Fdm Share Discussion Threads

[greek islander] 24/8/2009 10:49

With stocks especially selected low and mid caps booming at the moment one wonders whether FDMG would have reached the current share price anyway even without a bid being in the offing?
Sort of makes the 135p a real easy option - a real low price. My feeling is that 150p would have probably got there but £2 would be a fair price in the current climate. I would have cashed in at 175-185p purely because there are even better bets out there. As it is I'm holding out for more.

[paulypilot] 24/8/2009 10:30

Hi,

Would be interested to hear what other investors think, but my view is that the 135p potential offer is still derisory, just less so than 120p.
It still woefully undervalues the business.

We have 42p/share in net cash, plus earnings at the trough of the economic cycle around 14p EPS. So 135p just values the (ex-cash) business at 93p, or 6.6 times earnings.

Why on earth do the management team think that shareholders would want to sell our shares at 6.6 times trough earnings??? They're not thinking straight.

Regards,
Paul.

[greek islander] 24/8/2009 07:52

Offer price increases to 135p per share

"FDM Group PLC


("FDM" or the "Company")


STATEMENT RE POSSIBLE OFFER

On 4 June 2009 FDM (AIM: FDMG), the international IT services business,
announced that it was in discussions with its management team (the "Management
Team") in respect of a potential offer for the Company at 120 pence per share in
cash. Since that date discussions have continued and have resulted in a revised
proposal from the Management Team that may or may not lead to an offer for the
Company at 135 pence per share (the "Revised Proposal").

The Management Team comprises Ivan Martin, Rod Flavell, David Templeman, Sheila
Flavell and Andy Brown. It is anticipated that any offer that is forthcoming
will be funded by funds managed and advised by Inflexion Private Equity Partners
LLP ("Inflexion"), the Management Team's selected funding partner and investment
by the Management Team.

In light of the Revised Proposal Karl Monaghan, sole Independent Director, has
granted the Management Team, Inflexion and their advisers permission to conduct
a full due diligence exercise into the Company. The Company has entered into non
solicitation and inducement fee agreements (the "Agreements") with the
Management Team and Inflexion. Under the terms of the Agreements the Company, in
certain circumstances, would be obliged to pay to the Management Team and
Inflexion an inducement fee of up to 1 per cent. of the value of the Revised
Proposal.

Whilst discussions are well progressed, there can be no certainty that an offer
will be made for the Company.

This announcement has been made with the consent of the Management Team and
Inflexion.

Further announcements will be made in due course.

Enquiries:

+-------------------------------------------------+-------------------------+
| FDM Group plc | Tel: [phone] |
| Karl Monaghan - Independent Director | |
| | |
+-------------------------------------------------+-------------------------+
| Financial Adviser to FDM Group plc | Tel: [phone] |
| Brewin Dolphin Investment Banking | |
| Matt Davis/Neil McDonald | |
| | |
+-------------------------------------------------+-------------------------+
| Financial PR Adviser to FDM Group plc | Tel: [phone] |
| Buchanan Communications | |
| Lisa Baderoon/Jeremy Garcia | |
+-------------------------------------------------+-------------------------+
| The Management Team | Tel: [phone] |
| Rod Flavell, Chief Executive, FDM Group plc | |
| | |
+-------------------------------------------------+-------------------------+
| Inflexion Private Equity Partners LLP | Tel: [phone] |
| Gareth Healy | |
| | |
+-------------------------------------------------+-------------------------+
| Financial Adviser to the Management Team | Tel: [phone] |
| Ernst & Young LLP | |
| Tim Medak | |
| Mark Harrison | |
| | |
+-------------------------------------------------+-------------------------+


Dealing Disclosure Requirements


Under the provisions of Rule 8.3 of the Takeover Code (the 'Code'), if any
person is, or becomes, 'interested' (directly or indirectly) in 1% or more of
any class of 'relevant securities' of the Company, all 'dealings' in any
'relevant securities' of the Company (including by means of an option in respect
of, or a derivative referenced to, any such 'relevant securities') must be
publicly disclosed by no later than 3.30 pm (London time) on the London business
day following the date of the relevant transaction. This requirement will
continue until the date on which the offer becomes, or is declared,
unconditional as to acceptances, lapses or is otherwise withdrawn or on which
the 'offer period' otherwise ends. If two or more persons act together pursuant
to an agreement or understanding, whether formal or informal, to acquire an
'interest' in 'relevant securities' of the Company, they will be deemed to be a
single person for the purpose of Rule 8.3.Under the provisions of Rule 8.1 of
the Code, all 'dealings' in 'relevant securities' of the Company by the offeror
or the Company, or by any of their respective 'associates', must be disclosed by
no later than 12.00 noon (London time) on the London business day following the
date of the relevant transaction. A disclosure table, giving details of the
companies in whose 'relevant securities' 'dealings' should be disclosed, and the
number of such securities in issue, can be found on the Takeover Panel's website
at www.thetakeoverpanel.org.uk. 'Interests in securities' arise, in summary,
when a person has long economic exposure, whether conditional or absolute, to
changes in the price of securities. In particular, a person will be treated as
having an 'interest' by virtue of the ownership or control of securities, or by
virtue of any option in respect of, or derivative referenced to, securities.


