Dm Share Discussion Threads

[jeff h] 12/6/2008 18:37

I was surprised at the timing of the announcement.

A trading update is due in a few weeks and presumably it will be at least decent (otherwise there would be no need to issue the strategic review rns compaining about share price performance and it materially undervaluing the company whilst 'delivering outstanding financial results')....so why would they not have waited until then to make the Strategic Review announcement?

An opportunistic MBO by AW as AA29 suggests?....or has anyone any other
possibilities/theories?

I added when the market opened after the announcement...I'm surprised the
share price response was muted (apt I suppose!) on the day, it seems that
one way or another shareholders will be rewarded.

[aa29] 12/6/2008 18:12

But if the company is sold to Adrian Williams - he buys out the minority shareholders at a great price (for him) and Altium get to collect a nice fee.

Strangely though he was content to wait for the share price to come right in due course at the AGM just six weeks ago.

[guru11] 12/6/2008 16:36

A surprising statement. Surely to sell the company would not be in the best interests of the shareholders. Does one really expect to get a realistic share price offer. It may be an unloved stockmarket company at present but with the share price not rising, and the pe ratio getting lower and lower, it is surely only a matter of time before it will start to rise.

The statement is a bit worrying. Are the directors thinking of retiring ?

The price today is 16.25 / 16.50 the spread being quite narrow.

The true share price value should be around twice current price.

[8trader] 10/6/2008 23:01

It's indeed a strange statement !

It smacks of impatience, if things are going well and indeed, turnover,
profits and most importantly net cash are growing fast then ignore
current stock market woes and carry on increasing the cash and then pay
a bumber dividend of say 5p at the end of the year.

Or why not buy out the small % not owned by the large shareholder at
say 25p if they really want the best for them ?

At 23 million market cap there's plenty of similar stocks making 5 mil
profits, in fact there some worth half this amount making 5 million but
none seem to have the current and steady growth of Dmp which is why it
has a better rating.

[aa29] 10/6/2008 11:30

That sentence is rather unclear. I've taken it to mean that Adrian Williams with his c80% stake has the final word on any future action.

[skyracer] 10/6/2008 10:29

Still trying to get my head around this statement:

" As a result of the Company's shareholder structure, DM cannot be obliged to undertake any particular route which the Directors believe would not be in shareholders' best interests. "

Unfortunately a bad time for any corporate action. In a positive market the statement might have sent the shares soaring. Personally I have been content with DMP, taking a long term view that continued good performance would eventually be recognised in the share price.

[aa29] 10/6/2008 09:22

Guru - the 190k has not been announced as a buyback. I suspect they've been suspended.

Today's RNS announces a Strategic Review :

DM, the direct marketing group specialising in customer recruitment and database management, announces that the Board has commenced a process to consider the strategic options available to maximise shareholder value (the 'Strategic Review'). The Strategic Review will assess all options available to the Company including continuing the Company's share buyback programme, potential bolt-on and strategic acquisitions or whether it is in shareholders' best interest to explore a potential sale of the Company. This process is at an early stage and as yet no discussions have been held with any potential buyers. The Board has appointed Altium Capital Limited ('Altium'), its current financial advisors, to undertake the Strategic Review.

Background

The Board of DM believes that the Company's share price has failed for some time to reflect the underlying value of the business and now materially undervalues the Company. This share price performance is despite the Company delivering outstanding financial results, including record results for each of the last seven successive financial periods, and DM's achievement in becoming the market leader in its chosen sectors. The Strategic Review will review how best to maximise shareholder value.

Financial Track Record

Since 2004, DM's turnover has increased almost fivefold to £20.0 million for the year ended 31 December 2007 (2004: £4.2 million). EBITDA for the year ended 31 December 2007 was £5.58 million. The profit before tax increased by 270 per cent. from £1.32 million in the year ended 31 December 2004 to £4.88 million in December 2007. EPS increased by 239 per cent. over the same period to 2.37 pence in 2007 (2004: 0.70 pence). As at 31 December 2007, the Company had a net cash position of £0.22 million.

