It may be that they didn't have all that cash on hand during the first half of the year. A lot of companies window dress their accounts by calling in cash just before the end of an accounting period. |
Thank you -that’s quite a poor oversight by the company |
I suspect just not the best treasury management in the first half of last year, salver, so they weren't putting the cash in the right interest accounts. But then fixed that in the second half of 2023 and in 2024
Eric |
Can anyone tell me why interest on cash this half year was 232 k and this time last year only 40 k when the cash is roughly the same |
TBH it is v difficult to buy in size. During the nadir of C19 I put in an order via my broker for £200k worth of shares thinking I'd have not problem and was told it could only be filled at 25% above the offer. It's one to nibble at. I've got a decent position and it's taken an age! |
Enjoyed the conversation between you two greatly -particularly about the age of the board! |
Absolutely fair, and the liquidity is the main thing that puts me off trying to step in and help you correct the valuation differential to fair value. But I think that will be true of a lot of investors. If this was more liquid, I'd be buying quite aggressively, regardless of some of those other factors. So for me that would be the big factor.
Eric
Eric |
Eric, I've been in these shares since 2008, always adding when it's cheap. The valuation has ranged from staggeringly cheap to very cheap in that time According to Sharepad since 2000, the shares peaked at 7xs EV/EBITDA in 2017 and troughed at 2.2 xs in 2009.The av. EV/EBITDA multiple in the last 24 years is 4.01 x's EV/EBITDA, which compares to 3.4 xs today.
If there is a narrative here it's pretty sticky. This will only be properly valued on acquisition. |
 I do find somethings it's easy to fit a valuation to a narrative
This stock is comfortably cheaper than it was last week. That's nothing to do with the Green discount. It's due to most investors not knowing that there was a material shadow earnings upgrade yesterday. Because who gets ready access to Peel Hunt research? Hardly anyone. I've seen that before plenty of times at other stocks. Price discovery usually prevails, even if it takes weeks, and CFX has seen that plenty of times in it's own history.
It's also illiquid which puts off the marginal buyer a lot of the time.
Lastly, on screener, it may come across at 10x P/E, but investors then won't realise there is such a large net cash pile or that the earnings forecast is probably materially lowballed.
The valuation will probably improve from here. Even 6x ex cash is very low by CFXs own history, based on the above factors. And yes maybe governance is another factor - but the market tends not to care as much when a company has deployed textbook share reductions and buybacks compared to one's that haven't
Eric |
The reason the shares are so cheap is the Green discount. Yes, it is a good business, but Green, who is rather canny, has managed to control it through share buybacks. So, this has effectively become a family business,and the Greens have paid no premium. It is clear that his son - about whom we know little is being groomed to take over. The history of nepotism is at best mixed and at worst downright bad for a business. Moreover, the age of the board makes the US senate look youthful. |
That maths makes sense
Eric |
If it was sold for the same price as Farrow and Ball i would get to 17 pounds a share -they both have a similar turnover but Farrow and Ball make 25 million after tax and Colefax around 5 -so on a crude basis Colefax should be worth a fifth -80 million plus its cash 20 million-100 million which is roughly 17 pounds |
Interesting, Salver.
I am not sure why I am going down the rabbit hole this deep but CFX is fascinating market case study. The 2021 Farrow & Ball acquisition gives an interesting precedent.
It was sold for an enterprise value of about £400m in May 2021 by the looks of it, compared to £101m of sales and £25m of profit after tax. For context, in 2023 it did £103m of revenue and £20m of profit after tax.
So it was sold for nigh on 4x EV/sales, and 16x EV to net profit after tax. Bear in mind that F&B has exceptional margins so the EV/Sales will look very high
Even so, CFX is on...
- About 0.3x EV/Sales
- Pretend Peel Hunt is right (probably too low), so about 6x EV to net profit after tax
In a trade sale, would struggle to believe they couldn't get at bare minimum 10x EV/net profit after tax which is crudely about £11/share
Eric |
Also just over one percent of the equity is controlled by a firm called Tangent Industries which is controlled by members of the Green family - so really they have over 30 percent |
Tim Green David’s son owns 400,000 shares his other son Nicholas 230,000 and David owns 10790000 - total shares about 1.71 million with total 5.917 million- so the family have actually around 29 percent- cunning lot ! |
Thanks Eric Yeah I was taking the definitive values at the time they issued the interims but forgot as flagged that's its weighted average.Just struck me as odd then ended up down a rabbit hole getting fixated on getting to a number that matched the 12.5% - my brain sometimes misses the obvious (the variability and insufficient data associated with average weighting during consistent repurchases) and gets OCD with numbers and trying to understand the reasoning for such a variation in reduced profits to double digit growth in earnings, lol. |
Doesn't really stack up against the facts over time unless I'm making a mistake
David Green (CEO) owns 18.2% after the 2024 buyback, back in 2021 he owned 19.2%
Tim Green owns 400k shares or about 6.7%. So together today they are about 24.9%.
Back in 2018, David Green was 27.7% and Tim didn't own any. So after a large number of tenders since then, they actually own a smaller % of the share capital
Eric |
Your right there he likes the price as low as possible sells a few shares in the buybacks (gives a few away to family members) his sons now have 10 percent and he’s got about 18 percent |
Personally I think one of the purposes of the buy backs is to increase Mr Green’s control without paying a premium |
Thank you for your excellent input-I was always bottom of the maths class -nevertheless have worked my way up to about 2.7 percent over three accounts with this one -my largest purchase was in 1998 at 69 pence when there were about 31 or 32 million shares in circulation- I’ve done well here but bombed with Sanderson!! |
Former accountant, ha
I think you're on to a good'un here salver, there's not much reason this should be sub £10 even today in my opinion. Good luck with it. I'll watch it from afar and see the boat sail away! I'd start lobbying the management team to do special dividends alongside buybacks
It's very pleasant to see a British company doing really well on the world stage. Although a luxury goods giant or the like should probably buy it at 8-10x EV/EBIT and really milk the quality of the brands
Eric |
Fantastic-I’m guessing you must be an accountant Pireic -or otherwise top of your year at least in the maths class! |
Just FYI, the EPS growth.. the 12.5% is the weighted average effect on share count year over year. So bear in mind they've done buybacks/tender offers in basically every prior year too
So the full amount of last year's buyback won't even be realised in this year's figures, it'll be in next year's figures, which means even next year's EPS growth will be benefiting from the buyback completed last year.... if that makes sense.
In other words, the full lowered share count will only be seen through the full FY26. FY25 only has about half of the buyback benefit as it took place in early October, which was around the half-year mark. So only half the year's benefit in FY25, and the full year's benefit in FY26, meaning that even FY26's EPS growth will benefit from the FY25 buyback (in October 2024)
Eric |
Hi Eric "OK I am actually touch out on 100p but with some loose maths I can get to "Yeah I got 100p (see my earlier post 111). Plus if there is another 200k share buyback that will / could push it up further. |
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