Terms in quotation marks are defined in the Code, which can also be found on the
Panel's website. If you are in any doubt as to whether or not you are required
to disclose a 'dealing' under Rule 8, you should consult the Panel.


Responsibility


The Directors of the Company accept responsibility for the information contained
in this statement. To the best of their knowledge and belief (having taken all
reasonable care to ensure that such is the case), the information contained in
this statement is in accordance with the facts and does not omit anything likely
to affect the import of such information.


Brewin Dolphin Ltd ("Brewin Dolphin"), which is authorised and regulated in the
United Kingdom by the Financial Services Authority, are acting exclusively for
FDM Group PLC and no one else in connection with the matters set out in this
announcement and are not advising any other person and accordingly will not be
responsible to any person other than FDM Group PLC for providing the protections
afforded to clients of Brewin Dolphin or for providing advice in relation to the
matters described in this announcement.


Ernst & Young LLP ("Ernst & Young"), which is authorised and regulated in the
United Kingdom by the Financial Services Authority, is acting exclusively for
the Management Team and no one else in connection with the matters set out in
this announcement and are not advising any other person and accordingly will not
be responsible to any person other than the Management Team for providing the
protections afforded to clients of Ernst & Young or for providing advice in
relation to the matters described in this announcement.



This information is provided by RNS
The company news service from the London Stock Exchange
END

[paulypilot] 23/8/2009 13:05

Hi,

My observation on the mooted MBO, is that generally the longer discussions drag on, the LESS likely a deal is to happen. Certainly by this stage, I'd be very surprised is anything were to happen, given that talks have been going on for well over 2 months, since the 4 June announcement

That said, credit markets have been improving, and general business confidence getting much better over this period, so a VC is more likely to want to press ahead.

The big stumbling block is that 120p is nowhere near enough to persuade shareholders to accept a buyout, it's just not going to happen at anything like that price.
There is then a danger that management might become embittered & maybe try to de-list the shares, although there would be uproar if they tried that.

I still think a substantial share buyback at current market price is by far the best way to enhance shareholder value. At the very least they should increase the dividend to pay out the bulk of earnings in divis. Why not? It makes no sense at all to just accumulate cash on the Balance Sheet, which then earns a negligible return from the bank.

Regards,
Paul.

[davidosh] 22/8/2009 17:04

Paddyfool....What exactly makes you think that ?

[paddyfool] 22/8/2009 16:40

It looks remarkably now like the buyout will goahead.

[strollingmolby] 21/8/2009 09:12

Paul - LOL! It's actually her pension scheme.

[paulypilot] 20/8/2009 23:42

Hi RBC,

Hazell Carr Edwards are very astute investors in undervalued companies, I know their head investment honcho. My understanding is that they are opposed to the 120p MBO - so they're on my list !!!

Regards,
Paul.

[rbcrbc] 20/8/2009 13:26

So who is/are Hazell Carr Edwards FURB and how high do they want to take their stake ?

Currently at 2.01%

[paddyfool] 18/8/2009 12:46

great play here if you believe they will be taken out at £120 or greater. Quick 10-15% to be had. The risk is they are not taken out and teh share price reverts to 80-90p feels like it might be worth it!

[dangersimpson2] 18/8/2009 10:49

But where has the cash gone ?

Looking at the cash-flow statement:

£700k went on increasing recievables more than payables.
They paid £300k more to HMRC than the tax liability they incurred in the period.
They spent £100k more on stuff than they depreciated their existing stuff.
The dividend cost them £600k.
Lost £200k sterling value due to FX rate fluctations.

So £1.5m profit becomes £0.5m cash reduction.

[paulypilot] 18/8/2009 10:35

Hi,

Results are pretty good taken in the context of the sharpest & deepest downturn in living memory. Profits would essentially have been flat vs last year, were it not for the additional expense of London office relocation. So I'm happy with the underlying trading picture, which is around 15p EPS annualised.

Divi - agreed they could & should have been more generous, but they want to keep the cash to buy the business off us!

Cash at Bank - agreed it looks lower than I was expected. Looks to me as if Dec 2008 Debtors figure was lower than usual, hence net cash figure roughly 42p/share, and not 50p/share as hoped. But not the end of the world - just cashflow timing.

Interest Received - because interest rates are negligible on short term cash deposits, you can't read anything into this. But the miserable £37k received from the cash pile over 6 months, just reinforces my point that they really need to do something more useful with the cash - i.e. return it to shareholders, so that we can earn a huge return on it in the stock market right now! That said I would rather them sit on the cash, than spend it on some value-destroying acquisition.

Possible MBO - for chrissakes! This is moving at Glacial speed. How long does it take to decide whether to make an offer or not??? It's a stupid plan, just ditch it please, management. We don't want to be bought out!!!

