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Real-Time news about Fountains (London Stock Exchange): 0 recent articles
|gengulphus: That will be £5m per year of additional turnover, not profits.
Looking at last year's accounts ( http://www.fountainsplc.com/jkcm/cache/fl0000496.pdf ), they made £4.4m gross profits (i.e. turnover minus the direct costs of producing the goods and services they provided) on turnover of £41.8m - a gross margin of a shade over 10%. If they repeat that with this additional turnover, the contract will be worth around £500k per year in gross profits. (That's on the assumption that the existing work for British Waterways is quite small in size - the RNS gives the £5m/year figure for the combination of the existing work and the new contract, not for the new contract on its own.)
That £4.4m of gross profits was then almost entirely swallowed up by administrative expenses - i.e. overhead costs not particularly associated with providing any particular goods and services, but definitely necessary to keep the company running. The net result is that the company made only a tiny overall profit for the year of £177k, or a bit over 1p per share. That's a very measly return of about 2-2.5% on the 48p share price - certainly not enough in itself to justify the price being that high, which means that the price is actually being kept high by hopes that profits will increase.
Hopefully the new contract won't increase administrative expenses by much (increased turnover does tend to increase administrative expenses a bit, as a larger company generally needs more admin) and so would boost overall profits by up to about £500k per year. That's worth up to about 3p per share of profits each year, or 9-15p per share over the 3-5 year duration of the contract - which together with the existing 1p per share would be a reasonable (but not spectacular) return for shareholders on the 48p price of a share. So in itself, this news provides some justification for the price being as high as it is.
On the plus side from here, the company has shown itself still capable of winning a reasonably high-value contract - if it can win a few more, the profits might start to look quite good!
On the minus side, old contracts will run out from time to time, reducing turnover - and companies generally don't announce such events even for big contracts, since they will already have announced how long the contracts were for when they originally announced the contracts. And in addition, quite a large part of the company's turnover probably comes from contracts too small to require announcing at all. So an announcement of a big contract win like this one only gives a hint which way the company's turnover and profits might be going, not anything conclusive. There is definitely a risk that the turnover rise due to this contract might be more than counterbalanced by old contracts running out and a lower level of new contracts in general. (Read the "Outlook" section on page 12 of the above link and you'll see that a "slowdown in work volumes" is definitely a worry for the company.)
In short, while this contract is good news for the company, I see it as mostly saying that 48p is not a clearly-too-high price, and would want more before I decided that the shares were clearly cheap.
|mqhopewell: RNS Number : 0442N fountains PLC 10 February 2009
British Waterways contract win
Combined with existing work for British Waterways, the contract is expected to be worth approximately £5 million per annum for the next three years, with an optional two year extension.
Please excuse me as I'm still new to investing, but with shares in issue at 15.03m, £5m/annum equates to approx 33p per share? I'm just trying to see why the share price is at a low of 48p?
Any thoughts welcome.|
|charliecharlie2: In response to Blackb1rd. To make cutbacks 2 months before ye would be a pretty bold move, almost suicidal. They seem to be targeting large scale contracts, but these come with a very high mobilisation cost. It seems that cashflow is a major problem and not costs, have they been rumbled by a customer on a big contract????? If historically they are consistently having to reduce costs and staff as stated over the last couple of years, and if they are successful in winning new work, then how are they going to cover costs and have staff available to manage the new contract mobilisation? From experience any contract mobilisation costs are extremely high against revenue for the first 6-12 months.If new work is awarded and commences within the next 2 months all the costs will be in this fy and the revenue in the next fy. Again from experience, reduce the turnover, increase the profit. IMHO they are stretching themselves thinly, particularly where cash is concerned and eventually something may well snap. That may well have a further effect on the share price between now and ye. How many times do they have to have a restructure and cost cutting exercise when the same management team are overseeing it? a IMHO hold onto your hats and sit tight, this could be another fnt rollercoaster ride!!|
|blackb1rd: Historically for the past 4 years there has been a dip in the share price around this time of year. Resulting in the share price going back up, maybe not to where it was, but it has gone back up. IMHO if the company has reduced costs and staff for the past couple of years and profits have gone up until now.
Have they got the infrastructure in place for any new work?
If they get new contracts and are losing 100K a month (fillipe said that 650k has been lost in the second half of the year.) Are they going to make more cutbacks or go for bigger contracts to compensate for the negative contracts.
IMHO I think the share price might go down by another 10p and then stay steady until the new year, thats if they are not a target for a takeover with a low share price.|
|charliecharlie2: Had shares for @ 12 years, been through rough and smooth with them, sold a few, bought a few to many by the looks of things, this is becoming a bit of a trend with them,alwys around the middle of the year. Lumber is a small part of their turnover, @ 3m, isn't that too low to effect the share price - maybe I am being naive?|
|cocodot: Has anyone else heard about Fountains losing their IT department? Any views on how this might affect their share price? Anyone seen this in other companies - what was the effect? I can't see this being a good thing ...|
|tday: With the benefit of hindsight, perhaps 'the essence of mediocrity' is a little harsh.
The company needs a shake up and that is unlikely to happen, with the present Board. I'm sure they mean well but, the share price performance says it all.|
|tday: Looking at the share price history, FNT is priced the same as 5 years ago. What does that tell you?
