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I don't know why you keep referring to £100m of liabilities as if somehow that is relevant to valuation. They are operating leases for which the vehicles sit at the other side of the balance sheet. DX have no bank debt but instead £38m of cash which will be lower in the next year as a result of the investment in ex Tuffnell and other expansion sites for which the P&L has yet to see the benefit. Easy to understand why HIG have chosen this time to make their move.
HIG bring nothing to DX to enhance its value; neither synergies nor the skills to reorganise the business. It's interest is simply that it believes it is getting it on the cheap because, it hopes, shareholders can not see the value in front of their noses...
Typical small PI's. Happy to be thrown a few crumbs, whilst PE steals their lunchbox...
Results are yet to show the benefits of the Tuffnells business, so PE have decided to move now before the market wakes up.
Decent trading upgrade which has pushed FinCap to marginally increase forecast for the year finished. Cash now £37.6m and adjusted earnings £24.2m. At 32p that puts DX on a cash adjusted P/E of 6.9 !
58p would be 12 x cash adjusted earnings for 2023/4
At 40p the fully diluted market cap is £256.1m. FinnCapp were forecasting (27.2.23) 2023 y/e cash of £34.3m and adjusted earnings of £23.6m. That's a cash adjusted P/E of 9.4 dropping to 7.8 for next year. The Tuffnells situation may muddy those figures but is a strong upside. Hardly ambitious.
Tuffnells have been struggling for years. They were basically given away by Connect to a management team (£15m payable over 3 years but with a loan of £10.5m provided to support it's turnaround). In their 2021 accounts they noted that 2022 would be loss making but had put in place a profit recovery plan and expected to return to profit in 2023. DX will have known all this and made a decision whether to buy them (either pre or post administration) or just let them go under the pick up the business.
To be even worth 0.5p off the share price the Tuffnell's claim would have to amount to £3m. I'd be very surprised if it was settled at even close to that number. As to 2-man, it amounts to 13% of turnover. Whilst every bit of growth is welcome, I doubt progress is going to stand or fall on this activity...
They'll be defending the quantum of claim or even that there is a claim (bearing in mind Tuffnells have to substantiate loss). I'd expect it to be settled out of court and I don't expect the cost to DX to be material (since, at least from the Times story, the person approached didn't provide any information and instead reported it to her boss).
Was disclosed in the RNS of 20 September 2022 - the Investigation identified evidence that confidential competitor information was obtained over a period of time and that an isolated offer of payment (of de minimis financial amount) for such information had been made by employees. What wasn't disclosed is how comically trivial the matter was. Hardly surprising Tuffnell's would have a punt at this, but it hard to see how damages and lost profit from information that wasn't handed over could be material. Storm in a tea cup...
Portswigger. As the Sage of Ohama said "In the short run, the Market Is a voting machine, but in the long run, it's a weighing machine".
I've always believed that the end game for DX. is a sale. Neither Series or Dunn are lifestyle executives and have a lot of skin in the game (Dunn's holding is worth £19m even at 30p). They were brought in by Gatemore to turn DX. around (which they've been very successful in doing) and I think the only area of disagreement is timescale of exit. Gatemore simply want to cash in on the turnaround, whilst Series/Dunn want also to benefit from the growth potential of the business.
I think we are now at a point where operational gearing will drive up earnings significantly. I think the target is a margin of 10% (currently around 4.7%). IF (and its obviously 'if') they can achieve that, then with the corresponding turnover increase that implies, EPS of 7-8p isn't out of the question in 3 years. Add a cash balance of maybe 12p a share and I don't see why we shouldn't expect a 100p a share takeout, even on the most conservative of P/E...
Of course it may not turn out like that...
Regardless of what the share price opens at on re-listing, eventually it will be the trading performance which determines the share price. What we know about that is that performance continues to exceed market expectations and that the business continues to grow strongly. They have a history (in respect of trading) of under promising and overdelivering so could well imagine 3.4p for 2023 being beaten. By then cash should exceed £40m (7p a share) so 50p-60p a very realistic target...
How do you know Deards has resigned/gone?
Depends what exit LD is expecting for his holding. If he expects DX. to eventually be sold (which is what I expect), then it doesn't really matter whether DX. is listed or not...
Cash at end of 2018 was $97m. Over the next 2 years they should generate around $170m in cashflow. So that's $267m they'll have available to fund $20m (dividend) + $38m loan payments + $45m normal capex + $154m (development expenditure) = $257m. Just about enough but tight.