Charles Taylor Share Discussion Threads

[contrarian2investor] 22/5/2009 16:07

dasv & simon,

Thanks.
Great charts and research. You have both wetted my appetite and I will now put CTR on my watchlist.

dasv,
That Updata software looks like a gem of a tool. Are you enjoying it? Is it inspiring you to increase your equity holdings?

Yours with integrity c2i
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EDIT:
Here is an article I found for you Simon. It could be that some Motley Fool income-seekers jump onboard this afternoon.
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Friday May 22, 12:00 AM
Follow The Leaders: Charles Taylor Consulting
By Owain Bennallack


Those who see director buying as a bullish signal might have noticed the lack of big deals recently. Are boardrooms wary after the strong rally since March?

One group who've been buying are directors at Charles Taylor Consulting
(LSE: CTR.L - news) (LSE: CTR), an insurance services specialist.

Date of deal Director Capacity Share price Spent
8 May Rupert Robson Non-exec chairman 182.5p £30,113
8 May Charles Cazalet Non-exec director 182.5p £27,375
8 May Julian Avery Non-exec director 183p £18,300
12 May Stephen Matthews Director 183p £14,648

On closer inspection, the buys aren't very exciting. At less than £100,000 against a market cap of £70 million, they're not substantial. Charles Cazalet and Julian Avery only joined the board last year, and none of the non-execs are big shareholders.

Still, buying, even by non-execs, is more positive than selling, and these directors have highlighted a tempting opportunity for income seekers.

Entering the Bermudan triangle

Warren Buffett says only invest in businesses you understand, in which case good luck with Charles Taylor. It operates across the globe via dozens of subsidiaries, its single biggest territory is Bermuda, and its activities are dull as well as opaque. If you grasp how it's performing from its results, you probably work there.

In essence, Charles Taylor:

Provides insurance management services, especially to mutuals organisations in the same industry that self-insure by pooling resources.
Has a claims business 'adjusting' in insurance speak that generates revenues mainly through time-based fees. A speciality is big events like Hurricane Katrina.
Owns life and non-life insurance companies in run-off.
Has just added a fourth support division serving the London insurance market, after a £7.8 million acquisition.
The mutual management and adjusting businesses mainly involve shipping, hence the Bermudan connection.

Show me the money

Charles Taylor is a highly specialised people business with a £45 million wage bill, operating in sectors most of us never encounter.

Some say investors are fooling themselves to ever think they can understand a company from its published results, but here there's not even the illusion of an illusion! After two days reading Charles Taylor's annual reports, I'm only a little wiser.

Easier to digest are its reported earnings and commentary. The year to the end of December 2008 saw total revenue fall 1% to £80.8 million. Profit before tax was up from £8.3 million to £9.9 million, but adjusted profit declined a fraction, with adjusted earnings per share dropping to 28.67p from 31.76p.

Basic earnings per share rose by 8% to 19.9p, and the annual dividend rose 5% to 13.86p a share.

Charles Taylor carries significant debt of £31 million. Its assets are mainly goodwill, so no great comfort there, but interest is covered five times. In November it increased its banking facilities to £45 million -- a positive development these days and giving it some headroom, especially for acquisitions.

Management reassured early this month, saying the group was "financially robust" and that "performance for the year to date is in line with management's expectations", adding it would look out for additional companies to acquire.

Acquisitions are part of Charles Taylor's core business, so I don't see this as a negative.

Pension problems

The pension deficit may be more of a concern. Just £8 million two years ago, it's ballooned to £24 million as markets have fallen -- a significant liability for a £70 million company.

I'm not as worried as many about big pension deficits, provided the underlying business is sound, seeing them as a symptom of two bear markets in a decade. Big deficits should be reversed if and when shares recover, at which point companies may be re-rated. The scheme is closed to new members.

Also notable is currency risk, due to exposure to the US dollar. Some of this risk is offset with options, and I'm going to assume management has a better grasp on it than me.

Tuck away for income

Charles Taylor looks cheap, with a P/E ratio of just 6 at today's 175p, going on adjusted earnings. A 14p dividend for 2009 would equal a forward yield of 8%.

