EBIT of £10m + for the year. Activity levels will see some consolidation next year, but at a higher level than the historic base. What a great way to start a Wednesday.
Ragnarlothbrok, given the scope for some margin recovery after integration issues and the operational leverage here it would be a disappointment if EBITDA was only 20% higher. They had planned to shift £1m of sales admin costs into R&D which will also flatter EBITDA assuming they capitalise the costs. As you say, getting some indication on trading, even if it does not provide any FY guidance, will be helpful.
I agree with a lot of what you say, but if trading is materially ahead they are obliged to provide a trading update. Absence of a trading update until July therefore indicates no material uplift. I agree that their core M&A related activities will have declined, but I would expect general use by professional services firms to have increased, plus I suspect there is now a lot of legal work going on regarding re-financings, loan renegotiations, potential administrations etc. I also expect that they will have increased client numbers and overall would be surprised if they aren't experiencing a material activity increase. If they can't benefit now they never will.