Autoclenz Share Discussion Threads

[westcountryboy] 28/3/2012 08:28

Hi Des

Yes, but it was of course a polite chiding of you all for hiding away here and letting TCFF go to pot :-) (The 'suggestions' were about how we could improve the board, in fact.)

Anyway, I'm glad to have found it. I was struck how little difficulty I had in picking up blocks of 10000. Someone must be willing to sell?

cheers
WCB

[deswalker] 28/3/2012 08:08

Pleased to see this post by WCB over on TMF last night. He asks for better suggestions and I can offer none ...

Imagine a company with net assets of £12.3m and a market cap of £2.8m. Imagine, moreover, that it is consistently cashflow positive, having reduced its net debt from £2.66m to £0.27m during the last three rather torrid years. Imagine that it has eps (adjusted for its significant but temporary amortisation practices) of 8.65p, and yet a trader can pick it up at 25.5p. And it pays a divi too, of nearly 4%.

This is the sort of company that I would love to own, and would love to see discussed on TCFF. It is called Autoclenz, and it cleans cars for clients of various sorts. It also has on the board James Leek, of Torday and Carlisle/E Wood fame, who did us all so proud. Until the weekend I had never heard of it.

In an ideal world it would be discussed on this board. But at the moment the board is hibernating, and so great Fools like DoY, DesWalker and Stemis have to go over to ADVFN to discuss it :-)

Fortunately I discovered them lurking there in the nick of time, on Sunday, and have now salted away a nice holding of shares, accumulated over the last two days. I seem to have been responsible for most of the buying, in fact, though I obviously have a companion in crime.

These purchases have not so far had a dramatic effect on the share price, which strikes me as still ludicrously cheap.

Anyway, the point of this post is only partly to enthuse about ACZ, but also to wonder how Fools can check out the latest gossip on shares like this if TCFF is not functioning to tip us all off :-)

I think we will just all have to check out DoY's investment pages, which go from strength to strength:



Any better suggestions? :-)

cheers
WCB

[deswalker] 23/3/2012 13:11

Coincidentally the now delisted JCR have just issued their Finals for 2011.

They show a pre-exceptional EBITDA of £682k, net-debt of £2.363m and 13.149m shares in issue.

Now I know ACZ and JCR are in different sectors but I'd suggest there is at the very least a partial read-through.

Suppose x is the JCR price in pence and y is its current EV / EBITDA ratio. We have ...

13,149,000 x / 100 + 2,363,000 = 682,000 y

A JCR share price of 20p (ie that immediately prior to delisting) implies y = 7.32 cf ACZ's EV / EBITDA ratio of 1.75 !! Yet those shareholders who continue to hold JCR seem to think it is good value at the delisting level.

Nobody can tell me that JCR is a better investment than ACZ right now. Not even close.

[deswalker] 23/3/2012 09:16

Just posted this on TMF ...

Autoclenz issued their Finals for 2011 yesterday ...



Back in November they flagged that second half trading was tough and that they expected to miss their internal profit targets. This prompted the share price to halve over the following months but has rallied a touch on yesterday's better than expected full year figures (business picked up towards the end of last year).

At the current 27p Offer price and 10.4m shares in issue we have a market cap of £2.81m. Inspite of the tough year they reduced net-debt from £750k down to £274k giving a current EV of approx £3.08m.

In spite of numerous difficulties they still managed a pre-excepetional EBITDA of £1.764m (vs £1.815m the year before). So currently this sits on an EV / EBITDA of 3.08 / 1.764 = 1.75 !! I think that is rather cheap.

The exceptionals have either stopped (loss making contracts closed down back in October) or are coming to an end in the near future with the final settlement of a long standing court case. Provisions have already been made for these costs in the Balance Sheet.

The Outlook statement says that trading remains tough but they've been saying that for a couple of years now and yet they keep churning out the profits and the cash. Reading between the lines one can't help but feel that they are relieved the court case is just about settled, that they will be much more cautious about contract pricing in future and that they are cautiously optimistic. They are also frustrated at the lowly share price and I shall be urging the Chairman (James Leek of Torday and Carlisle fame) to instigate buybacks as soon as the court case is finally put to bed.

