Fayrewood Share Discussion Threads

[badtime] 07/7/2008 14:00

tad disappointing tht share price has drifted bak

[scburbs] 07/7/2008 12:51

I have had a bit more time to look at the intercompany position and the Interface Solutions accounts to 31.12.07 which have been filed with CH.

At 31.12.07, Interface owed Fayrewood £2,010,492. This was a significant reduction from £5,246,097 they owed FWY at 31.12.06. This appears to be primarily due to the group replacing intercompany debt with third party trade receivable funding.

So it looks like FWY did what I always side they should do and released the funds from Interface by making it take on third party debt to free up the surplus cash inherent in the business (i.e. the cash that is created by having a normal amount of debt). I am assuming they got out the remaining £2m before the sale, hence no reference to it. They then sold the leveraged Interface for a small discount to TNAV.

All in all an entirely sensible plan.

scburbs - 4 Jul'08 - 08:50 - 2575 of 2582 edit

SteMiS,

Agreed that was my reading as well, but why no comment on it?

I believe the gap is around £2m. This is derived as follows:

Cash on 30 April £32.2m (RNS 8th May)
Implied cash now £36.4m

The gap being

Sale consideration £1.96m
Further interest on cash c.£0.24m
Intercompany debt in Interface to refinance £2m

[etarip] 06/7/2008 09:52

Have checked last years accounts, the Barclays Bank 6M euros warranties and guarantees on the sale of Esprinet SpA do not expire until September 2011. Some one will have to be prepared to take on this potential liability before these monies (net of any cost) can get back to current shareholders in the near future.

Given the tone of the RNS I would expect that the Directors have something in mind to deal with this situation and the delayed completion on the "Interface" sale.

[etarip] 04/7/2008 11:53

Stemis:
True, there would need for a cash exit for the current shareholders provided by the owners of the asset being bought by the company.

[prewar] 04/7/2008 10:16

Presumably a business wanting to float would buy Fwy in this instance and so cash would get back to shareholders and the business could enter the mkt quickly?

[stemis] 04/7/2008 10:13

etarip,

The use of FWY as a shell doesn't get money into the hands of shareholders per se. Essentially the shell buys another business, which wants a public listing, either for cash or for shares. Any remaining cash is still in the company so the problem of getting it out still remains.

[etarip] 04/7/2008 09:32

Stemis:

I found this to answer your quetion.

According to Chris Akers, an entrepreneur who currently heads two shells and has been associated with several successes in the past, 'the main attraction of shells is that they represent a guaranteed route to market which may not have been available to certain businesses due to either market conditions or management's lack of contacts with the City.'

For Liam Murray, a corporate financier at CFA Capital, another attraction is that they offer a 'fast track' route to joining a public market. Says Murray, 'a conventional flotation will take at least three months and usually around six. But if you reverse into a shell you can actually complete in a month – provided, of course, everything falls into place.' This is a crucial advantage as it means that a chief executive will have to spend less time with advisers and more time doing what he is paid to do, namely, driving his company forward.

[badtime] 04/7/2008 09:15

shareholders wud need to agree..nt sure what majority is required though

[etarip] 04/7/2008 09:12

Does anyone know if it requires a shareholders special or ordinary resolution to liquidate this company or can the directors initiate it without reference to the share holders?

[scburbs] 04/7/2008 08:50

SteMiS,

Agreed that was my reading as well, but why no comment on it?

I believe the gap is around £2m. This is derived as follows:

Cash on 30 April £32.2m (RNS 8th May)
Implied cash now £36.4m

The gap being

Sale consideration £1.96m
Further interest on cash c.£0.24m
Intercompany debt in Interface to refinance £2m

[stemis] 04/7/2008 08:43

The sale is a sale of shares so any intercompany debt would remain a debt on the businesses being sold. Unless Fayrewood are complete fools (which I don't believe) the sales and purchase agreement will require the repayment of intercompany debts on completion. If Fayrewood were agreeing to write off or capitalise any intercompany debts they would need to say so. They haven't.

Why is FWY not buying back all its stock it can lay its hands on? At 31 December it had holding company distributable reserves of £16.6m.

I'm not sure why anyone would buy FWY just to get their hands on the cash, except at a discount. Maybe North Atlantic Value as they own 26%. Can't the directors just put FWY into liquidation?

