Pennant Share Discussion Threads

[kenbarlowx] 01/5/2014 01:24

Thanks Dangersimpson for pointing the RNS out.

£1.00:0.12m gain. £1.20:0.40m gain. £1.40:0.68m gain. £1.60:0.96m gain. £1.80:1.24m gain. £2.00:1.52m gain.

Mr Snook is paid about £0.25m. If applying the usual RBS 2-year salary bonus model, I expect him to get interested at any bid above £1.30 a share.

Shame if it's bought though, this is a company (local to me) I was intending to fall in love with.

[gengulphus] 30/4/2014 16:42

It does seem a bit weird... The two explanations I can think of are poor drafting of the RNS, with the requirement actually being about a more specific 20-day period, or a feeling that in an incentivisation arrangement, there ought to be a not-yet-achieved performance condition...

Gengulphus

[dangersimpson2] 30/4/2014 16:37

Hi G,

Good point - although I'm struggling to think why else this condition would be included apart from an attempt to set a minimum price, I agree it may not be that effective in reality. As an incentive the 100p condition would seem a strange one since the geared effect of £14k for every 1p above 91p should be enough incentive to get the best possible price!

Cheers,

Danger

[gengulphus] 30/4/2014 16:23

I think the 100p level sets a minimum takeover level at which point these would pay out because if there was a conditional offer at say £1.20 the share price would undoubtedly trade above 100p level for 10 days but if the conditional offer was 95p these wouldn't.

As worded in the RNS ("conditional upon the ordinary shares of Pennant having traded on AIM at a price of 100p or more for 10 business days within a 20 business day period") if e.g. speculation about takeover prospects drove the price to 100p or above for 10 out of 20 consecutive business days, and then the speculation disappeared and the price dropped, followed eventually by a takeover approach that succeeded at 95p, it looks as if the condition would have been satisfied and he would get 95p-91p = 4p per B share.

I.e. the condition as stated doesn't say which 20-day period the price must be high for, just that there must have been such a period. Once such a period has happened, it looks as if the payouts will happen regardless of whether the price is still over 100p or how long ago the period was... Of course, if the share price is below 91p, the formula for calculating it indicates no payout, but between 91p and 100p, there looks to be the possibility of a payout, depending what the share price has done in the past at that point.

Gengulphus

[dangersimpson2] 30/4/2014 15:50

Edited - Was reply to Big7ime correcting error however he's now corrected it himself.

[big7ime] 30/4/2014 15:20

That's the way I read it but it's not totally clear as per usual

[dangersimpson2] 30/4/2014 14:36

my take on this is the grant of an option for £7k, but which could net the owner >£1,400,000, less the paltry £7k cost if a S.P. target of >100p is met for the conditions stated.

I don't read this that way. The takeover conditions (the right to an amount equal to the difference between either a takeover price or a sale of the trading business and a return of capital and 91p) are sub-conditions of right 4 which means that both conditions need to be filled - trading above 100p and an offer being accepted. The RNS is quite clear that these are B-Shares not options and they have the right to be sold to any offeror only on an unconditional offer being accepted (or sold back to the company at cost if employment ceases) not converted to ordinary shares. There is no share price condition alone that will see payment made to Mr Snook.

I think the 100p level sets a minimum takeover level at which point these would pay out because if there was a conditional offer at say £1.20 the share price would undoubtedly trade above 100p level for 10 days but if the conditional offer was 95p these wouldn't.

The B-shares cost Mr Snook £7k and the possible actions that will see payment are:

1. share price above 100p for 10 business days AND unconditional Offer.

Payment is from selling the B-shares to the offeror for the difference between 91p and the unconditional offer price.

2. share price above 100p for 10 business days AND return of capital.

Each B-Share will have the right to the same capital return per ordinary share from the company if Mr Snook pays 91p per B-Share to the company.

3. Mr Snook leaves Pennant for whatever reason.

Payment is £7k from the company to Mr Snook to redeem the B-Shares.

If the above is wrong it means the RNS is worded wrongly and the company needs to correct it.

[owenski] 30/4/2014 14:20

Deuce, yes, I see what you mean and read through the RNS again. Thanks

[pj 1] 30/4/2014 14:14

Somone likes it anyway suddenly +8%, makes a change after the drop

[deucetoace] 30/4/2014 14:03

owenski,
From the option he only gets the excess over 91p if the company is sold for more than £1 so he won't get £1.4 million but a couple of hundred thousand is feasible. Of course he has a significant holding himself which would make him a millionaire but that is a different issue.

