The next focusIR Investor Webinar takes places on 14th May with guest speakers from Blue Whale Growth Fund, Taseko Mines, Kavango Resources and CQS Natural Resources fund. Please register here.
JPM are not selling. JPM are just lending out their shares for a fee, for those who want to play the market.
This is what they're doing:
https://money.usnews.com/investing/investing-101/articles/things-to-know-about-lending-shares#:~:text=Lending%20out%20shares%20to%20a,who%20want%20to%20short%20stocks.
Look at the voting rights, which remain roughly the same as before. When you retain the voting rights but your shares fall, that means you've lend them out. When the duration of the lending out period expires, the ones who borrowed the shares have to give them back to JPM, plus a predefined fee.
JPM is a dirty dirty company and I'll be truly happy when those vultures get out of here. Their actions cause share price volatility, which is bad for the SP in the short term.
https://www.theguardian.com/business/2020/sep/29/jpmorgan-chase-admits-spoofing-us-market-manipulation-pay-920m#:~:text=JP%20Morgan%20Chase%20has%20agreed,US%20authorities%20said%20on%20Tuesday.
JPM are not constructive owners such as IKO or CD&R. They're just here to make easy money.
The results announced were a little better than the company had predicted but yes... I was amongst those who expected even better news. I was particularly surprised by 53m loss.
I think that SIG opted to invest, hire, train and invest to chase business out there. They didn't cut back costs as much as they could have done. You to spend money to recapture market share and make much more money later on.
I trust the new board, the talented people who returned to the business and I trust CD&R. They didn't invest massively at 25p for nothing. This is a recovery play and the omens long term are good. I can see this at 100p or even 200p as some seasoned investors predicted recently. But it will take time...
Great posts Raleigh.
My personal view is that CD&R are not interested in a full take over. If they were, they would have taken their full allocation of shares at 25p -- not make their contribution conditional to other investors joining in. Or they would sweep more shares now.
I don't think CD&R can buy 100% of every single company they get involved in. I imagine they want to hedge their funds, just like we do with shares. Also, I know very little about the construction sector but I imagine it's worth having strategic partners/allies such as IKO. For CD&R investment to bear fruit, this company needs hard work, vision and allies -- not infighting.
From here on, every trading update and result will be better than the one before I believe.
Recapitalisation and loads of cash in the bank
Change in leadership
CD&R experts on board
Getting back their best people
Improving their marketing
Hiring and investing in themselves while others cut back
Actively chasing business where business can be found
Insulation programme about to kick in.
Government's moto is "built built built" these days
The recovery is underway and will soon gather speed. My best guess here is that every trading update will be better than the one before.
This will not just recover by 25% when the pandemic ends. This is a multibagger.
Ian.B -- Some of the years you mention they actually made profits. For example, in 2019, their underlying profits before tax was £43m before tax. It was only after accounting entries such as "goodwill impairment" of £90m that they appeared to make a loss. Goodwill will "return" once covid subsides, Brexit gets sorted and and the macro environment improves.
However, no-one denies that this company has issues. That's why they ousted their CEO and CFO in February. Importantly for us, these issues can buy us a share for just 22p (from 100 or 200 they used to go for).
Sig will restructure, improve and recover. They will improve their margins too. That will not happen in 3 months and it won't happen in 6 months. But when it does happen, people will be kicking themselves for not getting on board for just 22p.
Good luck whatever you decide
Union -- the important thing is that we both agree that this share will go up. It can only go up. As you very rightly say, such a low capitalisation for a company with revenue of billions is absurd. Perhaps you're right and CD&R will make a bid for this. I personally wouldn't bet on it but...
...as Wilmsy rightly said I've made mistakes before. I was mistaken about covid which accelerated fast just before SIGs results and destroyed the macroeconomic climate. And I was also mistaken about SIGs results. The results they were indeed better than expected but not as better as I had expected.
Wilmsy, I hope that my mistake was just a mistake about timing, not the long-term direction of the sp. It will go to 40 and 60p. It will just take a little more waiting. In the stockmarket, paper losses are not real losses unless you sell. Time is our friend here.
I do need a beer Deb... great idea, thanks!
So, if I got this scenario right...
- Francis is an undercover agent of CD&R.
- His task is to destroy this company, or rather, make it look like this company is destroyed. The ultimate aim is for CD&R to make share holders despair so that CD&R buy SIG very cheaply.
This sounds a little too cinematic for me. And there are logical issues with this line of thinking:
-- Why didn't CD&R buy more of SIG at 25p? Did they exhaust their allowance?
