Smith (ds) Share Discussion Threads

[fairtrader66] 30/8/2020 23:54

Glad we're all on the same page again

[robbie791] 30/8/2020 21:28

Thanks investors

[brassgemini] 30/8/2020 21:18

Yep a UT - definitely just a balancing cross trade....nothing unusual at all

[robbie791] 30/8/2020 19:57

Thanks kazoom
I appreciate that
I will have a look tomorrow
Hopefully it will calm some nerves.
Thats investing i suppose

[kazoom] 30/8/2020 18:49

Hi Robbie,

Refreshing to see you casting yourself as naïve , so many people on these boards claim to be experts when clearly they are not.

If you look at the trades data here

you will see that this trade is classified as 'UT' , that is the end of day "Uncrossing Trade". It is essentially the result of a post close "auction" whereby market participants (mostly the market makers IIUC) can complete any unfinished business for the day and return their holdings to where they want them to be.

Some (very limited) information from the LSE

It is not correct to call it a sell - ADVFN classifies buys and sells based on where the trade price sits in relation to the bid-offer spread.

In short, I would say - don't sweat it - it doesn't mean too much at all.

[robbie791] 30/8/2020 17:20

Sorry to be nieve but I see a sell of smds for £5million at 16:35 for 2.58 per share how bad is that for our shares
Sorry again but new to this

[fairtrader66] 29/8/2020 08:47

They're just recycling senior management really.

[wallywoo] 29/8/2020 08:29

Bgt a few here for the first time. FTSE 100 shares always get hit hard on the downside. But the same is also true on the upside, so will hold for better times.IMO they will reinstate the dividend soon, which should kick off a rerate.

[fairtrader66] 28/8/2020 21:57

I suppose you could say that they're more cardboard cut-outs than real board members. Their margins are good but on paper they're flimsy. Sometimes it's good to start on a new page. Get a whole new package of talent together.

[moorsie2] 28/8/2020 20:52

Dont get me wrong. I hold and will continue to hold. Industry tailwinds are very good. My issue is with management playing a great hand ( industry tailwind, great factories, strong brands) very poorly so that anyone who invested 4 years ago to now have been seriously let down.

I would much prefer a new CEO togowiththe new chairman. Management need tobe accountable for their poor performance

[fairtrader66] 28/8/2020 18:22

SMDS Delivery against medium-term targets
Medium-term targets Delivery in 2019/20

Organic volume growth at least GDP+1% (+0.4%) = +0.6%
Return on sales 10% – 12% = 10.9%
ROACE 12% – 15% = 10.6% ahem.. looks close to me
Net Debt / EBITDA ≤2.0x = 2.1x
Operating cash flow/operating profit(7) ≥ 100%= 103%

[fairtrader66] 28/8/2020 18:14

Harping on and on about the ROCE in the middle of a PANDEMIC seems a little silly to me. This is a company that is well positioned for the future DESPITE global economic uncertainty. It has an income statement and balance sheet that will see it through a global recession AND it has positioned itself to deliver efficiencies into the future (which is touched on in the transcript above).

Profitability has INCREASED from April 2020 results even with 1) having to report in the middle of the pandemic and 2) revenue declining for the same reason. Profitability increased YOY in two ways: Overall profits were up and the profit margin was up. Those are real earnings which will see significant growth in the future meaning this PE is currently too low.

SMDS wrote this in their annual report:
The Group’s overarching treasury objective is to ensure sufficient funds are available
for the Group to execute its strategy and to manage the financial risks to which the
Group is exposed.

The above shows good forethought re: positioning and careful approach in the middle of change which allowed for a heathy profile going into the unexpected pandemic

I really don't care if people buy or sell this share but I do think the fundamental premise of earnings and growth are being missed here. Sometimes you have to spend some money now to make lots of money later. If this was a tech company which wasn't profitable and it was pumping money into expansion and R&D NO-ONE would be harping on about the ROCE.

[robbie791] 28/8/2020 17:18

Moorsie2
I don't know how long I can hold this share is doing my head In LTH

[moorsie2] 28/8/2020 17:03

With the right industry replacement then, .. yes

[robbie791] 28/8/2020 14:12

Will Roberts going help the sp?

[ygor705] 28/8/2020 13:52

Muzmanoz......thank you for the post which just adds to the evidence already highlighted on this thread that we have a management problem here. The question is, when is it going to get sorted? While we wait the share price continues to rot and shareholders interests continue to be ignored.