[pj 1] 30/4/2014 13:59

Thanks for your input DG, ds2, that went over my head yeaterday

[dangersimpson2] 30/4/2014 13:08

I agree, my thoughts here:

[dgwinterbottom] 30/4/2014 12:57

Interesting RNS issued late yesterday!! It reads to me as essentially incentivises the CEO to seek a takeover of the company at as high a premium as possible? Anyone care to comment please!!

[pj 1] 29/4/2014 08:52

Not always a fan of HSBC Investdirect for various reasons. But dividends have always been paid very promptly by them (shame their Placing communications and actions take so long)

PEN received yesterday :-)

[sharesoc] 16/4/2014 11:42

There is a joint ShareSoc/Hardman company seminar in Leeds on the 20th May with Ideagen, Avacta and Getech all presenting. It is the first ShareSoc event in the North of England with no charge for the evening. It would be great to see as many investors there as possible showing your support and to encourage more events like this in the North. For more details and registration for the event go to: hxxp://www.eventbrite.co.uk/e/hardman-cosharesoc-investor-forum-tickets-11117004259

Twitter @ShareSocUK

[gengulphus] 10/4/2014 19:40

Is that a normal paper exercise, or could PEN be looking to buy back some Shares?

Quite possibly both!

They seek (and so far get) the rule 9 waiver each year, i.e. it's a normal exercise. It's done to ensure that buybacks can be done without obliging the directors to do a management buy-out - without it, any buyback (other than of the directors' own shares) would push up the management's percentage stake in the company when it is already in the 30-50% range, which would trigger a mandatory bid under rule 9 of the Takeover Code if it weren't for the waiver.

The waiver doesn't oblige them to do buybacks - it just keeps the possibility open (I believe the Takeover Code also obliges companies to take reasonable precautions against their buybacks pushing shareholders into situations where they have to make mandatory bids). But Pennant also have a tendency and history of doing share buybacks, generally when the share price is fairly low. I think the last one was at around half the current share price in November 2012 ( ).

I'd be surprised if they've dropped that way of thinking! So my guess is that they're not just keeping the option of buybacks open, but also keeping an eye open for opportunities to do them if the price drops low enough... At the time of that November 2012 buyback, the EPS 'run rate' indicated by the 2012 interim results was 2*2.21p = 4.42p per year, indicating the buyback was at a P/E of just under 10. If they're looking to do buybacks on that sort of basis this time, they would have instructed their brokers to buy at a limit price of around 65p (*). I.e. some way below the current share price, but not out of reach if the stockmarket has a determined slide!

I should add that Pennant's tendency to do buybacks on that sort of opportunistic "if we have the cash and the price drops low enough" basis is one of the things I like about the company. I quite strongly dislike buybacks funded by debt and those done on a "we intend to spend X amount on buybacks no matter what" (as when big companies announce a "£2b buyback programme" or such like - a positive invitation to other market participants to try to fleece the company by driving the price up!). But Pennant's approach seems quite attractive to me.

(*) I am of course not privy to Pennant's instructions to their brokers! I.e. that's only guesswork on my part... But if the price were to show signs of descending to that sort of level, I'm confident enough about that guesswork that I would probably be tempted to add to my holding!

Gengulphus

[pj 1] 10/4/2014 15:47

Is that a normal paper exercise, or could PEN be looking to buy back some Shares?



''At the General Meeting also held earlier today, independent shareholders passed the resolution, on a poll, to approve the waiver of obligations under Rule 9 of the City Code on Takeovers and Mergers in respect of Christopher Powell, Jennifer Powell and the Powells' Concert Party, as detailed in the Circular dated 14 March 2014, in the event that the Company makes market purchases of its own ordinary shares.''

[sparkey_two] 07/4/2014 12:38

Yes it is strange. End of year sells already factored in and why sell two days before the dividend date. Happy if we fall this month as my dividends are set to re-invest...

[el1te] 07/4/2014 11:18

Odd pretty large drop on low volumes - probably triggering some stops. Not a bad gift opportunity for those who want it!

I'd be topping up if I had spare cash - unfortunately I don't

El1te

[boadicea] 03/4/2014 21:13

Unsurprisingly, we seem to have a modest amount of profit-taking at year end - one could possibly have expected more.
A quiet period while it builds up confidence for the next advance will do no harm.

[penpont] 19/3/2014 23:26

Excellent summary El1te, makes a v good case for investing here.

[el1te] 19/3/2014 23:10

Pennant International Group - An Encouraging Path

New write-up on Pennant available below. Feel free to sign up to free email updates via the right hand sidebar and leave comments on the article



Good Luck with your investments

El1te

[topvest] 10/3/2014 09:47

Still a nice growth story, particularly in the training division.

[pj 1] 10/3/2014 09:47

I have eps of 7.1 for y/e 2014, has anyone anything else?