The shares cost 440p back in 2002 and again in 2007, before falling to today's near decade lows. Debt has steadily increased. Earnings per share have fluctuated between roughly 22p-32p for five years, and new acquisitions will only help incrementally. And there are many calls on Charles Taylor's income, from debt interest and the pension to a predictably well-paid boardroom. There are also over 1.7 million options outstanding.

Still, the company exudes stability. Its origins go back to 1840, and it isn't likely to disappear overnight. Charles Taylor's specialist expertise and contacts would be hard to replicate, and its diverse client base further spreads the risk. The CEO joined the company in 1973, and first held the role in 1993.

The big attraction is the dividend, which has been raised every year since the Charles Taylor floated in 1996, as the chairman reminds us in his 2008 statement. At some point earnings will need to grow to maintain that record, but the cheap rating seems to discount the challenge.

An 8% forward yield, twice covered by forecast adjusted earnings and rising 5% a year, is an attractive asset to own. I don't expect fireworks, but I've bought a few to tuck away in my income portfolio.

More from Owain Bennallack:


Just in case you skipped the last sentence, Owain owns shares in Charles Taylor.

[simon gordon] 22/5/2009 10:35

Great graphics!!

Adjusted historic figures from the Report & Accounts:

2005
Adjusted Profit - 10m
Adjusted EPS - 27.5p

2006
Adjusted Profit - 12.3m
Adjusted EPS - 31.3p

2007
Adjusted Profit - 12.9m
Adjusted EPS - 31.8p

2008
Adjusted Profit - 12.1m
Adjusted EPS - 28.7p

I think profit for 2008 was impacted by the loss of a client in the Signal division. Profit growth has also been held back in recent years by intense competition for run-offs as Hedgies pushed into this scene, it could now be at a pivot point as capital constrained competitors pull back.

The company has been flatlining for the past couple of years, now they could get growing again with some opportunites opening up: Mutuals, Run Offs, Adjusting Consolidation and Axiom.

With a forward p/e of 6x and a yield of 8%, I think the risk/reward has a reasonable margin of safety.

[dasv] 22/5/2009 09:30

fundamentals and projections look good?


Note rising volume price trend indicating acquiring by buyers in increasing volume.

[simon gordon] 22/5/2009 09:28

Cheers Dasv...

[dasv] 22/5/2009 09:12

simon, p and f chart for ctr

436 target not activated, 212, 204 already met. Not much to go on I'm afraid.

[simon gordon] 11/5/2009 19:18

Potential catalysts going forward:

1. RMP v London Borough of Brent, court case gives a positive judgement.

2. Dampened competition due to constrained capital markets for "run-offs" leads to a greater opportunity for deals. Two made in '08.

3. Axiom builds critical mass and leads to stronger sales.

1 & 2 would be the most potent to get 2010 estimates upgraded.

Whilst sitting, waiting and hoping, you get paid 8% with potential capital gains if they get re-rated to 10x (£3.00) and if they can really get motoring, then 2010 could be higher than the anticipated 32.7p EPS.

The downside seems fairly limited. Black Swans:

A. Axiom turns out to be a dud.
B. Signal loses another big client.
C. Accounting scandal (Board of Directors looks solid, but who can you trust these days).

The earning streams seem predictable and to navigate the crash without a profit warning is a sign of strong fundamentals.

[jonwig] 09/5/2009 08:27

I've had a quick look, and the only part of their business I'm at all familiar with is Life Assurance in run-off, where I've a fair few shares in a company called Chesnara [CSN].

The rest of CTR's operations are outside my usual areas, and to a large extent one needs to accept their claims about the way their business is progressing.

They are a 'people' business, and the balance sheet is typical of such. A final salary pension scheme is probably essential in staff retention, but the liabilities there seem a bit steep.

Dividend looks reasonably secure, covered 2 times. I haven't yet looked at remuneration, but I'd imagine their directors and employees earn pretty fat salaries.
I'd expect the board to have a decent commitment in the shape of good share stakes - again I haven't looked yet.

My main worry, as I said, is the difficulty of easy external verification. For example, if I buy a construction company I know where to go if I want to compare their experiences with others'.

[simon gordon] 08/5/2009 15:37

The historic chart looks good as well.

