Simon Thompson article in the IC8 Feb 2017 09:33
He believes Shire is worth another £5m on top of book value. And he implies that Impetus and Sira are worth considerably more than book value. If we say a conservative £10m, against the combined £1.2m or so operating profit, that's a surplus over book of £8.3m.
The combined surplus over book value is therefore £13.3m, or around 325p per share, which added to the current 576p per share gives 901p per share of value, compared to the current 522p share price.
"The holding in Aim-traded investment company Volvere (VLE:530p) has performed well in the past 12 months and is likely to continue to do so. Run by Jonathan and Nick Lander, who have the respective roles of chief executive and finance director, the founders of the company have proved adept at investing in distressed and undervalued businesses with a view to turning them around and exiting at a hefty profit. They have been mightily successful as Volvere’s book value per share has increased at a compound annual growth rate of 14.3 per cent since the company was formed 13 years ago.
It’s a pretty low-risk investment. That’s because Volvere has cash and marketable securities worth £18.5m for new investments, a sum worth 452p a share, and borrowings of £2.37m are very modest in relation to the profitability of its three investment holdings. These investments are very conservatively valued at £6.5m.
For example, the Landers have been working their magic on Impetus Automotive, a provider of consulting services to the automotive sector, including vehicle manufacturers, dealerships and national sales companies. It was a well-timed and shrewd acquisition as Impetus reported underlying operating profit of £522,000 on revenue of £8.1m in the first six months of 2016, a dramatic improvement on a trading loss of £43,000 in the second quarter of 2015. In fact, Impetus has generated underlying operating profit in excess of £1m since Volvere took control in 2015, an impressive return on the £1.3m Volvere paid for its 79 per cent stake.
The company also owns a security business generating £118,000 of annual profit. So, in effect, the combined book value of £1.7m for these two holdings equates to less than 1.5 times their annualised operating profit, a valuation that suggests the carrying value in Volvere’s accounts is far too modest. Furthermore, Volvere owns an 80 per cent shareholding in frozen pie and pasty maker Shire Foods, which is in the books at only £5m, or less than four times its underlying operating profit. True, higher raw material costs following sterling’s devaluation, and the decision of a customer to bring manufacturing in-house, are issues – but ones that are more than reflected in the modest valuation. I still take the view that the investment in Shire is worth double book value in a trade sale scenario.
...So, with the investment risk still skewed to the
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