Member Info for ragnarlothbrok

Only a few pence from the all time low in December 2020 after the rights issue. The issue was done at a price of 10p. So not a single holder in this company is up at this point in time. Since then they have grown sales and EBITDA despite making significant divestments, have introduced a progressive dividend policy and refinanced their debt at very favourable rates just before interest rates took off.

Current MCap of £80m is less than total debt, suggesting financial difficulties, although leverage at December was only 1.3x and should now be less. The covenant requires the ratio to be below 3x. They have a huge amount of headroom

Nonetheless, the SP is down around 33% in less than 2 months...are there insiders who have been given a hint about results tomorrow? For some reason a large holder has certainly decided to pull the pin in the last couple of weeks

They confirmed at the AGM in June that results are on track for H1 so is their nervousness about the outlook and strategy? The reaction tomorrow will be interesting, current trend suggests an all time low will be breached

1 day early this year!!

Ah just re read and 13% is for last year. With that in mind not really much of any update at all but sounds positive at least

Revenue growth of 13% versus consensus expectation of 10% is a good result. Hopefully they are keeping costs under control as well

You don't seem the only person today who is annoyed about not getting a dividend.

It does seem a little strange...even with the upfront payments for the second processing plant they still have a huge amount of cash, over 8p/share after the auction receivables were banked. I suppose there wont be much revenue coming in during the second half, they could be up for costs of $80m so want to preserve cash...

You can find a presentation on the website, there is some good info in there

https://www.gemfieldsgroup.com/interim-results-presentation-for-the-six-months-ending-30-june-2023/#

Broker consensus (9 analysts) for 888:

Sales

2023: $2,240m

2024: $2,354m

2025: $2,464m

EBITDA

2023: $445m

2024: $499m

2025: $549m

A lot of companies were optimistic around June but the outlook has really declined since then, Germany in particular is looking very shaky, China stimulus never came and the UK, well is the UK

Yes Billi was on the cheap side, they almost implied it was opportunistic. So if I read correctly they have reduced guidance to above £21m NPAT, looks like this is down on consensus from £24m. So 12% reduction but debt is much higher, surely a timing element of that. Its a long announcement, does it really need to be so long? Haven't had time to read and digest but 36% down seems extreme. Maybe some looking forward to a capital raising to bring down debt?

Apart from the demise of Buckingham, and a higher than usual number of building companies going bust, the industry seems to be holding up well

Some good news about HS2 would no doubt be a boost but that seems unlikely

So with expected net debt headroom of only £1m, they really need a minimum of £5m in new capital. They would probably like more but don't know how much more they would do at this level. In this market, with that outlook you would expect 3p to be a pretty good outcome, giving a post raise market cap of £10m.

But they failed to make a profit in 3 of the last 5 years, without raising their prices by at least 5% or seriously reducing their costs is this business viable? I'm not getting the vibe that they are planning on either, just snipping costs here and there. Overheads are much too high, surely some of these are COGS? The gross margin at 25% is low as it is.

Surely there is a net zero argument to replace old windows with better insulating ones. In this current environment and without any incentive will people let their windows fall out before replacing them?

Had a look at the Zeus note Darton mentioned, its quite useful thanks for sharing. I could copy and paste all the data into excel and move some numbers around.

Sector HSS definitely the cheapest in the sector on most metrics, with Speedy not far behind. Speedy is 60% larger and with more free float and liquidity so would expect a premium. Speedy dividend yield is 2x that of HSS but HSS has double the coverage, taking the approach of paying a sustainable growing dividend while Speedy is paying out all its spare cash. Both have similar cash flow yield. HSS's capital light, technology driven, services business is a key differentiator. Still early days and its not easy to value these businesses separately

Both are trading on EV/EBITDA of 2.5-3x, P/E of 6, net debt/EBITDA of

Adjusted EPS was 5.25p. They lost some inventory which resulted in a large one off non cash cost. SP tanked which is when I started getting interested. But yes HSS is cheaper

Looks like a few us on are on the same path here, also in this one and noticed the Keystone results yesterday. Decent results and an encouraging reaction. They trade at a significant premium to Knights and the sector, always have but not really sure why. I reinvested DWF proceeds here, the sector as a whole is looking very beaten down, they are looking very cheap at sub 3x EBITDA and they will quickly improve leverage and dividend payout. That gap down from 370p 18 months ago was simply outrageous. I expect that to continue to be filled over the next 18 months

I'm also curious about Exponent. They have been in for over 10 years, made some money in the beginning, but since then down over 90%. Doubled down in the capital raise at 10p. They have seat on the board, will be intimate with the company, surely an opportunistic MBO has crossed their mind...

https://www.exponentpe.com/our-portfolio/hss-hire

Speedy also looking like very good value, similar valuation to HSS, higher dividend payout ratio for an >8% yield

Very plausible... been nearly 3 months since last update. Ashtead warned on its UK operations but the starting point was so high it seemed unrealistic. Speedy also suspiciously quiet

I wonder what Exponent are thinking about this. Its not that far from the 2020 emergency placing price...from nearly 3 years ago! If I could find a few more pennies down the sofa I'd nearly have enough to buy this company myself.

Will they release H1 results on the last day permitted again this year? On fundamentals this business is sound, do they have an investor relations department? They could start with a results calendar

I have been out for a while but still watching, not much has changed, they deliver the top line but this always seems to come at the cost of serious additional investment, this time a 20% increase in headcount. They have tripled sales since 2019 but operating margins have declined from 43% to closer to 20% and full year EPS will be lower than 2020 (7.1p). They have a growth strategy yes but it seems expensive and the narrative never seems to change. I like the business but will not invest again until they can demonstrate better operating leverage, delivering revenue growth at a much higher rate than growth in costs

I think that pretty much sums up the attitude of the UK equity market portswigger. Take the cash and run! But I can see your point, the market does not value these companies very highly, and possibly never will, so the bird in the hand and all that

I ask what HIG are bringing to the table to try and work out how they are going to deliver value for themselves. DX is not capital or talent constrained. To me it really just comes down to attitude and time horizon. PE is prepared to take advantage of the short termism of the public market by taking the company out of the limelight for 5 years, letting it grow as a private company and then selling it on, probably back to the public markets. What will change about the company apart from it becomes private and may squeeze its costs a little harder? I guess its becoming a bit more philosophical now rather than specifically about DX.

Also, my larger conviction investments keep getting acquired and I'm struggling to find better opportunities. Out of curiosity portswigger what will you do with the cash from DX?

Agreed. 30,40,50% in a year or two is great but 150, 200% over 5 years is much better. Companies in the UK are dropping like flies!! What exactly do HIG bring to the table? I certainly don't think that DX management need any turnaround or general business advice and the company is very well capitalised, even without taking on any debt.

This seems like one of those textbook examples where PE acquires a company with low levels of debt and strong cash flow and then guts it. With EBITDA of £70m and being debt free DX could borrow £100m, pay a huge dividend and retire that debt over a couple of years. Suggests to me that this deal is undervaluing the cash flow

Holders in the UK small cap market have been so badly battered you can hear the collective sigh of relief when an offer comes and in above everyone's entry price. Gatemore will be especially pleased given their likely single digit entry (I wonder if its enough for them). You can buy is at 42p, who would be selling at 15% below the offer price and why haven't the hedge funds stepped in yet to fill that gap?