Valuation - with about 42p/share net cash, and EPS of around 15p/share, I make this a valuation of about net cash + PER of 4.3 !!!
Given that this is the valuation during a Recession, that doesn't even factor in any upside for the economic recovery/ ongoing growth. Which is bonkers, the price is barmy. Might have to buy some more, but no spare cash at the moment.

Anyway, smashing company, and a creditable performance in a nasty Recession, well done to all at FDM for that. However, thumbs down for the other points, especially this MBO idea not having been kicked into touch yet.

Regards,
Paul.

[rbcrbc] 18/8/2009 09:06

I suspect you can guess my reaction to:
a) The increase in business despite the economic situation which is fantastic.
b) The lack of increase in the dividend which is XXXX
c) The lack of progress in sorting out the offer which is also XXXX

But where has the cash gone ?

10.1m at year end plus profit before tax of 2.2m should not equal 9.46m ???

[rbcrbc] 17/8/2009 17:35

I'm not sure that there is anyone who wants to sell for less than 120p !!

But, tomorrow is another day.....

[paulypilot] 17/8/2009 17:01

Hi,

Just to be clear I am definitely NOT advocating that FDM do a share buyback at a significant premium to the current share price. They should try to pay as little as possible of course, since the purpose of a share buyback is to acquire the shares below intrinsic value (indeed as cheaply as possible), thereby enhancing shareholder value for remaining shareholders.

I would be absolutely against any share buybacks above 120p for example.

Regards, Paul.

[rbcrbc] 17/8/2009 16:33

Paul,

Whilst I agree with your maths on the effect of a buy-back on EPS it is unfortunately NOT the case that buy-backs lead to increased dividends, so often they don't and there is absolutely no obligation for the dividend to increase pro-rata to the EPS.

Also, don't forget, that there is plently of room here to increase the dividend substantially from current profits. (But it would make more sense to discuss that with tomorrows figures available, in case things have changed).

I also didnt see many sellers at 110-120p so think they will have to move quickly up to the 200p mark before getting sellers for a buy-back and whilst I am very happy to trade out at 200p and back in after it falls when the buy-back ends, I don't really think management use of any buyback should really encourage short term traders.

So, whilst I would prefer the cash to be invested back into growing the business either organically or by (overseas) acquistion. I think a one-off special dividend and live with the tax implications would be the simplest option.


David,

If our non-exec Karl does the business and issues a full and proper statement re: the MBO with the interims then I will (probably) be happy for him to stay. If not it is most definately time for a change.

Do any of those on your 'waiting list' have easy access to Brighton ?

[davidosh] 17/8/2009 15:37

Any thoughts on the strength of the non executives here ?

Results tomorrow do not forget...

FDM (AIM : FDMG), the international IT services business, today announces that
it will be reporting its Interim Results for the six months ended 30 June
2009 on 18 August 2009.

[metaphysicalman] 17/8/2009 14:22

Paul

Agree 100%.

Note that if the MBO did go ahead, the cash pile would no doubt be used to immediately retire some of the acquisition debt - they are effectively buying the future earnings and cash streams for only 77p per share - daylight robbery.

Regards
MetaphysicalMan

[rbcrbc] 16/8/2009 10:33

I think a study has recently proven that buy-backs actually do sod all good and return very little value to shareholders.

Do you have a reference for that ?

It certainly was not the case at TRC recently where I more than doubled my money, and I have recently found another buy-back situation that looks likely to double my money again before Christmas.

There have been many large companies that have done buy-backs with borrowed money that has increased EPS, which managemnet bonuses were measured against, that situation IMO is verging on criminal. But where there is surplus cash it can be a very different situation, and here I would expect a buy-back to rasie the share price on a temporary basis, but an inceased sustainable divided to have a longer lasting effect maybe a combination of the two???

[matt] 16/8/2009 10:11

So I guess the MBO is much like buying a premier league club. Purchase it and load the debt into the business. In this case pay it down with earnings for a few years and at 120p they'll be laughing if they then refloat it in the future debt free again. Nice work if you can get it.

[stegrego] 15/8/2009 23:41

I think a study has recently proven that buy-backs actually do sod all good and return very little value to shareholders.

[davidosh] 15/8/2009 12:36

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 ? (RBCRBC)


I think you will enjoy reading this one....




I urge all of you to get behind this message and suggest other companies that need a strong non exec on board. I have five hugely respected investors all with the right qualifications to do the job. They are not selected from a cosy 'say yes to anything group' and all are qualified accountants. Three have worked as directors of FTSE companies and two are very well known to you all here. I am very happy to add further names and each position will be advertised within the group to gain the right horse for the course. I will not be promoting the targets in any way in advance but any situation where there are weak boards with minimal non exec representation, directors that are highly remunerated but with minimal shareholdings and poor performance, or simply companies that permanently underperform and seem not to be acting like a listed company will be fair game. We are now in the ascendancy with ONE DOWN....a few hundred in play !!