AGA Rangemaster Share Discussion Threads

[cockneyrebel] 11/3/2011 10:46

Agree CWA1 - 70% earnings growth forecast this year and 50% for the follwing year.

Puts them on a PEG of 0.26 !

I doubt I'd have got a look in this am had the market been rational :-)

CR

[cwa1] 11/3/2011 08:52

Yes CR, really liked those results. Decided to add a few first thing and I suspect I'd have had to pay a good bit more if markets had been more bullish, so the wobbles can be useful sometimes.

[cockneyrebel] 11/3/2011 08:42

Rather good results today and with 50% earnings growth forecast these look cheap now imo.

Suspect they'd be well up today had the market got balls.

CR

[druinsky] 15/2/2011 09:04

Looking very very good imho

[smicker] 11/2/2011 00:01

After that general explanation i wanted to see what is the situation here.

From the half year results

The full triennial valuation of the pension scheme undertaken by Towers Watson
Limited on the actuarial basis as at 31st December 2008 has now been signed by
the scheme actuary and has been submitted to the Pensions Regulator. The
actuarial deficit as at that date has been assessed at £161.3 million when
there was a £57.5 million surplus on an accounting basis. Recalculated at 31st
December 2009, the actuarial deficit is considered to be £84.0 million compared
with the accounting deficit of £40.5 million as at that date.

From the IMS of 19th Nov

On an accounting basis the Scheme was close to returning to surplus at the end of October 2010


So two major movements here. Firstly the actuarial deficit has reduced by 77.3 million in one year. It also appears that the company will be able to provide an updated figure as required but, given other articles i've looked at, it is likely to have reduced further in 2010.

Looking at the accounting deficit.

The first question is how can a 50+ million surplus become a 40 million deficit when the actuarial deficit has reduced? The answer is contained in a presentation on the website and was caused by more conservative assumptions of future performance

"The IAS 19 pension position was the principal change in the balance sheet. A lower discount rate and higher inflation rate assumption were the main drivers which moved the scheme from a £57.5 million surplus at the end of 2008 to the £40.5 million gross - £29.2 million net of deferred tax - deficit reported at the end of 2009."

"The increase in liabilities was driven primarily by the lower discount rate of 5.65% compared to 6.4% a year earlier and a change in the inflation rate, up from 2.4 to 3.45%."

As stated above the IMS indicates there is no longer any deficit. I think it is fair to assume that this will not have been caused by any relaxation of the discount rate or inflation rate.



At this point i am asking myself why the company would be making the payments outlined in the half yearly report

"the Group will make deficit contributions to the scheme of £2.0 million in 2010 and 2011,and (assuming the triennial valuation to be undertaken as at 31st December 2011 subsequently does not change the contributions schedule) thereafter £10.0 million per annum from 2012 to 2020 inclusive with a bullet payment of £48.0 million on 31st December 2020 "

It seems clear that the fundamental figure driving this is the 2008 Triennial valuation of 160m deficit as the company state that the 2011 valuation will be when the contributions are next reviewed. From above, at end 2009, it had already reduced to 84m in one year and as stated earlier all articles i come across suggest deficits have continued to improve.

I think it is very significant that the company have only agreed to 2m per year contributions until the 2011 valuation and there isnt any likelihood of them paying anything like the 10m per year.

It would be interesting to see what has happened to other similar pension schemes in the past year.

[smicker] 10/2/2011 23:20

I've been trying to understand the point of having different pension deficit numbers and i've come across this explanation.....

Can anybody out there define for me what the actuarial deficit of a pension fund is? I have come across an example of a fund which has a budgeted deficit for 2004 of about 60 million dollars, but an actuarial deficit of 2.66 billion. --------------------------------------------------------------------------------

The pension fund deficit (or surplus) is the difference between the assets and liabilities of the fund.

It is reasonably simple to value the current assets. It's basically what you would get if you sold all the shares, bonds, property, cash in the Fund today at a fair market price. But of course, pension funds can't really do that, and they generally exist as going concerns, so they have to forecast future income and asset growth.

Valuing the liabilities is a bit trickier. Once people have retired, you have no idea when they are going to snuff it, but you can still get an average life expectancy annuity calculation. The problem is the people still working you are still accumulating unknown nominal salary rises etc. which affects what you will have to pay out when you retire.

Traditional pension valuations could assume that the assets (i.e. shares and bonds) grow faster than the liabilities (current and future pensions) and therefore there was a surplus. This was true on an ongoing basis, but not if the Fund stopped tomorrow. Basically the actuarial valuation is sort of based on the liabilities that already exist against the marked to market valuation of the assets if the Fund was wound up today, together with a best "actuarial" estimate of what the future unknown liabilities are - treating these as real liabilities (even though uncertain) not contingent (and in some cases off-balance sheet) liabilities.

So the actuarial valuation is how bad it is, if the music stops. The other valuation is how bad it is expected to be if the Fund continues and economic growth etc. continues at the expected rate indefinitely.