[etarip] 04/7/2008 08:40

always think that

[badtime] 04/7/2008 08:36

slightly more buying yesterday...makes u think..hmmm

c tht othr rns about the egm ..giving directors approval to solicit offers for the share capital of fayrewood..worth buying a few more?

[etarip] 04/7/2008 08:36

Surely any tax will have been provided for in the accounts.
Of the appprox £35,000,000 in cash about £6,000,000 is not immediately available for distribution. That means one sixth of the 153-156p will be held. The majority for the Barclays guarantee. Anyone know when that runs out?
Anyway it looks good. I bought some more. Better return than in a building society.

[stemis] 04/7/2008 08:31

Even better.

[scburbs] 04/7/2008 08:24

Des, They say it is the price for the sale of the shares so can't be the EV, perhaps they found a way of repaying the debt pre-transaction. If the debt wasn't being repaid then NAV would take a hit which doesn't appear to be the case.

"Under the terms of the sale and purchase agreement entered into between (1) the Company, (2) PPD and (3) SCH on 3 July 2008 for the sale of Interface and SLS (the 'SPA'), Fayrewood has agreed to sell, subject to Shareholder approval, the entire issued share capital of Interface and SLS to PPD for a cash consideration of £1,976,000."

Stemis,

Net assets at 30 April 2008 were £36.9m so the loss of £732,000 should be covered by profits (i.e. interest) since 31 December 2007 keeping NAV broadly similar, i.e. c.156p per share, but in cash.

"As at 30 April 2008, the Board estimates that Fayrewood's net assets were £36.9 million"

[fft] 04/7/2008 08:24

Stemis,

Is it realistic to assume that shareholders will get about 150p a share ? Or are there tax / other issues that will prevent this ?

And where should the share price stabilise to allow for this ?

Any thoughts ?

[stemis] 04/7/2008 08:19

The price for the shares is broadly as expected, i.e. a slight discount to TNAV.

The net assets at 31 December 2007 were £36,428,000. The disposal will result in a loss of £732,000. Following completion of the Disposal, the Group's net assets will be represented almost entirely by cash balances; that's £35,696,000 on a proforma basis. This equates to around 153p a share (based on 23,257,116 shares).

[deswalker] 04/7/2008 08:10

It's the EV of the business they're buying (ie including debt) for £2mill. They wouldn't be able to directly compare the sale price to the net assets (which includes debt) if this wasn't the case. It would be disingenuous.

[scburbs] 04/7/2008 08:06

Whilst it is less than crystal clear, they appear to be saying that the net assets will be around £36.4m with the £732k loss on disposal being matched by interest income on their cash balances (this is running at £140k per month from another RNS). This is around £1.56 per share. Unless there are any significant share options to be cash out which might reduce this.

"Effect on Fayrewood

Following the Disposal, Fayrewood's only trading activity will be the provision of consultancy services to PPD under a six month contract at a rate of £4,000 per month. The Board estimates, after taking into consideration professional fees and other transaction expenses of approximately £450,000, the net proceeds in relation to the Disposal will be approximately £1,526,000 -which is approximately £732,000 lower than the combined net assets of Interface and SLS of £2,258,000 as at 31 December 2007.

The Group's net assets were £36,428,000 as per its audited balance sheet at 31 December 2007. Following completion of the Disposal, the Group's net assets will be represented almost entirely by cash balances. Of these cash balances, £1,000,000 will be held in a retention account in relation to the Disposal. A further €6,000,000 will continue to be held by Barclays Bank plc as security for a bank guarantee they have provided to Esprinet SpA, the purchaser of UMD SA, to cover certain warranties and indemnities provided by Fayrewood in relation to the sale of that business. All other Group cash balances will be unencumbered."

[scburbs] 04/7/2008 07:57

The price for the shares is broadly as expected, i.e. a slight discount to TNAV.

The much much more important question is what is happening to the millions Interface has in intergroup borrowing.

Logically this would be being repaid at completion, but the lack of any reference to it is slightly worrying!

[deswalker] 04/7/2008 07:31

wake up people. news out.

[badtime] 01/7/2008 20:28

aye...agree to tht

[deswalker] 01/7/2008 20:22

We should have received the last deferred payment for the BM sale on 30 Jun (0.5 mill euro). Should be a nice clean set of accounts for the interims in the next couple of months and hopefully a clear statement of how they're gonna release the cash.