[deswalker] 23/3/2012 09:15

SteMiS - agree with your sentiments in #168. I now own just over 1.5% of the company (160k shares).

harrogate - all fair points and worthy of questions at the AGM. On the one hand being listed costs money and and gives competitors information. But on the other it allows access to a market for the shares for buyback purposes which is something that James Leek as real form with (Torday & Carlisle). It was certainly a medium term plan when I spoke to him at last year's AGM.

I find it hard to imagine any of the institutions listed would vote in favour of a delisting when the company is doing just fine as a listed entity. The share price will improve in due course when they have a better year or two, are willing to increase the divi and when the buybacks kick in. As we see with these smallcaps, 50k shares (£10k's worth) of buying can see a 10% rise and anybody willing to invest £50k would see the share price quite a bit higher. They really are that illiquid.

I should say that I agree with SteMiS. This is certainly one I would be comfortable to hold into delisting and would look to buy more should the share price fall enough. Dividends and cash returns direct from the company would be sufficient for me. They've been in the business 40 years and I see no reason why they won't be around in another 40.

[harrogate] 23/3/2012 08:56

Hi

Thanks for the details ..It is a very different shareholder base from JCR so I agree with what you say but it is a strange statment to make unless it has already been discussed with the large shareholders. Delisting isn't the end of the world ..I have over 2% of JCR which is now a private company and I feel comfortable but you do have to trust the management since they can have a very different agenda if private and replace dividends with bonuses and dilute shareholders through various means ...If you trust them then fine

[stemis] 23/3/2012 08:38

Des,

Now over 1.5%

Is that of the company or your portfolio?

[stemis] 23/3/2012 08:36

To be honest I wouldn't be too concerned if ACZ delisted and might even buy more shares if the price fell heavily as a result.

Leek isn't a lifestyle investor/director and there will be an exit at some point in the not too distant future. Regardless, if the company continues at it is, then in 4 years time the net cash will exceed the market cap. At 15p (which might be a reasonable price if a delisting was announced), that would take less than 3 years.

[deswalker] 23/3/2012 08:28

IS Partners Helium Special Situation Fund - 24.26%
Octopus Investment Nominees - 12.80%
James Leek (Chairman) - 8.70%
F&C Asset Managers - 7.27%
Simon HJA Knott (Deceased Nov 2011) - 6.24%
Rathbone Brothers PLC - 4.95%
Charles Stanley Group PLC - 4.72%
Singer & Friedlander Investment Management Ltd - 4.16%
Bestinvest PLC - 3.73%
Rensburg Sheppards Investment Management - 3.23%
ISIS EP LLP - 3.08%

Total = 83.14%

That doesn't look like a register that will readily consider a delisting IMO but I shall be attending the AGM again this year and shall ask the Directors about this and other points.

Their comment about low valuation is absolutely right but there are a few reasons why this can change ...

- they've have had a bad 12 months but have generally ridden a very severe recession out rather well.

- the "Other Intangible Assets" will amortize away in about 29 months time and then people will be more able to see the basic PE ratio is currently about 3 and by then they should have net-cash approaching half the current market cap.

- in the past James Leek has talked about buybacks. Shareholders of Torday & Carlisle will remember how successful those were for total returns. I shall be broaching the subject at the AGM.

As for the AGM, I was the first shareholder they had seen in years. They were delighted to take me through all sorts of stuff. If you're able to make it then I strongly recommend attending.

[harrogate] 23/3/2012 08:03

As a holder of Just car clinics that delisted last year that looks to me like a very clear signal that that is what is going to happen. JCR used almost those same words on announcing the decison to delist. What is the shareholding here since 75% is needed to delist but with nominees etc it is amazing how easy that is to get unlss there is a significant blocking stake.

