Anexo Share Discussion Threads

[raymund] 05/7/2023 18:32

ST's write up as a 'recovery buy' in IC worth a read

[p1nkfish] 03/7/2023 17:55

How long to prove the case and with risk?

Barge pole imho until some proof and even then caution.

[rivaldo] 03/7/2023 15:06

FYI a nice write-up on ANX (poor use of "it's apostrophes!):



Conclusion:

"Nevertheless, the group has grown it’s EPS at a rate of +9.2% over the past 5 years and has a current dividend yield of +2.3%. These may seem like low figures, but the group trades at an LTM P/E of just 3.3x, and when including net debt in the equation, a P/E of 7.6x. Analyst estimates have them pegged to grow their cash flow substantially faster than their earnings over the coming 3 years and grow EBITDA at a rate of ~12% p.a. This could result in deleveraging into reasonably high interest rates, leading to an increased pace of growth below the EBITDA line due to declining interest expenses.

Anexo is an interesting business model, but seems to be playing around with it’s status as a going concern, which gives context into it’s optically cheap valuation. There is a fair amount of solvency risk in play here, but should they effectively improve working capital and deleverage, the investment case seems to be quite strong."

[gusrezo] 07/6/2023 17:54

the worst scenario is that this 7.2 million doesn't take into account the expenses incurred in previous years.
Then we have: 2.9M(2020) + 0.9M(2021) + let's take 0.9M for 2022, since the total 2022 expenses for emissions cases are 4M and most of it should be marketing related to Mercedes.
And then let's add 10% yearly interest on the2020 2.1M loan (0.6M of interests over 3 years): that brings about 5.3M total expenses.
If we subtract the loan (2.1M), the own cash allocated to the case is 3.2M; if they get 7.2M, it's more than 100% "return on own cash" in less than 3 years. Not bad, probably it was expected a higher amount, but currently there's a total lack of trust on the actions and words of the management.

[serapuff] 07/6/2023 10:47

There was a deleted comment on the Anexo LSE chat where the IR mentioned that they are receiving back 7.2M in cash instead of 12.2M in cash.
Hence the return should be 7.2 - c.4.8 (invested) = 2.4M, or about 50% over a few years which given what they are paying in interest now is not that great.

[timmythedog] 07/6/2023 09:28

Don’t agree with you Serapuff - I think that the £7.2 is after the costs of acquisition, processing etc. So if we assume that they spent c£5m on the case then the relevant sum received after claimant cheques and litigation funding repayments was £12.2 so a net 140% return in the £5m put in.

[serapuff] 06/6/2023 07:42

Given the wording of the RNS, and the fact that expenses has already been expensed through the P&L, it does sound more like 7.2M is their share of the settlement, of which after deducting the costs involved sounds like a pretty poor return on investment

[gusrezo] 05/6/2023 17:42

The 91,000 claimants from Therium settlement with VW was 193 million - 2,100 per claimant. So 12,000 from Anexo would be 24 million - a cut of 50% for Anexo would be 12 million and then has to pay the private equity funder. I think in Therium case was pending whether VW would pay appart the legal costs.
Anyway the VW case was not going to move the needle in Anexo in the long term, the problem is the mismatch between the funded credit hire cases and the cases the company is able to collect, there's a backlog of 12,000 cases in 5 years and even the auditor has claimed a higher impairment of receivable due to aging... let's hope that, with a shrinking fleet and more productive lawyers, the situation is reverted.

[wjccghcc] 05/6/2023 16:50

Doesn't really make much of a dent in the 73mm net debt.

[balcony] 05/6/2023 15:48

Just over £7m for ANX from the VW settlement.

[alex_mc] 05/6/2023 15:45

hxxps://www.anexo-group.com/content/news/archive/2023/050623

[p1nkfish] 01/6/2023 14:23

Just looked in. Credibility of company taken down with the CFO jumping ship. A great shame all round. Barge pole until picture becomes clearer and signs debt is under some better control. That is not a quick fix imho.

[timmythedog] 01/6/2023 13:39

I’m not sure I would be basing any of my investment decisions on something which may or may not have an effect on twelve years’ time.

[moathunter] 01/6/2023 12:22

BTW I bought ANX at £96m/ 81p.
There appears too many positive uncertainty outcomes:
- halt growing--> cash flow generative, court backlogs improving gradually, proven barriered competitive advantage over many years, taken private at a premium (tight float = nice share price falls), op margin reverts up from 23% to 30% pre-Covid (fewer rivals too), expansion in UK (credit hire in only 30% of UK), VW claim, slum housing growth and motrocycles too.