One problem is the fact that it's a low margin, high labour cost business. Such businesses rarely surpass expectations and often fail to meet them.
Two profit warnings in the last 8 or so years, suggests that something isn't right. What, I wonder, is the common denominator?
IMHO the company is too conservative, too concerned with minutiae, too staid, too risk averse, too humdrum.
It appears to lack innovative management at Board level and the non execs seem to mirror the executive directors.
The company needs new, younger, enthusiastic, charismatic directors. The present mob, the new CEO excepted because, I don't know him - are the essence of mediocrity.
A share to trade but, not to hold.
Other views welcome.|
|gateside: From the weekly AM Review
fountains - Still Gushing Merrily
fountains is a well established and mature United Kingdom company. The business had an excellent record, the good husbandry at the heart of its operations seemingly spreading to the treatment of its shareholders too. The global warming scare, the emphasis on conservation, and even the fashion for arboreal-worship seemed to be tailor-made for the creation of a benign commercial environment for the company's operations. There was a transaction with a large US company, Asplundh, which saw the latter take a stake in the company, a move which also encompassed a strategic alliance to extend the range of services to UK and Irish Utilities. But March 1999 interim figures that saw turnover expansion in the sphere of the aforesaid utility services and landscaping, and a £500,000 capital injection, signed off the good news, at least for a season.
To be fair to fountains, the company had always identified the fact that the price of timber made economically sensitive its harvesting and replanting operations. But a nasty July 1999 trading statement, which foretold of a £900,000 exceptional charge due to substantial expansion in this area without proper management control being exercised, damaged the company's rating severely. Nor did it improve its standing upon publication of the full 1999 accounts. Further and better particulars had revealed a whopping £2.6 million charge instead, a sum which palpably weakened the group, not only the share price. Analysis of the relevant activities revealed that a line-management attempt to keep up contribution levels from forestry in the light of falling margins, by raising turnover, had embroiled the company in financial guarantees and loss-making contractual commitments; and that getting out of these involved hefty legal and professional fees, to add to the misery.
But this merely got the management going, and the rise of utility and related services, from just over one-fifth of turnover in 1998, to nearly three-fifths by 2000 showed what the strategy was. Whilst keeping a flag firmly planted in the forestry and landscaping sectors, the company was now working for, for example, 9 out of the 13 regional electricity companies; and in this and other areas was building up its in-house expertise so as to broaden and deepen the level of service on tap. The contrast between the regularity of this type of work, and the disappointment which has been the lot of those engaged in the forestry business in the United Kingdom in recent years, was perhaps too obvious to need much emphasis.
The full year to September 2001 saw turnover down £2 million from the £35 million recorded the previous year. The effect of this was less marked at the gross profit stage, had vanished at the operating level, and by the time that the pre-tax stage was reached - courtesy of a £165,000 drop in interest costs - fountains had managed to post a 23% increase, a figure hardening into an adjusted earnings figure for the year, of 10.5p. The dividend was increased from 1.98p to 2.22p.
The Chairman said that the company had lost £4 million in sales due to the impact of the foot and mouth epidemic, and what caught the eye was the £1 million increase in operating cash-flow, a trend which eliminated borrowings by the year-end. Hell-bent on decreasing the volume of traditional low-margin activities, the year-end report talked too of an encouraging prospect pipeline, and an increasingly attractive long-term position too. So it was a bit disappointing to see that at the interim stage to March 2002, fountains' sales still fell from £17 million to £16 million.
Mitigating factors were the effect of foot-and-mouth disease on operations, a gross profit expansion from a superior business mix, and maintained earnings as a result.
The strength of the 2002 figures was that of a gross margin increase of 3%, equivalent to £1 million; the weakness, that that £1 million went in strengthening the management team, and that this choice, together with near-static turnover, robbed the company of any growth credentials for the third year running, the 10p earnings figure being virtually unchanged
And it was the same story the following year as near static sales to September 2004 generated plenty of cash - now £1.5 million - but static earnings too; but not so the dividend, up for the fourth time. A cautious but profitable return to forestry management (especially in US hardwoods) broadened the base a little, but with everything conspiring to highlight the company's position as the presumed partner of choice in the growing recognition of the threat of vegetation growth to the efficacy of transport and electricity distribution, what investors are waiting for is a surge in sales - and earnings.
But market optimism was done no harm at all by a confident February 2004 AGM statement, confirming that the year's good start was continuing. This week, this turned out to be a £1 million sales hike, which drew the interim pre-goodwill amortisation earnings per share up to 5p, and allowed a half-year payout of 1p. The Chairman hinted broadly of acquisition prospects too.|
|gd150772: Dipped my toe into FNT yesterday! The I/C tipped them at 126p and then followed them up after the agm with a "keep buying" at 141p. The recent fall in the share price seems to be have been a tree shake of the highest order by the mm's. Overall, volumes have been rather thin, just a case of the mm's shaking the weak holders out.
With 80% of FNT's business secured for the year at the AGM stage i'd be very surprised not to see them come in ahead of expectations. Oh well all will be revealed come late may/ early june as they report their interim results...
Fountains share price data is direct from the London Stock Exchange