Hercules Props. Share Discussion Threads

[spec12] 16/2/2004 14:23

thanks pen.

[rivaldo] 16/2/2004 14:20

As you say penpont, good to see some objective comment and someone looking at the actual figures for a change.

Thx to DJ and CR for the warning - don't mind a contrary point of view, but nothing has yet been pointed out that everyone wasn't aware of anyway.

So 275p here we come (possibly!)!

[penpont] 16/2/2004 14:08

Some much needed objective comment below from citywire -

'The drop in Hercules Property Services' share price masks a good set of interim figures and an upbeat trading statement; shame then that news seems to have got out before the formal presentation today.

Shares in Hercules (HPS), a £45 million property insurance and services company, are down 19p or 7% at 240p - at one point the drop was 10% - despite an 81% increase in first half profit before tax, a return to profit at the earnings per share level and a moderate increase in the dividend to 1.6p.


All divisions progressed well with insurance achieving growth of 28% and commercial property services ahead of expectations. The company is also having success by cross-selling its services and is confident for the second half and full year.


The long and short of today's sell off is that clearly, some investors already had wind of the good news and were buying in the lead up to results. Profit taking has set in and taken the shine of things. On the other hand the shares are hardly expensive on a price to earnings rating of 6.7 times for this year and six times for next year, and net yield of 3.5%.


There is confidence in today's statement and the shares have already clawed back some of the earlier losses. First target should be 275p but there will need to be further interest to mop up the loose stock today.


©2004 Citywire '

[ydderf] 16/2/2004 14:05

Scripophilist - of course that is what happened, but the result has been a continuous weakening of the balance sheet and increasing borrowings which look as though they could only be repaid through the resales of the aquired businesses - there is no resultant growth in value in the business hence the figures i posted up the thread

[scripophilist] 16/2/2004 13:20

I haven't researched them in depth but looking at that posting and checking the fins the answer is simple. It looks like they have borrowed money to aquire assets which have been posted as intangibles. (I would need to check what they have bought and how they have accounted for it). This has reduced NAV excluding intangibles.

[ydderf] 16/2/2004 12:12

rivaldo - exactly! Haven't you learned anything from the old Marconi and other shareholder value destroyers btw, wonder why the directors hold so few?

[doobydave] 16/2/2004 12:12

While we're on the subject of debt, it's good to see some of paid down in these results.

[cockneyrebel] 16/2/2004 12:11

ChrisG - I think the reason for the fall today, if affected by anything on this bb was Freddy's post pre-open rgarther than anything I said.

rivaldo, that's true, but when a company is spending all of its profits buying other companies so that it can make profits then they are not 'real profits' in an organic sense. I'd have liked to see sales growth better than it was myself and eps after amort/gw higher than it was.

But anyway, its a market out there and we all see value differently. I hope I'm wrong as I don't have a position anymore and it doesn't affect me.

Don't trust the words of the one who calls himself 'Freddy' either - he speak with fork tongue a lot of the time imo.

CR

[rivaldo] 16/2/2004 11:57

Who is this Freddy bloke who's suddenly appeared after most of us have virtually doubled their money here? He's got a big chip on his shoulder about something.

Perhaps the increase in debt since June '99 has something to do with acquisitions:

Nov 1999 - Deacon for £12m cash
Nov 2001 - Wood and Courcier for £3m cash
Feb 2002 - DOR for £4m loan notes
March 2002 - Gross Fine for £15.2m cash and loan notes

But then there's usually a simple answer for everything.

[stewjames] 16/2/2004 11:34

ChrisG, you were negative on this when it was a much lower price. What changed your mind?

