Ensor Share Discussion Threads

[gengulphus] 14/9/2016 12:01

Purpose of exercise was to return cash to shareholders. Not yet done and it seems they do not know when and how they are going to do it. ...

Agreed about "when", but "how" seems clear from what they say: a capital distribution.

... I would say that is a pretty strong grievance actually whether it be against the directors or advisers, it is called poor planning! Even if the relevant legislation only came in to place in April the discussion process would probably have been going on for years beforehand and they should have been aware.

The quality of planning needs to be judged against what planning is actually possible. If the legislation produces tax problems with making the capital distribution before everything has been sold, then the best plan available for returning the cash is to wait until everything has been sold, then make the capital distribution. What has been done so far is entirely consistent with that plan, so no, your grievance about returning the cash is weak.

Assuming that's the case, the fact that the best plan available for returning the cash is an unsatisfactory one is of course caused by the slowness of the sale process. That slowness is your strong grievance - don't dilute it with accusations of poor planning of the cash return when what they're doing may well be the best available way to plan it!

Gengulphus

[gengulphus] 14/9/2016 09:56

tiswas,

I don't see that what I wrote emphasises the other matters that you mention, which I agree with. But I'll certainly agree that it doesn't make them any better!

The main point of writing it is just that there's a tendency when one doesn't like what is being done to go looking for anything and everything that one thinks might be bad about it, producing a long list of grievances - some much better founded than others. That actually tends to let those one has the grievances against off the hook - they can focus their attention on the less-well-founded ones and downplay the better-founded ones, making it appear that there isn't really all that much to be upset about.

Because of that, it's a very good idea to be self-critical when one has grievances against someone, concentrating on one's strong points and ruthlessly chopping out the weak ones. In this case, their decision not to make an interim capital distribution right now due to tax uncertainties strikes me as at best a weak grievance, and the comparison with Soco an extremely weak argument, for the reasons I stated - and so IMHO they ought to get the axe!

Gengulphus

[meijiman] 14/9/2016 09:17

I agree. I sold out for a modest loss. Management clueless. There is something called 'opportunity cost'.

[tiswas] 14/9/2016 08:30

Gengulphus

Thanks for the comprehensive response. I accept everything that you write but sadly it just goes to emphasise what a pig's ear the directors have made of this entire process.

A sales process that has lasted more than 15 months with two core businesses still not sold.

A share price below where it was when they started to out shareholder value.

No apparent plan as to how they are going to distribute the cash received to date to shareholders in a tax efficient manner. (Not a problem to those of us with smaller shareholdings within an ISA)

So, anyone care to guess how long N months is?

[gengulphus] 13/9/2016 20:52

tiswas,

Secondly, isn't that exactly what Soco did when they returned cash through "A" or "B" shares so that shareholders could chose income or capital?

Firstly, "B share schemes" that offered shareholders the choice of income or capital treatment became ineffective on 6 April 2015, a change that was announced in the 2014 Autumn Statement ( ):

"2.152 Special purpose share schemes – The government will legislate to remove the unfair tax advantage provided by special purpose share schemes, commonly known as ‘B share schemes’. From 6 April 2015 all returns made to shareholders through such a scheme will be taxed in the same way as dividends. (Finance Bill 2015) (39)"

Soco stopped using them then, as did all other companies that I am aware of, for the very good reason that they're now just a way of pouring their admin costs down the drain.

So while I don't know exactly what change davidosh is talking about when he says "revised "transactions in securities" rules which came into force in April this year", it's not that one: the dates don't match.

Secondly, davidosh says "new rules make it very difficult for a continuing business" (my bold). Soco definitely intends to remain a continuing business for the foreseeable future, so basically for them it's a choice between making a payment that will be treated as a dividend now or deferring any payment indefinitely.

Ensor intends to go out of business when they've disposed of the remaining two subsidiaries, which means that they might or might not be treated as a continuing business now, but pretty definitely won't be once they've done that. So for them, it's a choice between making a payment now that runs a risk of being treated as a dividend, or making one in N months' time that doesn't. Not at all the same choice as the one facing Soco.

And as regards Ensor taking tax advice on the point, rules that are only a few months old (and sometimes ones that are quite a lot older!) often have unresolved questions that will only be resolved in real-life cases, which is an expensive business! So it may very well be that Ensor have taken advice on the point, and the advice they have received is essentially "Don't risk it - the cost to your shareholders of deferring the payment until the situation clarifies isn't big enough to justify you taking the risk. Let someone else with more at stake be the guinea pig!"

Gengulphus

[shanklin] 13/9/2016 14:27

P.S. Happy to participate in a dial-in if that's the only way we can be kept up to date.

[shanklin] 13/9/2016 14:24

davidosh

If any information were material and definite, an RNS would be necessary.

If its useful background information, along the lines you suggest, I would suggest the directors just write it down on a piece of paper, get it approved by the NOMAD, and issue it as a non-material RNS (or whatever they are called).

