Fdm Share Discussion Threads

[rbcrbc] 15/8/2009 11:21

By far the best bet, instead of earning 0.5% on deposit on all that cash, is to distribute it back to shareholders via a large share buyback programme

Whilst I certainly agree that the uncertaintity needs ending and they have too much cash I am not convinced that a buy-back is the right option.

I believe they have £10m cash.
If they paid an average 150p during a buy-back they could buy 6m shares leaving some cash behind.

That would reduce the shares in issue from 22m to 16m.
And increase 'the directors' holdings (2.26m as at last accounts) from 10% currently to 14% thus making the next cheapo MBO (?150p) much more likely to succeed.

I would prefer a doubling of the regular dividend and a one-off special dividend.

If we dont get a decent, full and proper management plan for the cash pile and end of the offer with the results on 18th then I think it is time to impose a new Non-exec or two.

Is it one Non-exec for each 20% of shares ?

Paul, did you say that 40% of shareholders had offered a degree of support for the offer to be rejected ?

[paulypilot] 15/8/2009 00:00

Hi,

Very quiet here.

This mooted MBO nonsense has been hanging over this stock for too long now - I think it's time for an RNS stating unequivocally that the MBO is NOT proceeding, because shareholders don't want to sell.

It's not good for the company, or its shareholders, to have this uncertainty hanging around. I realise that the share price might well drop if they announce that the mooted bid is not proceeding, but that's fine, as I want to buy more of these anyway (as a long-term holding), as I reckon it's a fantastic investment - great company, and great management (albeit badly advised on this matter).

And as shareholders, we're keeping our eye on that cash pile. A value-destroying acquisition will be voted against at the EGM, so let's not even go there please management!

By far the best bet, instead of earning 0.5% on deposit on all that cash, is to distribute it back to shareholders via a large share buyback programme - which makes total sense whilst the shares are trading at about half fair value. It's also tax efficient & would hugely enhance shareholder returns by multiplying EPS & Dividend per share.

Come on management, do something sensible & bold!!! These things are really not complicated at all, despite what all the fancy-talking & expensive advisers from the City - they would have been encouraging share buybacks when the price was high, because gearing up was "efficient use of capital". But when the share price is low, nobody mentions share buybacks! Unbelievable sometimes, the lack of simple common sense.

We all know the shares are currently priced at about half fair value, so buy them back for cancellation using the company's own cash - this creates value for all of us!! It's so bleedin' obvious, why aren't you doing it??!!!! Come on!!

Regards,
Paul.

[davidosh] 10/8/2009 08:05

Results out on the 18th



Still no news on the bid.

[greek islander] 25/7/2009 12:43

UK-Analyst blog today,
Evil Knievel still strongly opposed to the 120p offer price -


"FDM (FDMG) came out on Monday with a downbeat trading statement such that the stock is now sitting 15p below the mooted 120p cash bid from management. I wouldn't fall for this statement - it was originated by the management. FDM is cheap."

[paulypilot] 21/7/2009 13:19

Hi,

"Paul,
I don't get your logic - you believe the company is worth more than £1.20 but you are unwilling to buy any at over £1. That does not make sense.

As for the TS, the directors have a fiduciary duty to the shareholders which they have fulfilled - they CANNOT lie or deliberately mislead."


My logic is very simple - I identify companies that I reckon are worth substantially more than the market price, and then try to time my buying of the shares such that they are bought as cheaply as possible! (which may be below the current market price, especially if the price is drifting). The difference is my profit (or potential profit anyway!)

I don't think anyone is suggesting that the Directors have lied or mislead anyone with the TS. However, these things are not as black & white as you suggest. You can take one set of numbers, and construct a TS which can be anywhere you like along a broad spectrum ranging from very bullish to very bearish. It's all about how you use language, and what nuances are put on things.

I feel with FDM's trading statement recently, it's actually pretty upbeat (profits in line, despite very difficult market conditions), but phrased in a fairly downbeat manner - as you would expect, given that management are trying to buy the company on the cheap!

But they are perfectly justified in pointing out possible risks to the downside, and there is nothing wrong with that.

The same is true of company accounts. People think profit is a single number, but in practice it's not. I used to be an auditor, and the auditor signs off the accounts as giving "A true & fair view". Note carefully, not THE true & fair view, but A true & fair view - i.e. making it clear that there is more than one true & fair view.