-- Why don't they top up now that the price is even lower?
-- What will be the reaction of other shareholders when they see SIG getting destroyed by Francis? The guy barely managed to get his shameful bonus voted by shareholders and that was was just a few thousand pounds... imagine when he starts showing bad result after bad result. He will be ousted even faster than his predecessors were.
-- Sig is predominantly owned by institutions. IKO, JPM, Pension funds, Goldman Sachs and more. These are not private investors to be bullied into handing over their shares for peanuts.
Well, I certainly hope you're right and someone will come and give me 40, 50 or 60p a share tomorrow but I personally don't see that happening.
I just see a company showing underwhelming results in a very bad climate to show underwhelming results. I see a CEO who presented the results in an even more uninspiring way than they deserved so that his work will shine even brighter in the next trading update (I assure you he'll be more eloquent and shiny then). Who knows, he might even ask for another £300,000 bonus if he makes the SP rise 100% from their lows today in a year from now.
SIG recently started on a path of recovery. This will take years to materialise but we'll get there. They need to try hard to claw back market share, inspire and train their people, sort out their branches and do a million things, small or large, on every level.
From now on, every trading update will be better than the next. They have the money to reshape and wait out the crisis comfortably. They have the sector knowledge, the branches and a decent name on their field. Soon enough, they'll have macroeconomic tailwinds too. I'll do nothing and wait the trading update (December, I believe?).
Good luck everyone
Perhaps MMs are absorbing the shares. They have their own stack of shares for every company.
Sorry, meant 2013 nobel prize in economics (not 2012).
Westh1 -- good points. I hate conspiracy theories but I wonder if Francis downplayed this on purpose a little. This will allow his work to shine brighter later on (and the sp to skyrocket). This allowed him today to put on the mantle of the calm and confident CEO who buys in the company when others sell. And he also loaded up on the cheap (although I don't believe this last point was his sole aim).
Debcashew -- Many thanks for your good words. The same apply to you too of course.
Rollhatdice -- Since you're asking, I'm a Senior Lecturer in Economics at a university in England. I'm not a professor but I might be one day. I specialise in Macroeconomics and, recently, in Behavioural Economics (which is funny because the area is mostly microeconomics, not macroeconomics).
Having a PhD in Economics means close to nothing when it comes to the stockmarket though... Economists make lousy investors actually (with the notable exception of JM Keynes of course). Indicatively, the 2012 nobel prize in economics went jointly to two economists who supported completely opposite and opposing views on the stockmarket (https://www.theguardian.com/business/2013/oct/14/american-nobel-prize-economics-fama-hansen-shiller)). Eugene Fama supports that the market incorporates all information and is always fair and rational. Robert Schiller supported that the market is subject to ups and downs generated by panics, overoptimism and even... hearsay. He supports that markets are irrational. I always tell my students that our discipline is confused. The greatest virtue of an economist is to understand when to ignore theory and when to take it seriously.
A
Union -- there's nothing wrong in waiting for a company to improve/recover and then the share to pick up as a result. In fact, that's what the best investors do.
The UK markets are now about 25% lower than where they would be without the pandemic. The pandemic will probably be history in less than 12 months for the UK and that idiotic Brexit will be sorted one way or another by early 2021.
2021 will be full of tailwinds for this share and all other shares. I just hope that SIG will recover far and beyond that generic 25% I mentioned.
I need to do some urgent work and won't be posting more here today. Good luck with your investments Union.
* CD&R invested at 25p (not 35p).
I couldn't see SIG's webcast because I'm at work at uni.
I have to admit though, I expected a little better results today. We all knew they wouldn't be great results and there wouldn't be profit though. Plus the macroeconomic environment with national lockdown on the cards and BoJo's Brexit doesn't help. Short-term investors sold out and run. Now the share price is at its bottom or very close to the bottom.
We are now at the darkest point but I know this will rise again. 2021 will be full of good news. Brexit will have settled and the economy will be growing fast as BoE and all think tanks predict. Construction will be center stage of the recovery. And insulation initiatives will have kicked in.
SIG are on their way to recovery already. I believe that. They will up their game, will recapture market share and turn this around. 2021 will be good news after good news and 2022 will hopefully see this company and share closer to former glories.
I wasn't going to sell for a quick today (like a few of you planned to do). I'm a medium/long-term investor, not a trader. Believe it or not, I've never lost money on a share longer-term. Well, except for the very first one I bought in the 90s.
We are at the lowest point and from here on it will be up. With ups and downs, but generally up. CD&R invested at 35p for a reason. And IKO invested even more money at 30p for a reason too.