[golfer25] 09/2/2011 18:08

AGA Rangemaster, the specialist in range cookers and kitchen living, today
issues a trading update ahead of its preliminary announcement of the results
for the year ended 31st December 2010 which will be made on Friday 11th March
2011.

[smicker] 08/2/2011 18:24

This shows that the improvement in pension schemes is continuing. Must be good for Aga

[darias] 18/1/2011 09:05

Stopped out

[steved] 16/1/2011 11:55

It has struck me for a while that Aga could well be a private equity target as it is stuffed with cash and has a stable of very highly regarded brands that should be worth much more than the current capitalisation of the group? Now the pension scheme is looking more manageable and risk capital is more readily available this surely makes it even more and more interesting and vulnerable to any potential predators?

Although there is'nt any segmental reporting it would seem Rangemaster is a very efficient operation with a global footprint and should be very valuable to another manufacturer?

The AGA brand is extremely powerful and iconic and could easily operate as a stand alone brand. Fired earth is similar.

The marvel operation could well be worth a goodly sum sold as a separate entity as could Leisure sinks, Divertimenti and Grange.

If this didn't occur it's got to be a really good recovery play as without doubt it is a quality business that has been around for decades and is now more focussed on it's consumer brands than for a considerable period.

wad collector - I don't feel there was any chance of this business going bust as it's too well managed and the balance sheet is very strong. The pension deficit is of course an issue but a manageable one IMO.

[wad collector] 15/1/2011 20:14

In my experience there are no pension experts.There are people who want to sell you pensions, people who run the pension schemes and people who try to guess the future.Sip with a long spoon with all of them.
I am just pleased that it no longer looks like Aga are going bust.One day they may return to the £3 or so that they once justified(pre-special dividend or whatever it was).Not 2011 though.

[smicker] 14/1/2011 17:30

My take now on the pension deficit is as follows. This scheme was 161m in deficit at the last trienniel valuation.

The company has then committed to make payments of

2m + 2m + 2.5m +(10m * 9 years) + 48m for a total of 145m.


They stated that the scheme was close to surplus in October and, given the rise in markets since, i think it is safe to assume there is now a very healthy surplus given the massive size of the assets (based on existing assumptions).

If this is the case there is the potential for a very significant reduction in the payments which must be made. The icing on the cake would be if the scheme could be offloaded in its entirety while it is in surplus to remove any future uncertainty though i dont know if this is possible/legal. ( anyone care to comment )

Getting really silly, is it possible the scheme is now so well funded further contributions wouldnt be required at all. I'm not fit to answer this. Any pension experts able to give their opinion?

[nellie1973] 14/1/2011 16:10

Broker upgrade today

[smicker] 14/1/2011 15:40

bearstalker,
There is a thread called jtcods blog. There is comment there on the pension deficit from posters more knowledgeable than me who understand these things.

[bearstalker] 14/1/2011 15:31

Thanks for looking anyway

[smicker] 14/1/2011 11:25

Bearstalker,
I've had a look at the interim results but, to be honest, i'm lost in the pension section. They seem to have committed to put 10m per year into the scheme for 8 years but why would you do this for a scheme in surplus? I clearly dont understand this. They mention so many different figures and accounting bases it could be either disaster or sorted already.

[bearstalker] 14/1/2011 11:22

Its a way of potentially storing money in the bank - clear the deficit out altogether which is seen as prudent and if managed funds perform and the pension fund is in surplus presumably they can take a penion holiday later (up to allowed limits of course)?

[smicker] 14/1/2011 10:59

I've had a look back at the 19th November IMS and the headline was

"RANGEMASTER PERFORMING STRONGLY BUT MARKETS REMAIN TOUGH AND UNCERTAIN"

so its clear the management outlook has taken a step change.

I dont know why but i had a notion that the company pension scheme was in difficulty but they stated in Nov that "On an accounting basis the Scheme was close to returning to surplus at the end of October 2010." I think its safe to assume that the situation can only have improved further. I'm not sure then why they felt the need for the 2m contribution mentioned:

"This is after a £2 million deficit recovery payment to the Group's Pension Scheme."

Anyone able to provide some futher detail on the pension scheme?

[wad collector] 14/1/2011 10:05

Yes , it is nice to see an absence of caveats.

[smicker] 14/1/2011 09:40

I think the most important part of the statement is the following

"the Group feels well positioned as we move into 2011."

No qualifications and in marked contrast to many other trading statements i've read recently. Without getting carried away i think we'll be well pleased this time next year.

[bearstalker] 14/1/2011 09:05

Pretty decent results given the worst recession for 60 years. Moreover, an increased in retained cash form £28m to £33m andt he market cap is only £75m.

Decent dividend also paid recently

[wad collector] 11/1/2011 21:53

Well spotted.I await my £3 target within months.

[roddyb] 16/12/2010 18:40

That Director did well then? Fancy that not much movement in weeks then he buys at 82p and the share then leaps 7% in one day.

This sums up the trading in this company, market too thin, no-one knows how to value the company so the slightest breeze and the share tanks or soars - too flimsy for me.