What happens in reality is that the FD will smooth out profits such that a nice progression occurs & actual numbers come out in line with forecasts. That can be done by tweaking all sorts of assumptions, provisions, and I would say that on average most FDs have at least 5-10% leeway on the profit figure, to get it where they want it.
This is exactly what I used to do when I was an FD. If we had a terrific year, I squirreled away loads of provisions which may or may not be necessary. The auditors liked this, as it showed prudence. Then it was entirely of my choosing when to release the provisions, which one obviously did when there was a patch of difficult trading. It keeps everyone happy, especially shareholders & banks, everyone does it.

So few things are black & white!

Regards, Paul.

[gengulphus] 21/7/2009 09:40

I don't get your logic - you believe the company is worth more than £1.20 but you are unwilling to buy any at over £1. That does not make sense.

I'd imagine that, like any of the rest of us here who actually want to buy the shares at all, Paul would like to buy them as cheaply as possible - and is judging that he will probably get an opportunity to buy at £1. It's also useful insurance - buying shares at £1 will make a nice profit even if the attempt to block the management buy-out at £1.20 fails.

And incidentally, I have nothing against the management wanting to buy the shares as cheaply as possible - if they want to buy shares on the market at £1.20, £1.10, £1, or whatever other bargain the market is offering, good luck to them! But I do have something against them trying to use their position to push such a deal through when shareholders don't want to sell.

Gengulphus

[greek islander] 20/7/2009 16:07

I get the feeling that previous efforts are somewhat subjective.
I find it difficult to take a distant objective view of the RNS and I would admit to being highly suspicious that the Management may well colour it to suit their purpose.
That it is a very flat unenthusiastic statement is undeniable, though Paul you clearly argue a point and I am afraid that I find everything in the preceeding correspondence from everyone including even me to be supposition simply because we have no meaningful information to the contrary. The RNS is not really telling us much, other than to confirm that management is aware that there is interest in what stage the takeover activity is at and to then cynically hold back any further information about progress.
Greengiant's one sided argument has some merit though I am too cynical and world weary to agree with it.
I think we are all wise enough to know that the price put on a company in an acquisition situation should reflect that and therefore £1 may seem a correct price now in the market though the value of the share price for a takeover of a low cap would rocket - the norm would be by 2-3 times the share price at the time of the offer. Though there is no clear rule. It is all ultimately what shareholders would expect and accept.
I haven't bought any more shares of late, yet I value my stock at a minimum of 150p a share. Is that so difficult to see?

[greengiant] 20/7/2009 15:21

Paul,
I don't get your logic - you believe the company is worth more than £1.20 but you are unwilling to buy any at over £1. That does not make sense.

As for the TS, the directors have a fiduciary duty to the shareholders which they have fulfilled - they CANNOT lie or deliberately mislead.

gg

[paulypilot] 20/7/2009 14:56

Hi,

Trading statement was OK in my view, given the economic situation - what do people expect in the worst Recession in living memory? (well, the sharpest one anyway, but my recollection of 1979-1981 was that things seemed far worse than they are now).

Given that they want to buy it on the cheap, they're hardly going to put out any positive spin in a TS, are they?

Surplus cash really should be returned to shareholders, since it's our money, and we could be earning a much better return on it in the markets ourselves, rather than it just sitting on deposit earning nothing & giving management ideas about using our own cash to buy us out!!!
I understand the point about a Special Divi being unattractive on a tax basis, but a big share buyback scheme would probably be a better bet. Or what about a Tender Offer at say 120p??? That would give anyone who wants to the chance to cash out, whilst letting the rest of us who want to hold long-term a considerable increase in EPS & DPS.

Anyway, let's hope we do drift below 100p, as I want to buy more!!!

Regards,
Paul.

[scorpionwinger] 20/7/2009 10:21

The point on the mounties is they are flat and this is supposed to be a growth company. In addition to which I don't believe there are great barriers to entry and what we don't see in this update is whether their margins are holding up. Noted cynicism re talking the share price down but were it not for that I would wonder whether there were a couple of little warning bells about future trading.

I agree the cash is healthy but here are my thoughts: a) surely they need a fair chunk of it for their working capital needs; b) I don't think the management has the depth to expand safely out of the UK; c) returning any surplus to shareholders through a special dividend hands our money to the government in taxes (which are much lower through a capital gain); d) the cash earns negligible return; e) the cash in the business is in theory priced into the share price

In any event, if this is such a great prospect above 120p, where is all the buying to propel it there. I get the sense that the market has decided that the bid isn't going to happen and if it formally goes away, we'll drift around in the 90p-100p range for a very long time. In addition to which the stock is so illiquid it is virtually untradeable.