[jonwig] 08/5/2009 15:35

Hi Simon - will have a look at this, thanks for the mention. A chartist's dream, maybe, that double bottom?

[simon gordon] 08/5/2009 11:52

Altium forecasts - 8/5/09:

12/09
T/O - 91.4m
PBT - 14.7m
EPS - 30
DPS - 14.6

12/10
T/O - 102m
PBT - 16.1m
EPS - 32.7
DPS - 15.3

"We are encouraged to see the group's trading statement indicating that the underlying business continues to perform well and in line with the management's expectations. We envisage that the announcement of the acquisitions and upgrades to estimates will be taken well by the market. As a result of our upgrade, we are increasing our target price to 330p (293p). We retain our BUY recommendation and consider CTR as substantially undervalued on both a PER and dividend yield basis."

[gilston] 27/11/2008 17:14

Well, Panmure Gordon got that all wrong, didn`t they!

Current shipping weakness must be impacting earnings.

[tole] 08/4/2008 16:40

07-Apr-08 Charles Taylor CTR Altium Capital Buy 276.25p 360.00p - Reiteration
07-Apr-08 Charles Taylor CTR Panmure Gordon Buy 276.25p 461.00p 390.00p Reiteration




Charles Taylor "buy," target price reduced
04/07/08 - Dresdner Kleinwort Wasser.
LONDON, April 7 (newratings.com) - Analysts at Dresdner Kleinwort maintain their "buy" rating on Charles Taylor (CTR-GBX). The target price has been reduced from 500p to 425p.

In a research note published this morning, the analysts mention that despite unfavourable currency effects, the company has posted its 2007 results in-line with the estimates. Charles Taylor has made several changes, including the announcement of a new chairman and the consolidation of the adjusting businesses under the "Charles Taylor Adjusting" brand, the analysts say. The company's financial condition continues to be robust, with net debt of only £30.7 million, Dresdner Kleinwort adds



Charles Taylor Consulting "buy," target price reduced
04/07/08 - Panmure Gordon & Co
LONDON, April 7 (newratings.com) - Analyst Barrie Cornes of Panmure Gordon maintains his "buy" rating on Charles Taylor Consulting (CTR-GBX). The target price has been reduced from 461p to 390p.

In a research note published this morning, the analyst mentions that the company has posted its 2007 results in-line with expectations. Charles Taylor Consulting's revenues and PBT in the year were adversely impacted by the weakness in the US dollar, the analyst says. The downward revision in the target price reflects the current recessionary scenario and the weaker investment performance prospects, Panmure Gordon adds.

[tole] 20/11/2007 12:41

Charles Taylor Consulting initiated with "buy"

Tuesday, November 20, 2007 7:27:53 AM ET
Panmure Gordon & Co

LONDON, November 20 (newratings.com) - Analysts at Panmure Gordon initiate coverage of Charles Taylor Consulting (ticker: CTR-GBX) with a "buy" rating. The target price is set to 461p.

In a research note published this morning, the analysts mention that the company has been posting attractive margins and healthy growth due to its expertise in adjusting losses, run-off and management. Charles Taylor Consulting has been posting consistent profits and the company has no direct exposure to underwriting risks, the analysts say. The company's short-to-medium term outlook has improved due to an increase in run-off takeover opportunities and new opportunities, Panmure Gordon adds

[spooky] 10/11/2005 08:15

Anyone care to translate the acquisition statement into a language i can understand.Rowe wouldn't do it unless it made sense but i'd still like to understand future revenues and profit flows.Any thoughts ?

[spooky] 26/9/2005 08:25

Today's outlook statement will lead to upgrades for next year and the shares are too cheap as a result,first stop £3.00.

[samg99] 26/8/2005 11:53

Not a short at the moment, IMO. This has to be the quietest share on the LSE, with the quietest bulletin board....not such a bad thing when you look at so many of the trainwrecks that attract hundreds of posts a day.

[spooky] 13/9/2004 20:03

Shares trade at under 10x,with margins of 16%,ROC over 30% and yields around 4%.Sounds more like a buy to me,but i don't actually understand what they do so perhaps i'd better do some more work :-)