[spooky] 23/3/2012 07:56

Isn't anyone worried by the following statement in the RNS:

'Being listed on the AIM market with its detailed reporting requirements does of course give our private company competitors a lot of useful knowledge about our performance and strategies, and also entails a degree of extra overhead and management resource. We continue to monitor this particularly in the light of the relatively low market valuation accorded to a number of profitable smaller AIM companies like us.'

This is a very clear indication that the company may delist.

[wilmdav] 22/3/2012 15:02

Yes, very encouraging H2. I suppose you could add £0.17m to full year underlying EBITDA to compensate for the loss at Property Services, which is discontinued.

My usual excercise is here:

[deswalker] 22/3/2012 14:34

SteMiS,

I'm struggling to find much cheaper than this anywhere on the market. Now over 1.5% and delighted at this morning's numbers.

Des

[stemis] 22/3/2012 10:00

Reasonable results. Underlying EBITDA remains fairly stable at around £1.8m pa (£1.764m in 2011) and net borrowings have come down nicely to £274k. That puts the company on rating of about 1.6 x EBITDA and a P/E of about 2.8. We even now have tNAV of £316k!

Assuming we continue like this next year then we should end up with tNAV of £1.5m and net cash of £100k or so. Maybe a rating of 1.3 x EBITDA. How cheap can this get?

As ever though, there is no market in the shares offered by the MMs.

[wmcht] 09/11/2011 14:50

Doesn't seem much point being quoted, would suggest prime candidate for an MBO.

[deswalker] 09/11/2011 11:48

SteMiS,

Thanks very much for your post. I agree entirely with your figures.

Yesterday I spoke to the Chairman, the CEO and the FD.

The Property Services segment has been closed so that £120k is an exceptional included in the above (they don't do exceptionals just take everything on the nose so I back them out myself). Also they have expensed another accrual of £95k on top of those already in the accounts for the higher than expected Supreme Court costs of the other side. As they say in the RNS they are challenging this figure as being too high. Also remember that there is a £35k exceptional from the first half for the shelved acquisition (phew). So in total I see circa £250k of exceptionals hence my reasoning why I think they are on schedule to do a pre-exceptional EBITDA of £1.6mill this year or £1.35mill after removing these one-offs. If they can repeat that next year then that's my 2012 forecast met.

The legal case needs sorting asap and they are desperate to have a clear run at improving the business without having this taking up management time. But astonishingly they have received no concrete claims for specific sums since the decision back in July. As mentioned above there may be some further one-off expenses above and beyond those already accrued but they are disputing these and they are not major.

Of the 20 workers who brought the case about 8 were moved over to "employee" status from 1 August and I think there is still some unhappiness amongst them.

I mentioned to Mr Leek about buybacks and he said they wanted to finally resolve the legal dispute first so that they can refocus back to their core business and then consider their options. However, I agree that it might be difficult to prize out too many shares until perhaps double the current price as those holding all seem to know what they're doing and why they're doing it. Dividends remains the other option which I know you're much less in favour of but which would actually suit me fine.

Finally, as I said in my earlier post, I'm hopeful that the small but not insignificant shock of trying but failing in the cleaning business (remember the Connaught bad debt from last year too) will have scratched the growth itch without causing too much pain. This company has a long history and the need for businesses to get their cars cleaned, repaired and moved from A to B before they can be sold, rented out or repaired is not going to go away or be done by a computer.

Any more thoughts gratefully received.

[stemis] 09/11/2011 10:43

Des,

Last year profits, and your implied forecast, are 2010 2011
EBITDA 1,747 1,350
Depreciation -462 -462
EBIT 1,285 888
Goodwill -1,070 -1,070
Interest -84 -84
PBT 131 -266That's a 31% drop in EBIT. Last year they managed to turn £1.747m of EBITDA into £706k of cash. Let's hope they can turn £1.35m into £250k and get debt down to £0.5m (if you recall debt went up at the interim due to working capital movements).