Whilst the risk probability x payoff outcome looks low:
non-cyclical and largely recession immune, interest-bearing covenant debt is low, risk of on-fault claims law being altered to their detriment/ ANX highly focussed in one product line, self-driving cars from 2035 reducing claims and cash flows, % of claims not settled in time and lapsing risk, nil cash flow however high director and PE ownership mitigating this and halting growth.

[moathunter] 01/6/2023 12:09

Carcosa- I feel for you, as I lost a lot recently on Purplebricks (24p-> 3p).

For those sitting on a big loss with ANX, I found the following to be most productive:
# re-read your original investment rationale
# "rub your nose in your error (instead of sweeping it away)" as Charlie Munger would say
# Examine how your investment process led to the purchase and answer this:
- do you have a fundamentally sound process and ANX's loss outcome was merely the low probability of some capital loss that we all risk with investing. If so, do not change the process (or adjust the process to protect you from your own psychology e.g. "sp falls make me want to sell").
- OR do you have a process with a flaw in it, that leads it to recommending purchases of such shares. In which case change the process.

For me, Purplebricks had a great network effect and I was blinded and overlooked the fact that network effects can quickly go into reverse (e.g. MySpace).
Also it was a tech stock and so in a changeable sector and hadn;t made a profit- so the investment process was changed to exclude such companies!

We all make losses; it's how we handle them that counts.
I'm sure you know much of this but bears repeating.

[shbgetreal] 30/5/2023 10:12

All of that is fine, but it is undermined by ending each post with justifying your actions - clearly that is either for yourself or your audience, as opposed to objective fact posting - I mean, you literally just said you are chasing emotional closure...

[carcosa] 29/5/2023 06:34

shbgetreal,

Dismissing my interest in the company as revisiting a source of pain oversimplifies the situation and overlooks the potential benefits of staying informed. Learning from past mistakes, identifying recovery opportunities, gaining market awareness, and achieving emotional closure, even after experiencing financial losses.

[p1nkfish] 26/5/2023 15:49

The CFO exiting was interesting. May have been a bust up? Just before results and replaced by an existing insider.

A decent CFO wouldn't want to be told what is acceptable if he doesn't agree. Only thing to do is resign as a matter of principle? Who knows?

Will turn off ANX PBB alerts now.

[shbgetreal] 26/5/2023 15:07

Why keep revisiting the source of your pain then? You said yourself you made a clean break, let's keep it like that.

[carcosa] 26/5/2023 12:04

Have just revisited this after getting a regular email on the subject from 'Small Caps Live Weekly Summary'.

From the audit report:

We identified a number of misstatements through our work which individually and in aggregate were not material. These items were reported to those charged with governance.

In concluding our audit, we identified misstatements in excess of the trivial threshold relating to trade receivable impairment. Where misstatements were identified, we reported these to those charged with governance.

While management recorded certain adjustments, the remaining unadjusted misstatement relating to trade receivable impairment represented a high proportion of our overall materiality and would serve to reduce reported profit.

5.5% (2021: 5.9%) of profit before tax adjusted for the add back of VW and Mercedes marketing costs.

The auditors have reported on those financial statements; their reports were (i) unqualified and (ii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

Hence the true PBT can be assumed to be circa 4.5% lower than stated.

Basically... read the Annual Report!

Well, that justifies my exit from ANX earlier this month.

[gusrezo] 16/5/2023 12:06

The company says the fleet has been reduce to 1,300 vehicles, so the cash outflow of the 2,000 vehicles leased the previous year (and a peak of 2,300) should shrink; with this fleet size, the number of funded cases could be 6,500-7,000 a year. The legal department have been able to settled this number of cases last year. It's a pity that the headwinds of the failed agreement with the insurance broker and the delay of the VW case, with the consequence of the breach of debt convenants, have brought this rasionalization of the business, when it was clear that they should have stop growing the fleet time ago: just in 5 years there's an accumulated backlog of 12,000 cases -difference between funded cases and settled cases-, that's an awful lot of account payables and debt.

[carcosa] 13/5/2023 10:19

I too sold out this week crystallising a 29% loss having first bought in August 2021.

That's my third largest loss since 2010.

Every company has a value and given it's history in the type of work it does and lack of FCF I really thought it was going to improve following the opening up of the courts and new business divisions providing a path way for growth. The VW case I expected to improve the balance sheet considerably failed to materialise (which will come eventually); and always the possibility of a MBO/Takeover.

I still think this unloved company can turn things around over the medium term but this constant drip feed decline in the share price for over a year finally got the better of me. I feel my money can be more useful elsewhere.

[p1nkfish] 12/5/2023 15:16

You are not alone hpcg.

[hpcg] 12/5/2023 14:51

I have sold up - sorry about the price action! I should have done earlier, obviously, there were several chances.

[shbgetreal] 12/5/2023 13:44

Hey guys, lots of whingeing going on this week - please put your money where your keyboards are and sell up, I will have them all