[muzmanoz] 28/8/2020 12:38

From the investors' results call.

Justin Jordan:
Thank you. Good morning, everyone. Thank you for the colour you've given us on
COVID-19, I'm delighted to see the modest recovery you've seen in recent weeks.
Can I just concentrate on more longer-term strategy, please, because I appreciate
there's various issues at play today, but can we just return to, over the last decade

Miles as CEO you've completed, I think it's 20 acquisitions, and M&A has been a
very important driver of the expansion of the Group over the last decade.
Justin Jordan:
But if we think specifically on Interstate, you've now owned it for almost three
years and you've very publicly and repeatedly talked about a 12 to 15% return
hurdle for M&A. On Interstate, including the minority, including the M&A and
restructuring cost, the acquisition of CCC, the Indiana box plants, you've spent
about 1.1 billion sterling to deliver 39 million of EBIT. That's a sub 4% return in
capital employed on that US expansion. Can you please explain to us what's gone
wrong, frankly, what you as CEO will do to improve the performance of that
business going forward?

Miles Roberts:
Absolutely. But I think you've seen the returns we have been making. If you look at
the US, when we bought it, I think in the first full year, we made over 13% return,
13.2 from memory, something like that. I remember discussing it with yourself.
And we've always said that with the exposure this business has done very well. The
returns are very good. The exposure is on the export price of paper. All the
reduction comes from that export price. We identified that risk. This is certainly a
sort of a medium-term asset. We have to bring that paper back on shore
domestically, and then we'll get the returns. If you adjust for the change in the
price of paper that we'll get from bringing this volume back on shore, then you start
to get the returns much more in line with our range of 12 to 15%. That is what we
set out. That is what we're doing, and we're pleased with that progress, but we
have been hit by the export market.

Justin Jordan:
And to get to 12 to 15% return on the US then please Miles.
Miles Roberts:
We were 13.2% in the year before last, we said the deterioration, you've got the
cost of opening Lebanon, plus you've got the export market. We bring the export
market back on shore, plus you get the return from the packing side on Lebanon.
You get back into that 12 to 15%, which is where we were, it's just a point in time
that you're choosing.

Justin Jordan:
Okay. But if you take a step back and just look at Group return Miles, it's excluding
Plastics, because clearly discontinued business you've excluded from your own
historical return on capital employed. Your Group return was 14.7 in fiscal 16. It's
now fallen for four straight years. In the same four-year period industry period
have seen improvements to capital employed. Now, unfortunately that is an
24
indication that your M&A is just not delivering whether it's Interstate or whether it's
Europac, it's just not delivering results at 15% return hurdles.

Miles Roberts:
No, look, we're very confident about the acquisitions we've made. If you look at the
history of when we bought SCA Packaging, we made a very modest return in the
first year, you don't earn 14 to 15% in the first year of any acquisition. If you look
at the Europac acquisition, the return on capital employed there last year with all
the reduction in paper was just below 9%. And that's with all the reduction in
paper. We said when we bought it, the target was to be 9% in the first full year. So
we're in line with that, but you have to recognise if you sell your highest return on
capital employed assets, plastics, and invest in new assets, you don't make the
same return in the short-term, but we're confident of getting back into that range
exactly as we have done before, you look at the forward projections and we can
absolutely see that. Most certainly.

Justin Jordan:
Okay. Can you give us a timeline then, please to get group return at capital
employed back to your 12 to 15% range.

Miles Roberts:
Yes, we've talked about that being in the medium-term. That's absolutely right. We
can't, COVID has come at us. We didn't know about that. We're looking for
recovering these markets but look at the history. Look at what's happened, that
14.7 was with all those other acquisitions in there. It shows what we can do. You
can see the synergies coming through. It explained the program of improvement. I
mean, look at how are we performing on the front line as well? Really these, they're
all in strategy. And it's purely a consequence of old and new and the goodwill there
and the time for these synergies to come through, et cetera, that's all it is.

Justin Jordan:
Okay. Well, Miles, look, we're personal friends, so I don't want to get personal
things away in the way of accountability. But one suggestion I'd make to you
personally is when with the interim results in December, can you give us a returns
analysis of recent M&A from Interstate, from UK Paper, Europac, etc. Prove to us
that you can deliver 12 to 15% returns on those acquisitions. And if you're unwilling
to do that, please don't do future M&A. Clearly it is very worrying.

Miles Roberts:
Justin, we've set it all out.