Acquisitive and Organic Growth
The Company, through a combination of organic and acquisitive growth, has become the leading UK direct marketing company specialising in customer recruitment, using games, competitions and database management. In April 2006, the Company acquired Dodd Marketing Limited for £9 million, funded exclusively by bank debt. As at 31 December 2007, taking into account cash balances, the Company was effectively debt free with a net cash position of £0.22 million. The Company has a track record of managing a geared balance sheet and has significant additional debt capacity available to maximise shareholder value.

DM has demonstrated its ability to make selective acquisitions at the right price and rapidly improve the acquisitions' financial performance and integrate them into the Company. Since 2004, four businesses have been successfully acquired, creating a highly successful and fully integrated business specialising in customer recruitment and database management. The Company continues to assess potential acquisitions as they become available.

Timetable

The Board believes that the Company is in an extremely strong position from which to assess and decide which of the options available best maximises shareholder value. As a result of the Company's shareholder structure, DM cannot be obliged to undertake any particular route which the Directors believe would not be in shareholders' best interests. The process is at an early stage and whilst it may or may not lead to an offer for the Company there can be no certainty as to the outcome of the Strategic Review. As the Strategic Review progresses, further announcements will be made as appropriate.

Ends.

Hopefully, this won't lead to the company being taken private and cutting us out of most of the upside.

[guru11] 09/6/2008 17:14

If I am not mistaken the £190k was another buyback.
If the company is accummulating cash, and I did hear of figures of £9m in a years time or somewhere near then one can understand the share buybacks, as this will higher the eps and lower the pe ratio, and making the chairman smile with his 80% holding.

[old tom howard] 03/6/2008 15:27

Good afternoon guru,

Not seen you around much lately mate. Busy at work?

[guru11] 03/6/2008 15:24

The sells do keep coming - maybe it is investors being sqeezed for cash, due to other reasons, rather than believing that DMP profits are weakening. I personally still have a lot of faith after the record of management over the last 4 years, that the gravy train will continue and in the end we will see a rise in the share price.

[aa29] 29/5/2008 22:54

Guru - this was mentioned at the AGM. They felt that they are protected from a slowdown to some extent because the game response is a relatively low level expense and not something that is cut back to the same extent.

I still suspect spare cash might be being conserved for some form of acquisition. We should get a trading statement in 2 months time.

[guru11] 29/5/2008 21:13

Strange trading of late. Anyone would think that things with the company are not as good. Although times are getting harder, food up 7%, petrol up now virtually each week, and the feel good factor is no longer with a lot of people as we tighten our belts. Still I still have faith that the record will continue with the excellent management we have.

Note the market makers still haven't really reduced the price much - maybe they know they have buyers in the wings to pick up loose stock!

[jeff h] 23/5/2008 13:02

Yes I agree guru a good buying opportunity so I added another 25k.

As AA29 says it will be interesting to see if the buybacks continue.

[aa29] 21/5/2008 13:14

Shares now available at 16.1p to buy and it will be interesting to see if this starts the share buybacks again. If they don't restart, it would make me wonder whether DM has an acquisition brewing.

[guru11] 03/5/2008 09:52

In a couple of years time 30 - 40p per share may not be out of the question.
Just wants a write up in the Daily Mail or one of the Sunday papers and the price could start to move.

I intend to be a long term holder - the past record is good - management is good - the only thing as we all are aware is that this is not reflected in the current share price.

The company appears quite aggressive now on share buy backs - yet another announcement on the 2 May, - now they realise the price is dirt cheap, which is good news for all of us shareholders, enhancing the eps even further, and lowering the pe ratio further.

[plast] 01/5/2008 17:09

got my div today nice, this is taking off now cant wait for next year, no ramp intended but about time too been holding this for a long time, as you say 8 been a long time.

[8trader] 01/5/2008 11:15

Really starting to move and this is very unusual !

