The latest Investing Matters Podcast with Jean Roche, Co-Manager of Schroder UK Mid Cap Investment Trust has just been released. Listen here.
After the collapse of Carillion and the problems it caused for government projects, the government increased scrutiny and requirements for potential bidders/partners for major contracts.. i.e. you must not be carrying debt greater than x%.. (Kier report monthly carry and year end net debt differently - they should maybe be clearer on this).. anyway this caused Kier to do the rights issue to ensure they could still be a preferred bidder on major contracts.. unfortunately the RI was badly handled and should have been done earlier (too much knee-jerk and not enough planning). The business and profitability hasn't changed and will only get better under the new CEO. Unfortunately for him he has had to address the wild previous promise of zero debt this year which was never going to happen. Suspending the reduced dividend will obviously accelerate the reduction in debt but was a little harsh considering the rights issue specifically mentioned the continued payment of an (albeit reduced) divi.
As long as they stick to their dividend policy... "Thereafter, the board will continue to recommend a 30% annual increase in dividends during the three-year period ending 31 May 2021." the share price should prosper longer term. It seems very cheap at the moment.
There might be no need for a placing. EBIT guide 2018 is 23 - 28m, for 2019 again 23 - 28m. Debt was just above 60m and market cap is now just 26m with revenue of a billion....
Bizarre when you look at say Imperial Brands who carry debt equivalent to their revenue.. If Staffline can satisfy the banks regarding the exceptionals they don't need to rush to reduce the debt.
Even if there is a placing, this level seems a silly valuation. Could do to borrow someone's crystal ball please.
I love this company and hold millions of their shares (more than 1m but not more than 3m yet). Yes I always make sure the Distil brands are properly displayed on the supermarket shelves - sometimes a bit of shuffling is required. If a place sells RedLeg but not Blackwoods I always make a point of asking for them to get some Blackwoods in stock etc..
The only think bothering me is that nasty leap in 'promotions/marketing'.. they could have kept the profit and even managed a few pence dividend instead of what.. I have rarely seen any marketing or promotions for Distil products.. I'm sure Don could verbally justify the spend but if it's not reflected in the bottom line.. then it's not really helping the shareholders.
Hopefully Kier can move on from here.
Year end debt being carried was very similar 5 years ago and they only had a 6 billion pipeline then. Good to see drastic action being taken but feel for those that will be made redundant... disposing of non-core operations is/was vital and will go a long way to getting them back on track... bottom draw for now though.
My missus prefers Blackwoods to Gordons & Bombay Saphire.. she says it's smoother with a more refined taste.
From what I have seen on the shelves in the supermarkets, Blackwoods has taken a place amongst the big brands rather than being put to one side with the new and novelty gins.
I do agree that some of the increasing marketing spend could be better directed at their Website... or even at their shareholders.. both of which would help raise the profile of Distil..
Good figures again and it sounds like Red Leg is now one of the market leaders. Plenty of cash in the bank.
If Diageo can sell a Tequila brand for $400 million (2014) and buy another Tequila brand for $700 million (2018) what price on a market leading spiced Rum? And if the big play doesn't happen then might as well keep taking the profits and start distributing them to shareholders.