Good luck my friends
A
That's a key point indeed. Thanks for sharing. We couldn't expect sales to be on the same level with last year anyway, since they sold Air Handling.
May to June
"The Group witnessed a gradual improvement in trading performance throughout May and June 2020, particularly in the UK and Ireland where branches continued to reopen during May as lockdown restrictions were eased. The Group's underlying like-for-like sales over May and June were down 21.7%, with May 35.7% down and June improving to just 8.0% down on 2019."
And will soon do even better than that...
In the announcement of its full year 2019 results on 29 May 2020, the Group reported that it had cash resources of £155.3m as at 30 April, with a net debt position, pre IFRS 16, of £114.1m. As at 30 June, the cash position had improved to £197.3m with net debt, pre IFRS 16, of £90.0m. This improvement reflects improved levels of profitability, a continuation of cost control actions and utilisation of government support schemes, as well as an ongoing rigorous, though careful, management of working capital.From the RNS -- this company will survive covid, restructure and do much better soon:In mid-July, the Group completed a successful capital raise, as previously announced, raising gross proceeds of £165m (£153m net of related costs). In addition, approximately £13m costs were paid in relation to the debt refinancing.As at 31 August, the Group had cash resources of £267.5m, with a net cash position, pre IFRS 16, of £29.2m.
Thanks for sharing this Trinid. This is very important. Sales must be booming indeed...
And now SIG has a lot of funds in the bank and a good business plan to exploit the market.
I really can't wait till the results tomorrow.
A
Thanks Raleigh -- I really like your posts too.
Bucklerfern -- 2019 was actually profitable. The underlying profit before tax was a respectable 42m.
https://www.sigplc.com/investors/results-centre
This company made a profit even after years of mismanagement.
It was only after 90m of "impairment of good will" and other artificial accounting entries that SIG showed a loss. Now what will happen when covid subsides? That 90m will come back in the books and SIG will show a spectacular profit. So we KNOW that this will catch the headlines at some point.
As for share dilution? This happened, and doubled the shares in circulation. I therefore don't expect the SP to climb back to 120p or 150p. I only expect it to climb back to 60p initially. After a lot of hard work and boosts from the government, I hope for a rise to 100p, but that's only speculation/hope. 60p is far more doable though and will happen relatively quickly (1-2 years at most).
Good luck everyone
Once the turbulence from Covid subsides, and unless we have another major macroeconomic shock, SIG sp should climb to at least 60p. Here are some points from me:
-- Over the last few years this share was on average at around 120p. Even in the years when they had minimal profits or (minor) losses, they stayed above 100p. This is because, even at 100p, the valuation was cheap for a company with so many branches in the UK/Continent and 2bn revenue a year. That's why the share rarely dipped below 100.
-- The share fell to 80-90p in February 2020 even though 2019 was expected to yield underlying profits of about 40m.
Why? The reason was that SIG practically ousted their leadership (CEO and CFO together, a rare move) and there were concerns that there's something rotten/irregular in SIG's accounts. Basically, investors got rid of the shares because there was perceived risk at the time that something might be wrong. Yet, it proved that there was nothing seriously wrong with SIG's accounts. They simply ousted the previous leadership because of their uninspiring performance, not because they had done something dodgy. I remember many shorters on this site were trying to scare investors by saying that the audit would reveal dragons. But the audit was done and there was no hole in the accounts. The market would normally elevate SIG back to 100p+ but then COVID 19 showed up and the share fell more.
However, I personally believe that the share price will go above 100p again given time, even after recapitalisation we now have double the number of shares. Why?
-- Because the increased number of shares also brought a lot of money with it (recapitalisation) and also expert investors who make super profits by turning around companies like SIG (look how CD&R transformed B&M for example),
-- Because the new leadership is more inspiring and seems to have a plan,
-- Because the old leadership cut costs significantly before they left (we need to give them credit for something).
-- Because the government launched an insulation scheme and will launch more construction schemes soon. "Build, build, build" is Boris's mantra and that makes a lot of sense macroeconomically.
-- Because there's trillions of stimuli/quantitative easing lying around. Unprecedented liquidity. Not everyone will buy gold (getting too expensive) or bonds (many have negative yields actually!!)). Money will keep coming back to shares. As long as your company has a market and is recapitalised, there's nothing to fear in the longer term.
-- Construction is semi-insulated (sic) against a rise in infections. Cinemas, airliners, hotels and pubs will suffer. Construction will just put masks on and go to work (my deep respect to them!)
Good luck everyone