Member Info for tenobas

This company grows profits at 14.5% p.a. but for two consecutive years profits will fall.

Over 10 years profit over turnover is up by 50%. (3.75 -> 5.5)

I note that the company never states exceptional restructuring costs despite buying lots of businesses.

This is IMO a big plus.

With a P/E of 13 and a dividend yield of 3% on the face of it this looks like a good buy.

On the other hand I have two concerns:

1) Are they amortising goodwill fast enough?

2) They are for the first time entering the EU but will the cultural and Brexit issues weigh heavier than the technological synergies.

The business buys on average two businesses per year.

Goodwill is about £100m and is being amortised at 5% p.a.

As the report suggests an issue is the amortisation of customers.

IMO assuming that they will keep customers for an average 20 years is not realistic.

If amortisation was doubled then profit over turnover would be up by 30% over ten years (3% -> 3.9%)

My concern is the possibility that the company is pursuing margin causing them to lose turnover.

I note that all their acquisitions include a payment contingent upon future trading targets which seem to be heavily weighted towards profit and that adds weight to the above concerns.

Turnover fell for the first time despite the influence of about £30m spent on acquisitions.

One reason for this is price deflation with a 30% fall in recycling prices and this could hit inventories.

Nevertheless there are long standing concerns about asset stripping goodwill.

I would buy at about 110p.

Mcfarlane Acquisitions

2024 Polyformes £11.5m

2024 Allpack Direct £ 4.7m

2023 B & D Group £ 5.4m

2023 A & G Holding Gottlieb £ 4.3m

2023 A.E. Sutton Ltd £13.7m

2022 PackMann £ 7.4m

2021 (Labels Division) (£ 6.3m)

2021 Carters Packaging Ltd £ 4.5m

2021 GWP Group Ltd £15.1m

2020 Armagrip £ 1m

2019 Leyland £ 3.25

2019 Carnweather Ltd £ 3.9m

2018 Tyler Packaging £ 2.1m

2018 Harrisons Packaging £ 2.8m

2017 Greenwoods Stock Boxing £17.2m

2016 Nelsons for C & P Ltd £ 7.2m

2016 Edward McNeil

2016 Colton Packaging

Https://www.fia.uk.com/static/2a999c49-760b-47e3-b02f96a2ca89ecd9/Guidance-Document-on-Li-Ion-Battery-Fires-12-20-v1.pdf

Could somebody explain the meaning of the group and company columns in these accounts.

In group cash flow £3.3m was paid in tax,

In company cash flow dividends received was (15.6m) (a dividend paid out?: to whom?)

My understanding is that the group columns consolidate everything for what the shareholders own and

that the company column is the company owning all the subsidiary companies.

Why are the numbers in group and company columns so far apart?

How is the company column of any use to shareholders?

Https://www.youtube.com/watch?v=ODirK7ZuYW4

https://www.youtube.com/watch?v=jQZK0z7xYuQ

This share is on a low P/E of about 20.

The latest pullback in the US has taken the share price from 53p to 43p (20%)

and NVIDIA (P/E 61) moved from 135 to 105. (23%).

17 18 19 20 21 22 23 24

EnSillica

T/O 8.6 15.3 20.5 23 ? Earnings (2.1) 0.2 1.8 1.9 ?

The NVIDIA sp graph still looks like an uptrend but the Envidia sp graph looks like a downtrend.

I guess it comes down to how much hype there is in the mix.

IMO for three reasons:

1) They are on a very high P/E : 37

2) Their earnings growth is mediocre and historically erratic:

15 16 17 18 19 20 21 22 23 24

Goodwin

7.3% 15.4 8.9 6.7 9.4 12.4 8.3 13.0 13.3 16.5 17.7

3) There is much hope for their vermiculite fire extinguisher for lithium battery fires but we do not know if users will find it worth the trouble. For example they might ameliorate the fires but not make a crucial difference. AFAIK they will not be incorporated in the cells.

+ Turnover down due to falling energy costs (but expensive energy is BOY's rationale).

+ £28m written off on failed ERP software solution

+ Lake City and Stack Metalurgical contributed £18m turnover but turnover was down from £420m to £400m

+ Debt up by cost of aquisition of US businesses. (all cash flow is disbursed to shareholders).

+ The business targets and achieves a ROCE of about 15% which is probably why it wrote off the ERP software.

(As I understand it ROCE excludes goodwill costs). Goodwill is up 30% since 2018 when earnings were higher.

On the plus side the cash flow is reasonably strong (partly due to disinvestment?) and the forward P/E at around 15 is not too demanding.