Justin Jordan:
Miles, the numbers don't lie. The return is falling.
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Miles Roberts:
Justin, Justin, Justin, we have set that all out. When we announced the acquisitions,
it's all been there. You can't seriously expect us to make an acquisition that gives
us a 15% return on capital in the first year, the acquisition, Justin, I don't
understand what you're saying. You were positive on them, recognising it's a low
return on capital in the first full year. So, go back to the acquisition case. That is
what we stand by. That is what we've always delivered and we will in the future.
It's all there already.

[cousin jack] 28/8/2020 11:25

Risk/reward balance attractive at this level so decided that in addition to my core holding I will buy some around 260 to trade.

[moorsie2] 23/8/2020 13:00

The shares are definitely undervalued, even punished by the market.

Robert's has been economical with the truth re his corporate communications over the last 7 years. It was tolerated whilst the valuation was riding high , it is hammered now when the market is against them.

I hear one or two analysts had a real pop at him at the last investor call.

When ceo ego comes before shareholder value then I worry. Smurfit was once like that and arguably also like that when they rebuffed IP approach.

Smds needs to be a part of a much bigger player that will control the European market and be a global player. That can happen directly or indirectly via a private equity take out.

I hope for us private investors egos are left at the door of the board room and they make the calls to become part of a global leader directly rather than indirectly....

[essentialinvestor] 23/8/2020 11:29

As a holder on Mondi would prefer they exicted plastics.

Reading between the lines of the last Mondi update they may be looking

for acquisition opportunities, would SMDS be out of that equation.

Given it's size I would assume yes.

[fairtrader66] 23/8/2020 10:13

Moorsie Again, you raise good points but I would like to highlight the following:

- Economies of scale assist SMDS's competitors' ROCE on a relative basis
- Comparing SMDS April 2020 year end results with Smurfitt's December 2019 results isn't useful as end April was slap in the middle of massive covid impact. I believe the ROCE would have increased in latest results if Covid hadn't happened (and did if you include the discontinued operations)
- Mondi is in a class of its own
- SMDS is a stable and decent return and currently undervalued
- SMDS might be able pivot a little more easily in times of change
- SMDS sold the plastics business just before Covid hit creating good liquidity with the background of an already decent gearing profile (major debt repayments '23 onwards)
- SMDS profit margin from continuing operations before and after IT actually increased YOY (as per I&E) WITH Covid hit whilst Smurfitt decreased YOY without covid hit

Again, I agree with what you're saying on direction of travel but I think a flexible and successful programme is already underway. Pressure from shareholders is good but there is a decent plan (and action) in place.

AND these shares are undervalued. I'm looking forward to the December H1 results and not September Q1 results btw.

[redartbmud] 23/8/2020 09:37

I am trying to look at the positives and potential here.
I bought in recently, during the period where the share price has been soft, in order to benefit from the recovery that should come, with a well managed business.
Normally I would have attempted to attend an AGM, so that I can eyeball the board and ask questions. That is not likely to happen anytime soon - if ever.
Maybe they are busy beavers addressing the challenge of the revamped business, but I can't help but feel an air of apathy running around the market when Smds is mentioned.
I do hope that I am wrong, especially as I doubled up a few days ago, at a price higher than that traded on Friday.

[moorsie2] 23/8/2020 08:51

FT66 so what part of continually declining ROCE year on year over the past 5 years to become the worst of the big 3, are you proud and happy about as a shareholder?

This has been on Robert watch and strategy plan.

[fairtrader66] 22/8/2020 11:51

Fair points but not impacting why I bought the shares. It's an under-valued share with significant value in the future. It's the fact that it is MORE under-valued than its peers that makes me buy SMDS. The more conservative SMDS is with regards to dividends allows 1) for more security in the future and 2) a lower price to buy in at. I believe they are still profitable (unless paper/cardboard prices have more than seriously hit the business model which I doubt is significant in the medium term) and I would rather hold shares now before the next trading statement than after. I will laugh also if I have egg on my face after the September trading stmt.

I don't think they need to necessarily "lead dynamically", I think they need to maintain focus on the DYNAMIC BUSINESS PLAN already under way whilst carefully managing margins and incorporating Covid risks/opportunities during this time.

[redartbmud] 22/8/2020 10:33

But they aren't exactly leading dynamically durning this period of disruption.
Chopping the dividend completely was a bad move when an extreme act was unwarranted.
They are looking slow on the uptake.

The Smurfitt business is doing exceedingly well in comparison.
No excuses.