I dont hold but pleased to see this happen for long term shareholders
because this must have been a painful stock to hold and watch.

All these buybacks finally must have put a squeeze on the stock with
so much of it held by the gaffer.

[aa29] 30/4/2008 12:50

Adrian Williams does own just over 80%. This has long been the position (he owned c90% before the last placing) and there are benefits for the company from a listing. This position is a drag on the price though.

I don't consider the share buy backs are with an ulterior motive - it's simply that the company is generating cash and it makes sense to buy back shares on a 2009 PE of 3.7 (at 15.5p) rather than have it earning 5% at the bank. Surely if they could make an acquisition with this growth and at this price, they'd jump at it so isn't the share buyback effectively the same?

[bsg] 30/4/2008 12:12

Does the main man in this co.. own 80% of the shares ? if so this share buy back seems like a precursor to taking it private ?

[aa29] 29/4/2008 19:24

My thoughts/impressions gained from the DM AGM :

Share price – they were surprised that their excellent results had not been reflected in a positive move in the share price. Not actively seeking to promote themselves in the present market conditions but preferring to get on with running the business with the expectation that sooner or later the market will catch on.

The 07 profit figure beat Blue Oar's 07 and 08 forecasts in one fell swoop. The second half performance shows gross profit improving from 35.9% (H2 06) and 37.4% (H1 07) to 41.4% on the back of increased income from the joint ventures with financial institutions' mailings and operational efficiencies/economies of scale.

House broker, Blue Oar, forecasts are for turnover of 22.17m (08) and 25.84m (09), PTP of 6.47m and 8.79m and EPS of 3.08p and 4.19p. Those figures give forecast PEs of 4.9 in 08 and 3.6 in 09. Guru – can you update the thread header please ?

These forecasts assume GP of 41.8% (08) and 44.2% (09). Comparing 41.8% to what they have just achieved in H2 and with the trading update suggesting that trading is in line with management expectations (higher than market expectations, perhaps?), I would suspect that the company is currently trading ahead of Blue Oar forecasts (company were at pains not to give any indication of level of trading at AGM so this is my best guess). Gaming transactions are relatively low value and they do not expect to see any adverse knock on effects from the credit crunch and connected slowdown.

AGM gave them slightly improved powers for buybacks (price restriction was relaxed). Blue Oar suggests that they might have £9m in cash by end 09 but Adrian Williams was relaxed by the prospect of the cash building up as it provides flexibility to do more acquisitive deals of lists and/or smaller competitors. Trading update might indicate one or two irons in the fire. Whilst it would appear to be easy to beat the return on cash, they stressed the need to be careful with acquisitions due to management time taken up on integration etc – comfort can be taken from their track record.

Overall impression was that there was nothing to suggest that this is not a greatly undervalued situation and indeed there is a chance that we may be surprised with performance again to the upside.

[jeff h] 28/4/2008 21:19

AA29 - thanks for sharing that with us, and well done on prompting them to issue something other than the standard

"at the AGM today all resolutions were duly passed etc"

I like you interpreted it positively though you put the effort into attending and came away with a bit more in addition to the statement.

[aa29] 28/4/2008 15:12

I attended the AGM on Friday and whilst they weren't planning to issue a trading update, they have acted on my suggestion that there was no harm in putting one out.

'Adrian Williams, Chairman, said: 'We have had a good start to the year with
trading being in line with management expectations. With the continued progress
of the Group and new developments currently being reviewed we look forward
positively to the coming year.''

When I have time, I'll add a few more impressions I gained. Not much given in the way of concrete information but the vibes were good and I think you can see that in what AW has said and if you read between the lines.

[guru11] 27/4/2008 18:05

Nearly the whole stockmarket is poor, and gems like DMP are now going unnoticed.
But with all good valued unloved stocks after the the poor periods that we are now seeing, they nearly all come good in the end. Just a matter of time. Those who hang in should be rewarded well. Not to mention they are now paying a dividend.