This is cheap (possibly 4.5 x taxed EBIT) but its hard to see an immediate catalyst for re-rating. Without the growth of the specialist cleaning division, what have we got? Who are they going to buy back their shares from?

[mongrels3] 09/11/2011 07:52

DesWalker... thank you for such an excellent post.

Much appreciated.

[deswalker] 08/11/2011 19:28

An annoying profit warning even if most of the reasons are one-off charges. After some discussions with the company (where they were coy about precise numbers but I managed to get some idea from them) I've downgraded my EBITDA estimate for this year to £1.35mill from £1.6mill. This new figure is £400k lower than that achieved in 2010.

Based on an share price of 28p we have a market cap of £2.91mill. The most recent net-debt figure is from 30 June 2011 of £0.91mill giving an EV of £3.82mill.

So based on my new estimate for 2011 we have an EV / EBITDA of 3.82 / 1.35 = 2.83.

And for 2012 where I believe they see no reason why things can't get back to at least the £1.6mill level we'd be looking at an EV / EBITDA ratio of 3.82 / 1.6 = 2.39.

I'm pleased they've finally shelved any plans around expanding the Specialist Cleaning division and indeed it was fortuitous that they walked away from an acquisition they were looking at in the first half (with £35k of exceptional costs incurred). For some unfortunate reason the management clearly had an itch over the last couple of years and they've scratched it. Perhaps they underestimated the length and severity of this economic downturn. However, now I suspect they will focus on their core competency in the Auto market and double their efforts to drive efficiencies and sales growth. The resulting cashflow should then be used for buybacks and/or dividends.

These are very cheap IMO and very tightly held hence the four tiny sales today. Indeed me plus the 14 names who need to disclose their holdings (Directors & holders over the 3% level) make up 85% of the register.

Sometimes these shocks are needed to force a company's management to simply stick to their knitting and over the long term can be beneficial. But in the short term it is a pain in the backside no doubt.

[bozzy_s] 08/11/2011 17:00

In a nutshell, is this one of those nasty companies that employs EU nationals to wash cars? Robbing jobs from British youngsters?

[deswalker] 31/8/2011 16:18

I'm sat on several slow burners (WORK is another example which you hold) but in the long run we're all dead so it would be nice to see at least one come to fruition each tax year. I'm also surprised by Mr Leek's apparent lack of urgency. He's got nearly £400k tied up here and I'd have though he'd want circa £750k out asap but he doesn't seem in any rush. He gives the impression of being a very cautious man.

[stemis] 31/8/2011 16:05

Personally I'd rather they didn't pay a dividend. I hold these outside a tax shelter. tNAV is now -£20k so nearly positive! Slow burner indeed but then so was E Wood, if I recall, and look what happened there.

[deswalker] 31/8/2011 13:35

Agreed.

A bit annoyed at the £35k exceptional following the £40k exceptional last year due to the demise of Connaught. They aren't huge sums but seeing as the 1p divi only costs £110k it amounts to circa a third higher divi... Still I guess they are keen to expand whilst presumably any targets are going for depressed prices. But clearly at not any cost which is good.

Debtors were higher than I expected too. It does appear that this tends to unwind itself partially in the second half each year, and I also know from the AGM that the FD watches this number very closely as one would expect.

As for Capex, also on the high side but I've recently read about a new fleet of vehicles for the Cleaning Services division to give them a more professional appearance now that they are winning business.

NAV minus Goodwill remains static at approx 31p a share. So once the Other Intangible Assets are amortized away over the next 3 years, one would then see a company trading at a third over NTAV, debt free and with a PE of five.

A slow burner no doubt but with management incentivised to get the share price up to 75p at some point in the next three years and a 2.5% divi yield whilst one waits I'm happy to sit tight.

Des

[stemis] 31/8/2011 12:24

Yes, steady as she goes. Interesting that £35k was expensed on an abortive acquisition.

Slightly disappointed that debt figures were marginally higher due to increased debtors and capex.

Not much to get too excited about. Undervalued, but we all knew that anyway.