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"The purpose of the [Share Buy Back] Programme is to reduce the issued share capital of the company"
Quote from DEC RNS. Don't companies do share buy backs when they feel it is the best use of their facilities at that time, given the share price at the time and the other options/facilities available to them for the use of that cash? Share buy backs are not announced to prop up or increase the share price, they are implemented to make the best use of the facilities available at a point where the Board feel the share price doesn't reflect the underlying value of the business, so it makes sense to buy them back and cancel them at that price. They aren't intended to boost the share price, hence the BB has to be run within the parameters of the MAR.
If the future is so utterly terrible at DEC (ignoring the announcement that the Board see no operational or financial reason for the recent share price drop), what haven't any of the many institutions sold large chunks of their shareholdings? Genuine question, not a wind up. All I can see is one fund dropping below 5%, probably ly because they are not allowed to hold over 5% of any particular stock. I am utterly disappointed by the share price movement, particularly becuase I promised myself I would sell half my holding last November when it hit 1.32, but I thought it had further to go, so didn't and have been regretting it ever since....however, given recent announcement and total lack of funds selling in large quantities, I am not convinced now is the time to see either.
I am certainly getting a bit frustrated with the people who don't put in any effort to understand the business model or review the DEC presentations that set all this out very clearly. They give out a fantastic amount of information in their results and presentations covering all of this info, including the build up of a well plugging cash provision. No problem with people giving their questioning/prudent views but please put in some effort to understand the business first. Spent far too much time on this chatboard so I am blocking myself from posting from now on! Best of luck to all!
But that is the business model, debt and equity used to buy the assets and then the debt is paid off well before the assets stop producing, so you have high debt repayments over 5 to 7 years and then cash flows are debt free, like a private equity investment, that is literally what they do so going to bump up against 2.5x ebitda when they buy and then if made no more acquisitions all the debt would be paid off in following years then debt free cash profile
Back of an envelope calculation:
Previous liquidity at 30 June (i.e. headroom in available facilities) $103m
Sale of undeveloped land in July +$16m
Operating cashflow income to 26 Sept: estimate +$100m
Debt and interest payments: -$90m (was c. $180m for 6 months to 30/06/23)
Divi payment at end of Sept: -$42m (this cash probably already with registrar on 26/09 and no way (in my opinion) an FD/banks would allow that cash to be paid on 29/09 to be included in liquidity)
Increase in facility limit: +$50m
Comes to +$137m versus their liquidity of $120m, so difference of $17m easily explained in working capital or timing differences.
I am ready for the onslaught of differing views!!
That is basic double entry, nothing to do with making a liquidity statement 3 days before the divi is due to be paid. the cash generation, regular repayments of debt amd dividends and 14 strong lending group seeing their amortised debt being paid down each month and confirming they are all happy gives me some comfort but perhaps none of them can see what you can GG.
Well a net working capital outflow of c $100m which they explained at the interim, and $84m of divi payments including the liability in 3 days time they would have to take into account when discussing current availability. Offset by cash flow generation (which is also used to pay down amortised debt, which increased due to the Tanos aqn).
Where dies it say he has left without a handover? The RNS said he was staying til end of September to assist with a handover. It is completely different in USA re notice periods, they don't rally have them, which is why it is much easier to move people on but on the flip side much easier for stand to leave quickly. I remember a PE deal where they bought a USA business and offered the senior management 6 month notice periods, standard in the UK. The PE house thought the Mgt would love that bit they were insulted and said there was no way they would sign up to giving 6 mo the notice! If they wanted to leave they wanted to be able to do so immediately, and if the owners wanted to fire them they could do so immediately, they said that was the USA way.... completely different approach to UK where execs expect 6m to q year notice so they get a nice payout if asked to move on....
You seem to have their business model co pletely round the wrong way in order to make it sound desperate. They do t have to hedge, their whole business model is to hedge, which enables them to get fixed rate asset baked amortizing debt against the hedged cash flows from the assets. They aren't caught in a vice like grip, it is their whole business model to do it this way and their lenders are perfectly happy.
The €16m asset sale was in July so a post balance sheet event for the figures as at 30/06/23. I think for various reasons given by others the cash/debt position as at 30/06/23 was at the bottom of a cash outflow cycle and will hopefully improve in H2 2023. DYOR
The Tanos deal was $250m and effective from 1 February 2023. It was funded by net $156m from the placing and $94m from the RCF. So the RCF has gone up by $94m but we only get 5 months EBITDA of the estimated NTM $107m EBITDA in the year to 30/06/23, so about $44m. Based on a full year EBITDA of $107m, the debt is fully covered in one year of owning this asset and it is earnings accretive, so can deliver more in cashflow than the cost of the dividends on the new equity raised. This business buy assets with debt and equity, normally between 2x to 3x forward looking annual EBITDA. So the debt goes up significantly when they first make the acquisition, hence up to c. 2.4x EBITDA at 30/06/23, but it can be covered with c. 3 years worth of EBITDA (inc interest on the debt) and then the asset is a long life asset delivering free cashflow with no debt associated with it. This business has a model where it gears up to make an acquisition, pays that debt down with cashflows and then has free cash flows afterwards, a bit like a Private Equity geared business, except with the gearing at a prudent sub 2.5x rather than 6 to 8x EBITDA on a PE backed business. Yes, the business is also like an end of life insurance book which has to buy more assets that will gradually wind down to deliver growth and is currently waiting for vendors to realise that they aren't going to get what they wanted 1 or 2 years ago for their assets when money was effectively free and gas prices were sky high. As long as they can keep buying assets at a reasonable price, taking into account the increased cost of everyone's debt now (and so lower consideration), and hedging their sales to ensure their debt repayments are more than covered then the business model is relatively sound. DYOR of course.
That just means they have $100m left on their credit facility, i.e. another 100m of debt available. They have about $4m actual cash but that is how they run it, nearly all cash being used to pay down the RCF which is the right thing to do.
Pretty horrific couple of days. I think the debt figure was higher than expected (timing of working capital, repayment of amortised using RCF) and on the conference call Rusty wasn't super positive about more acquisitions, which is the only path to growth for this company, saying that vendors have unrealistically high pricing expectations (not reflecting the new interest rate environment), so may be a bit of a waiting game for another big acquisition. The call was less positive than the RNS and I think that has scared off a few PIs, perhaps especially those who bought in the 80s and thought it would be a nice quick ride back up to 100p+. Holding on, but SP movement in the last 9 months a bit frustrating to say the least.