Member Info for Dingo1

Wiggly, I hope you are right re PE jumping in. The Deloitte reports significantly lightens the load for a PE option. Not sure I fully buy in on price (I can see Debt + Equity). If PE are able to put in their own debt then the return will include equity cycle plus interest achieved. Also on future sale the debt gets returned / rolled. From my earlier postsI think at this price this is clearly a PE play or IIs rejection for Sid to come back with improved offer.

Offer Price / Upside argument

- The offer is £242m. Do not buy into the additional funding in the share price argument

- The short term refi is a side show to support the Boards opinion (not worth s***) and Sid benefit on offer price. Not II who hold funds for pensions etc and not for PI.

- Post the sale what is ultimately put in and how much new debt is leveraged post deal is up to new owners. This just settles lenders until 2026 refi

- Struggling to see how the offer price is reasonable and could even be considered

o £6bn + sales order book

o Huge number of very skilled employees

o Strong market position with respected capability in areas of demand

o Potential asset sales / Divestments

o Pension surplus (I will come to this below)

Offer Price / Downside / Observations

- The accounts are being restated and concern that debt financing and therefore potentially future cash flows are inaccurate

o If so what are any of the recent Board statements around interims and surely inaccurate statements ?

o If the lenders needed a covenant waiver when both BOD and Audit Committee signing off a going concern basis

o If there is no likelihood of accessing pension surplus from Trustees position why was this included in statements from BOD ?. If it was reasonable to assume this c £300m as a 2025 opportunity then why is this not taken into account in the offer ?

o Was the Apollo offer reject due to concern back then over their potential DD ?

IMHO his offer hugely under values this as a PE type deal (unless all downsides true and BOD need to be hung out to dry) and higher as an integrated business with Sid. I am at a price point to hold and take a small loss, but wake up PE and II and either jump in or IIs hold for a better offer.

Icecool,

Agreed this would very likely be a technical covenant breach against lending terms. What i don't think we know is if it would be a breach in terms of Ebitda cover unless someone has alternative confirmation ?.

Lender now will be more interested in forward looking view of cover than rear view mirror. It might result in a higher interest ratchet as a result.

Little value to debt holders C £550m of not providing waiver with 18 month on term on basis of being within headroom for the rest of the term. Further the existing lenders would then be in prime position for refi based on my structured debt experience.

Only time will tell but the CFO now in place well experienced to secure a good result.

GLTA & DYOR

Longfell,

Apologies for not posting response until now. Had to do day job as founder launching new AI app in UK / US over last 48 hours. My take as follows:

Easily 6 to 12 PE firms who could right a ticket of £1bn plus EV (Enterprise Value) relatively easily. Some such as TDR more into retail space but others more in B2B / Infrastructure space and this is excluding the big boys primarily in US. Those that come to mind are Primeira, Bridgepoint, CVC, Brookfield

In terms of valuation there are a few key factors for me in temrs of big items :

Assets / Ebitda / Cash flow

- Future £6.1bn order pipeline to Ebitda projection. Does any of the Balance sheet / Ebitda restatement impact future Ebitda / Cash flow from adjustments in open long term projects. I know what has been said to date but clarity this would be a risk down adjustment. There may be offset on Tax position @25%.

- Opportunity upside to Ebitda enhancements e.g overhead reductions by being private, improved efficiency....PE very good at this

- On balance sheet - C $300m asset on pension scheme surplus. Either realised or reduced pension cost in forward projection

- Debt / Leasing - Not 100% sure on existing debt / leasing rates but may be opportunity in structured debt post acquisition

- Disposals to identify

- Ironically post purchase could WG v 2.0 after divesting non core to reduce debt they might then identify their own M&A

I see a risk off valuation around 2.5 / 3 Ebitda post knock for downward risk adjustment with perhaps some add backs e.g Pension surplus at say 75% realisable....

Range £850mn to £1.2 bn EV. Indicative price therefore risk off - £1.25 to £1.50. Bottom £1.

The way I see it if we go to suspension / extension for Sid, no reason (unless someone tells me otherwise re rules) that a PE could not enter during this period with a bid. It could suit them as not having to deal with issues of any public market until suspension lifted.

Potential scenario of PE v Sid in suspension period. This would also suit II for best outcome. I am a recently invested with reasonable slug being a value investor and not a trader. GLTA and DYOR

Longfell, I pretty much guarantee having lead a couple of PE secondary sale exits as a CFO that it will not just be Apollo although they have a current advantage. This is why I am holding having identified WG as PE potential. Finally bought in a reasonable slug around average 35p.

Take out Wood not Sid :-)

In the event of no deal from Sid, PE not only has the dry powder to take Sid out, but will also assemble a Board whom are capable of extracting optimal value creation from has underlying capability to be a very good business. In event that Sid don't follow through I am very confident in the background during suspended period and 6 month lock out PE will step in. This will then be a take private for the value of its parts. They are well practiced at refi. For PI I guess it will then still be at what price but certainly significantly higher than current market cap. They have a ready buyer once sorted but this is why I think Sid will bid to avoid paying the premium v any current risk.

A couple of thoughts on covrnant. 1) If reduced Ebitda there will be a tax adjustment (potential benefit to Sid). Not sure if currently paying CT. If so cash upside 2) If adjustment to interest rate in 2023 due to improved improved covenant cover then will result in adjusted rate. Sure lenders will be happy with this

One division. How many project balanace sheets to review. 2 items to resolve 1) Historic write offs 2) Review of forward prohections to improve cobtrol. Not sure no.of projrcts but high value loe volume so not surd months and months ?

Did Hrl have a pension surplus of c £300m + that could support interim cash flows ?. Assuming Wood can access ( in previous finance role I worked on pension surpluses and it took 4 to 5 months to get clearance) then this will support lenders while undergoing refi. Represents arpind 45% of debt outside leases. I am sure lenders will be taking into account.

This a critical point. Sid view and bid will be determined not on historical adjustments but future cash flows, revenue recognition and timing. If the expection is near to mid term i.e 1 to 2 years then concern, if say 5 year project then time to improve business and benefit from overhaul. This will determine both bid price and / or no bid

1) Existing and Future contract pipeline risk 2) High value engineers (worldwide shortage in expert skills) and risk to contracts 3) Significant customer base

At what point given Gold prices and xs cash flow does it not become difficult to maintain no dividend position. Even the Saudis would as significant share holder woul

Which was identified in both Company updates abd pension industry

Also did they have a large pension surplus identified ?.

If they fail to file on time e.g due to accounts or have confirmed the historic debt cover in covenant reporting due to accounts mistated they would probably need a waiver (subject to details in lending terms).

I think if Sid dont bid this looks like a take private PE e.g Apollo playbook to create value. There are a number of players with different funding approaches to stabilise debt position and then run the playbook.

Correctvre tax position. Even more advantage to a PE for future turnaround if Sid does not proceed

As I mentioned before. This looks like take private written all over it for PE. Too risky to wait for prepack....They can also interim debt position until new structured debt put in place. I am 100% sure they will be running scebarios. Based on current market cap sure not just Apollo.

So just to clarify fundamentals. 1) Need to refi £700m and £400m leasing assets give or take 2) Assets to support cash flow / debt reduction - C£300m pension fund surplus, disposals £100m to £200m, future contract Ebitda contribution (£6bn pipeline), any positive cost reductions (defo made by take private). How does this equate to shareholders game over ?????