Hence - I am fed up................!!

[rbcrbc] 20/7/2009 09:39

Looks like the business is holding up very well indeed in these recessionary times (revenue generating heads up slightly from 625 to 628), as David says, there are fantastic cash reserves and the completion of the move to the new centre in London means they are a coiled spring ready to pounce on the recovery.

IMO, they should be using this quiet time, and their store of cash, to setup the first mainland Europe training centre and iron out the bugs in it.

Looks to me like a veiled attempt to talk down the share price

[davidosh] 20/7/2009 09:07

scorpionwinger.....the mountie facts you mention

'At 30 June 2009 we had 302 Mounties and 326
freelance contractors compared with 293 and 332 at 31 December 2008'

So they increased to 302 from 293. Where is the problem with that ?

The level of cash backing at FDM is also considerable but not mentioned in the update. Certainly nothing mentioned that would worry any genuine long term investors

[scorpionwinger] 20/7/2009 09:00

They could but mountie stats are fact - and they didn't look good

[stegrego] 20/7/2009 08:46

If management are still wanting to buy, they arent likely to paint a rosy picture are they?

(I know they cant deliberately lie, but they can certainly cloud it a bit)

[scorpionwinger] 20/7/2009 08:39

That's a pretty disappointing trading update.....so much for a recession proof business. Not amused by the sp

Pauly, rather than telling us all how outrageous the suppposed offer is/was (god know if it still exists) could you see if you go back cloth cap in hand and ask those nice gentlemen to pay me my 120p so I can get out of here and find a liquid company whose share price is not going to drift aimlessly

[greek islander] 20/7/2009 08:38

Well it seems unlikely that the offer is being withdrawn though what is happening there is anyones guess after the flat trading update today.

[paulypilot] 16/7/2009 23:49

Hi,

Good, glad that peace & goodwill has been restored! ;-)

Things really can't go on like this. Management really need to withdraw this mooted offer now, as it's dragged on far too long already & must be distracting them from their proper jobs of running the business.

We're all in this together, and shareholders DON'T WANT TO BE BOUGHT OUT !!!

What part of that don't management understand ???
This is a fantastic business, and we all want to continue owning a chunk of it.

And I've reviewed the most recent Annual Report, and have to say that management are paid well. Very nice salaries & bonuses, for the size of business. At the top end of what is reasonable actually - all well & good when the profits are rolling in, but in these more uncertain times I'd like to see a bit of restraint here on executive pay.

Regards,
Paul.

[gengulphus] 16/7/2009 16:26

I do expect that if management are serious about this takeover then they must surely have been adding to their corporate holdings over the last few months the question is just what proportion of the total stock do they hold between them now.

The last reported director shareholding changes were on September 25th and October 7th last year, as a result of exercising share options. If they've made any purchases since, they're either very recent or the directors concerned and/or the company are ignoring the regulations saying they must report any change to director shareholdings within a few days.

Gengulphus

[greek islander] 16/7/2009 11:45

I do expect that if management are serious about this takeover then they must surely have been adding to their corporate holdings over the last few months the question is just what proportion of the total stock do they hold between them now.
The strength of the share price underlines the demand for stock though frankly it seems unlikely that they are getting anywhere fast as the buys and sells have hardly been exceptional and the share price has remianed pretty stable.
What we all need to know is where are they at and are they formally going to withdraw their interest. Surely some news feed is imminent.
All this uncertainty does not help anything.

[paddyfool] 12/7/2009 18:11

Paul
Thanks for that much appreciated.
Paddy

[rbcrbc] 12/7/2009 11:12

Maybe its time to start a telephone campaign, one call a day from each shareholder next week asking what the status on the MBO is should be enough to annoy the receptionist into winging at his/her boss which should eventually filter up to the CEO. Then two calls each day the week after .....

[orinocor] 09/7/2009 21:46

Why would the MBO be at £2 anyway. The share price has never been above £1.50.
No-one will pay 10 times earnings in a recession because earnings could drop by 30% next year. You dont know what the future is. Not when banks are going bankrupt and millions are losing their jobs. Reality check needed.

[orinocor] 09/7/2009 21:46

Why would the MBO be at £2 anyway. The share price has never been above £1.50.
No-one will pay 10 times earnings in a recession because earnings could drop by 30% next year. You dont know what the future is. Not when banks are going bankrupt and millions are losing their jobs. Reality check needed.