[ydderf] 16/2/2004 11:25

The more thoughtful amongst you wil have wondered, WHY the cumulative earnings per share over the past 5 accounting years of 195p, have resulted in a total payout to shareholders of a meagre 46p, BUT during that period debt has increased from 2m to 20m, AND ntav has gone from +16p to - 75p !!!1 The words, smell, funny, right, not and hmmmm, spring to mind.......You can witter on forever about earnings but unless they are REAL, shareholders never gonna receive them, standing back for a moment and finding an answer to this question will be better for your portfolios in the long run - the only reason this crock has gone up sharply over the past few months is the small cap macro environment - you have to be very unlucky not to have doubled since March last year in any dart yhrow list of speccy muppet small cap faves! It don' make them more valuable though, just higher priced! l

[rivaldo] 16/2/2004 11:03

LOL! Campbed, I'm sure you're right. But my calculation was:

H1 2003/4 - 12.9p
H2 2002/3 - Per finals, 32.6p adj EPS minus H1 11.7p EPS gives 20.9p EPS

Et voila : 33.8p EPS.

Are you doing a bit of private EPS adjusting ref last year's LTIP contribution?

Whatever, I totally agree that the market has over-reacted here. I'm hoping that the share mags will also do their homework properly, but I have my doubts.

Edit : No probs CR, see you over at CKN, MBY etc

[campbed] 16/2/2004 10:31

Last H2 2002/3 HPS showed adj EPS of 22.2p so adding that to H1 2003/4 adj EPS of 12.9p gives a FY 2003/4 adj EPS of 35.1p ( rather than Rivaldo's 33.8p)on a no growth in H2 worst case scenario. At 35.1p adj EPS and 240p share price that is a PER of 6.8

DYOR research etc but most of the retail sellers this morning need to learn to crunch a number or two IMO before they headed for the exit.

[cockneyrebel] 16/2/2004 10:20

Well we'll see.

I just don't see them as attractive at this rate but I hope you're right rivaldo.

Best of luck.

CR

[rivaldo] 16/2/2004 10:16

Brokers forecasts are on the basis of adjusted EPS. I repeat my earlier post: "No CR, you have to strip out the goodwill - they made £3.4m PTP compared to £2.7m last year."

Then take account of the seasonality of their results - only once in the last few years has the second half not been significantly better than the first half.

Even if EPS is flat from last year to this, HPS will then achieve 33.8p EPS this year, i.e a current year P/E of 7. This seems pretty reasonable to me based on no growth at all.

[cockneyrebel] 16/2/2004 10:09

ChrisG - give me a break LoL! Huge fan club?

I doubt I saw about 20 buys in this stock after I bought. Take a look - this stock was down 11p before I even posted on here.

Just doesn't interest me at this price. Yep, I know they have a lot of goodwill and amort.

But turnover up 2%, Pre-tax up from 0.7m to 1.3m - broker forecasts are for 9.2m, I can't see them doing that despit H2 being the better half.

These have to be fully priced at best surely? £43m market cap. I just can't see investors flocking to buy this story imo.

H1 results doesn't make me think they will meet let alone beat but nobody should follow anything I say, dyor and make your own mid up as i'm sure they will.

CR

[britishb] 16/2/2004 10:01

Results look good to me. If you look at the detail of the cashflow it`s fine (there are big seasonal working capital movements). I do believe ydderf wants your shares so be careful.

[crawford] 16/2/2004 09:56

The reason for the fall is not the in-line results, there was an expectation of better than expected results.

Nice to see an increased interim dividend, I think this shows the optimism in trading prospects. HPS should continue to recover IMO.

[chrisg] 16/2/2004 09:50

Oh, and ydderF, if you actually read the results this morning you will see the excellent cash position.

This is a seasonal business. Last year it made £13.7m positive cash flow from trading operations over the year. This was after an net cash outflow on trading operations of £19.6m in the first half. Now, as I say (as as results show) this is a seasonal business. If the first half cash outflow on operations in the current year is only £266,000 compared with £19.6m last time, you can only imagine what the annual positive figure will be. Assuming no improvement whatsoever in the second half, then just adding in the improvement from the first half to the actual second half will give a cash inflow from operations for the year of £36m. Now THAT is what I call a healthy business.

No grounds for shorting this one, as I see it, and certainly no grounds for personal remarks.

I'm off out for the day now.

[crawford] 16/2/2004 09:40

ydderF, how's the short on the Dow going?