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CEO buying £50k worth of shares suggests he has confidence in Kettle Controls returning to pre-Covid sales. If that happens and Billi continues on its current path, we should expect faster deleveraging which should benefit the shares.
Couldn’t agree more. I’m fuming. I notice the debt is due Feb 2026 and it is highly unlikely DOCS will be able to repay. Refinance will be much more costly assuming we don’t breach any covenants ahead of it. Dividend has to be cut. More pain to come I fear.
To me it looks like management have done the right thing. Loan covenant pushed to 2.75x from 2.25x which removes the right of a rights issue. In return they have cancelled the dividend for 2024. I think this is the right business decision. I’m happy to be patient as I do think Strix has tremendous potential once Kettle controls starts firing on all cylinders. Happy to stay on board.
Oh dear. Back to the drawing board. Monday is going to be painful. If we assume net income of £225m for 2024E, 10x net income implies a £2.25bn market cap or 170p share price. I think we test that or lower on Monday. In time, DLG should recover but Monday will be a bruising day.
But let’s not confuse losing the battle with losing the war…
McCormick / Premier Foods would be the counter example. McCormick offered 55p a few years ago for PFD which was rejected. Stock sank back to 30p but is now at 155p with management actions and Covid helping the business.
Https://www.thetimes.co.uk/article/2eef76f1-2960-4f5f-8d0b-358b3b096788?shareToken=24e704bc52ba1a298d99421f3af65230
I think DLG resumes a small dividend albeit for probably the wrong reasons. The challenge Winslow faces is the turnaround he envisages will take a couple of years and involve some investment. At the end of the turnaround there is a good chance we are looking at 275-300p with a dividend yield of about 5%. Can he show us a path for this stock to be worth 400p over a 3-5 year horizon? This is more difficult especially with the asset sale last year but it is what he needs to do for investors to stay on board in my view.
Running some numbers. The consensus analyst estimate for net income is £237m for 2024. Assuming DLG pays out 70% of net income, that is a £166m dividend which implies a yield of 6% at the current market price. If we assume net income recovers to £275m in 2025, a 70% payout assumes a dividend yield of 7%. £300m net income in 2026, 70% payout means a 7.65% yield at current levels.
In the absence of a bid, I think 275p share price by end 2025 assuming £300m net income and 6% dividend yield sounds about right considering where rates are. So looking at 60p or 28% capital appreciation and roughly 15% in dividends. 40% return over two years and still have the company paying dividends as opposed to taking a 275p offer today and losing the right to future dividends.
I’m actually happy to own the shares and collect the dividends. I will be collecting about 10% return on my capital as I bought shares below the current price.
Hard to find other places to invest wot make that kind of return.
Https://www.gov.uk/cma-cases/veterinary-services-market-for-pets-review
Surprised at the share price weakness. I don’t think the net margin margin for CVSG is much different to a dental business. Similar economics and good idea for seeing private healthcare prices. The CMA case is still open.
Peter Wood seems to think there will be a number of interested parties in Direct Line. Let’s hope we see some news this week. Struggle to see Ageas being able to offer significantly more cash in a potential bid but if other large European insurers start running their rulers over DLG, I think we may end up at 300p. Risk-reward is skewed to the upside here. If the potential bid falls apart, perhaps we drift back to 180p but if a 300p comes, it will be a “winner, winner, chicken dinner”!
I have taken a closer look at Halfords and noticed the dividend is not currently covered by the free cash flow generation. The business has also gone from net cash in 2022 to net debt. The guidance change is a real concern. How does management tell us FY PBT is £48-53m on 25 Jan, a month into Q4 trading and then suddenly revise guidance to £35-40m a month later on 28 Feb.
I’m not an expert but I don’t think February’s sales should have such a detrimental impact on the profits. Something doesn’t add up.
I think we will see the dividend cancelled by Halfords and that may be a better time to revisit the story. I stay on the sidelines for now cognisant that we have had M&A rumours on the name.
A chance to buy into one of largest UK motor and home insurance providers. Could Bain Capital, owners of esure return? What about Sampo who bought Hastings? I’m sure all the large European insurers will be running their rulers over DLG. It’s not often you can buy a business with this market share at such a knock down valuation.
First day in the office for the new CEO. Ageas obviously leaked the bid to turn up the pressure on the board. Think it’s a pretty shrewd buy for them at this level. I’m expecting to see competing bids in the coming days and weeks. Let the bidding war begin.