With the following having fingers in the pie I think so:

+ EU

+ UK Govt

+ Government of Oman

But might that be wrong?

This share is best left to the professionals:

+ Impact of massive share options to employees.

+ Chinese joint ventures

+ How much of a barrier to entry is their IP (they amortise it at alarming rates).

RYA and EZJ both have quarterlies ending in June.

The message from the EZJ June Quarterlies is that RYA say the demand is soft but that EZJ say it is strong. IAG also have no problems with demand.

RYA pbt down 47%.

EZJ pbt up 16%

The problem seems to be specific to RYA. Maybe it is because they do not do holidays?

Both are on a P/E of about 10.

Quotes:

'International Airlines Group (IAG) owns and operates 635 aircraft, and some say it has a fleet of over 580 aircraft.'

RYA: 'Fleet size 584' (it is mostly owned, i.e. the same ratio as IAG.

But IAG has revenue of Euro 29.4bn.

RYA has revenue of Euro 13.4bn

So IAG has less planes in proportion to revenue but spends 4.5 times as much maintaining each plane despite the fact that the wear an tear on RYA planes is higher.

**This is a truly awful performance**

Numpty: One thing I can be sure of RYA is not going to get better on this metric.

IAG P/E 3

RYA P/E 10

Actually I think I have found the reason:

'Ryanair expects to be dependent on external service contractors for Airbus A320 and Boeing 737 maintenance,

particularly for airframe, engine and component maintenance, for the foreseeable future'

So Numpty who would be the Numpty if IAG were to close down its maintenance facilities?

or if RYA bid for IAG?

Well, I have tried to find the reasons without success.

RYA own no Airbus planes but can I believe that that explains why IAG spend more than four times as much. IAG planes make relatively less takeoffs so that should be cheaper.

SouthWest spend only 5% so IAG's performance is awful.

My interest is in whether IAG costs will fall? Investors invest in companies that could do things better not those that do things well.

I have no idea why IAG's fuel bill is so much better. Why should not two converge on this?

Comparing IAG to RYA

Per revenue:

Fuel Costs IAG 25% RYA 40%

I thought that long range aircraft used lots of fuel because you have to use fuel to carry fuel.

Comparing IAG to RYA

Per revenue:

Engineering costs IAG 10% RYA 2.2%

Marketing + other (=IT property) IAG 9% RYA 6%

One should expect a budget airline to be a low margin airline but the opposite applies.

Both own their fleet outright so the comparison is valid.

If I understand this issue correctly then if previous annual reports are anything to go by then 3.28m shares were awarded to the directors and this shows as £1.4m share based payments in note 17 of the cash flow statement.

The collective remuneration of the two directors will be close to £3m.

The earnings of £14.2m taking account of the db pension fund contribution gives a P/E ratio of 8.7.

For a company operating in a sector consolidating around the use of robots having a well incentivised board this is for me a buy.

The results make clear that material costs are strongly down as are external costs (presumably because of the resolution of supply chain issues). These falling costs would be expected to cause the order book to fall but it did not (the order book was close to record levels) : "The closing

order book at 31 March 2024 of £83.6m remains close to record levels and was unchanged from the half year position"

There are no problems with the order book but the operational cash flow is up by 86%. This is not just a good result but is an excellent result.

This share is on a forward P/E of 7.8%. I find this share particularly attractive because in the past db pension liabilities exceeded £100m but are now heading for half this. Once the pension issue is put to bed either by natural attrition or by outsourcing the liability then dividends will be possible and it will become clear that the upside is not priced in.

This company has a history of weak and erratic growth.

IMO this price is based on hopes for the AVD products particularly in the US.

As to whether vermiculite could be incorporated into batteries who can say?

The pbt here seems to be growing strongly.

If electric trucks are a long way off this might be a better investment than VW.

I am trying to predict profits from the trading update.

Debt will be reduced by a little over £20m. (The cash stays steady).

From past years depreciation will exceed investment by about £15m

Dividends will be around £38m

There is also the affect of energy surcharges on receivables which will be down by say £10m because gas prices were down

So profit p is

p = 20 -15 +38 -10

p = £33m

Say plus or minus say £20m but significantly down.

Looking at the revenue growth it looks to be below wage costs.

The Trading update said:

Outlook

Reflecting the good progress achieved year-to-date, the Board’s expectations for full

year 2023 remain unchanged. Looking beyond this year, the Board remains confident in

the Group’s prospects for continued profitable growth.

So It looks to me as if they are talking jam tomorrow.

Broker recommendations are also a bit weak.

This business seems to be throwing off heaps of cash.

Cash Generated £270m

Interest plus leases £65m

What's not to like?