If its neither of these situations, and given we know the directors feel very constrained by the NOMAD in what they are able to say currently, we probably don't need to make life even more difficult for them by interrogating them over the phone to no good purpose.

HTH

[tiswas] 13/9/2016 13:19

david

Firstly the advisers should have been aware of that rule coming in and advised esr accordingly.

Secondly, isn't that exactly what Soco did when they returned cash through "A" or "B" shares so that shareholders could chose income or capital?

Garbet raises a point, is the empty shell and listing worth anything?

PS Yes, a dial in would be welcomed

[davidosh] 13/9/2016 12:54

I do not expect many will be able to make it to the Agm in Manchester early on Thursday morning so would it be worth requesting a dial in so that shareholders can take part in a Q&A to further understand the position we are now in.

[davidosh] 13/9/2016 12:51

i do not know for certain and have not spoken to the directors but they are probably worried about the revised "transactions in securities" rules which came into force in April this year... The new rules make it very difficult for a continuing business which has distributable reserves on the balance sheet to return capital to shareholders without it being regarded for tax purposes as a deemed dividend

[shanklin] 13/9/2016 12:39

One would have thought the advisors being employed by ESR might be up to advising on this. If not, what's the point of them.

[garbetklb] 13/9/2016 12:32

The tax treatment concern may be rather different for the directors in view of the size of their holding and their history.
But, yes, hard not to be a tad surprised that it's not been thought through.....
Just possible that there are issues as to what to do with the empty (listed) shell and how best to position it for a possible sale?

[zimbtrader] 13/9/2016 10:38

Remarkably restrained reaction there, Tiswas! I'm sure (hope?) some searching questions are asked at the AGM as that does strike me as being rather more than "unbelievable".

If there is an silver lining to be taken from todays update, it is that the company has actually provided an update and updated figures we can all work with to try and make some sense of with respect to the value of our investments.

I haven't the luxury of much free time for the next week or so but a VERY quick crunch of these latest figures suggests 74.9p per share IF both remaining businesses each sell for just 6 x historic gross profit. That increases by approx 5p per share if they secured 7 x historic gross profit and so on.

I have taken the stated Net Asset figure and subtracted the cash which will fund the final dividend.

Then subtract the stated figures for Property, Plant & Equipment, Intangible Assets and Inventories.

I then add £170k profit on the apparent valuation placed on Brackley (530k)

Then add extrapolated valuations for Ellard and Woods equating to their last gross profits of £890k and £628k respectively multiplied by 6, 7 etc...

Any comments / alternative valuations very much welcomed but please remember this is only a quick number crunch!

Zim

PS: It would appear that OSA sold at 12.2 times historic gross profit and Techno at 11.5 IF the figures I used for gross profit are correct (204.6k and 872.9k)

[tiswas] 13/9/2016 09:29

So they have been going through this exercise for 15 months or more and they are not sure of the tax treatment for any capital distribution!

Unbelievable.

[dangersimpson2] 08/9/2016 22:56

Because a profitable business is usually worth much more than it's net assets.

[hybrasil] 08/9/2016 20:38

can anyone explain why a company so obviously in wind down is valued at more than its net assets?

[tiswas] 08/9/2016 15:24

I agree jb.

Scandalous that they have spent so long trying to flog these companies. If the appetite to buy them at a decent price is not out there then for goodness sake face up to that and take them off the market. Can not be doing customers, suppliers or employees any good - never mind shareholders!

[jbarcroftr] 08/9/2016 14:49

We need an update from the Board

[zimbtrader] 31/8/2016 08:52

It would appear an offer has been made for the Brackley site....

www.roger-hannah.co.uk/property/117.html

[zimbtrader] 31/8/2016 07:38

Thanks, Lennyman. That being the case, it can be viewed as a renewal of their authority to buy shares back so, as you suggest, probably irrelevant in the current context.

I've reason to believe we may hear something from the company prior to the AGM and am hopeful that might include news on any plans to distribute some of the (now) surplus cash they have on the books.

They are pretty responsive to queries / feedback from shareholders - [e-mail] - if that's of any use to anyone else.

[lennyman] 29/8/2016 15:19

Resolution number 6 that you refer to has been on the agenda for every AGM since 2000 and before so I suggest that there is nothing strange or untoward and you should not read anything into the Resolution.

[gengulphus] 26/8/2016 00:17

Gen... Obviously, I should have said (and meant) "reduce" rather than dilute. Most seemed to get the point, though. Sorry to have caused you such consternation that you had to spend your valuable time posting to point out my error.

No need to apologise - I didn't have to spend my time on it, I chose to do so, specifically because dilution of existing shares is generally regarded negatively. Sure, anyone who thinks about it knows that a buyback doesn't do that - but from reading these boards, I'm by no means convinced that everyone who reads these boards thinks about what they read!

Gengulphus

[eezymunny] 25/8/2016 16:26

There's often/usually no tax because of this...



If the holding company can tick the boxes that exempt it from tax, then no tax to pay.