Inspired Share Discussion Threads

[1gw] 16/5/2019 09:44

Presumably the risk of a Corbyn government and the talk of renationalisation of the energy industry if there is doesn't help sentiment here. Anyone who's valuing the company on a probability-weighted basis must have upped the probability of that particular downside case over the last couple of months, don't you think? Even if such a plan starts with the network rather than the supply arms, there must be concerns about what happens upstream.

[wanttowin] 15/5/2019 10:54

Added a few more today, I have no idea why we are down here ??

[rivaldo] 14/5/2019 09:33

Peel Hunt reiterate their Buy and 25p target price:

[wanttowin] 01/5/2019 11:13

Added a few today.

[winnings1] 19/4/2019 18:20

Yump - You need to ask INSE as to what they can do to reduce the energy bill for your business. You might get a pleasant surprise. INSE is well established and well respected, not a start-up nor a fly by night.

[yump] 19/4/2019 16:12

I don't think there's any question over the quality of the accounting standards. The debate is partly around the grey area of the value of amortised intangibles and the lifetime over which they are amortised.

The fact that there is any debate at all, is a reason why INSE might not have the rating it apparently deserves. Add to that the general 'issues' around energy companies and in a smallish business that is probably enough to hold it down.

I am called every few days by people offering to manage my energy buying for my business. That I think puts the business model into a category that's not entirely attractive, whether the sun shines out of INSE or not.

[winnings1] 18/4/2019 20:00

In my view INSE is an honest outfit, is progressing into a large company, and has high accountancy standards.

[valhamos] 18/4/2019 19:14

You might want to look at INSE last set of published accounts for 2017 on their website for their accounting policies on goodwill and intangible assets. Also note 8 of the recent 2018 results RNS - there is no charge to P&L for goodwill. Hence there has been no impairment and certainly no amortisation because that is contrary to accounting standards.

[winnings1] 18/4/2019 18:59

What is the difference between 'writing down' and 'impairment' of goodwill?

[valhamos] 18/4/2019 18:31

winnings1 - companies do not amortise goodwill (but it is subject to impairment review). On acquisition the company has ascribed value to certain intangible assets, and because they have a finite life they are amortised.

rivaldo - "They won't worry about sunk acquisition costs or amortisation." On that basis they won't worry about capital expenditure or depreciation either. In fact they won't concern themselves with any expenditure prior to their analysis because it is "sunk". I hope you will see that is nonsensical. An acquiror is interested in understanding the financial dynamics of the business - how much return on investment the business generates. You cannot construct a future by ignoring how the business works in the present.

INSE exclude amortisation relating to computer software and customer intangibles if they are acquired in an acquisition but not if they are purchased. That needs more explanation that the accounts afford.


INSE was a very successful investment for me from 2012 to 2017 when I sold at 17p. However in 2014 basic eps was 0.59p and adjusted was 0.64p, in 2018 adjusted eps has increased two and half times to 1.61p yet basic eps is still 0.55p. This suggests that the adjustments are not all that they seem. The fact that company accountants and analysts both spin the same story does not make it right.

[rivaldo] 18/4/2019 14:48

IMO the adjusted EPS is the true measure of the profit the business is making. What will an acquiror look at when they survey the business? They won't worry about sunk acquisition costs or amortisation. They'll be looking at the core continuing cash flows and profitability of the ongoing business, in conjunction with the Balance Sheet, where the consideration for the acquisitions will be reflected in the cash/debt and/or in the share capital.

Which is reflected in the adjusted EPS (and cash flow statement) showing what the continuing business is earning. And which is what a forward-looking investor should be concentrating upon.

[1gw] 18/4/2019 14:04

It's normal amortization of acquisition intangibles that accounts for a lot of the difference between statutory eps and adjusted eps isn't it? They book all the new revenue from the acquisition in the adjusted number but without any share of the purchase cost. That might be ok for a one-off big acquisition with rapid amortization, but it's perhaps a bit more questionable when the business model seems to involve a never-ending stream of acquisitions. They paid real money or issued real shares for the acquisitions so there's a reasonable argument for factoring in the costs to the main earnings number isn't there?

[winnings1] 18/4/2019 13:46

Yump - A growing company buying out other companies operating in the same field and thereby growing its EPS is doing the right thing by annually writing down part of the goodwill and add back takeover expenses. The realistic figure for EPS has to be one that excludes takeover expenses and goodwill write-downs.

[yump] 18/4/2019 09:27

Its used selectively depending on what case you want to make.

[rivaldo] 18/4/2019 09:09

Yep - the core measure used by all the analysts.

[1gw] 18/4/2019 08:19

Adjusted eps?

[rivaldo] 18/4/2019 08:16

Current forecasts are:

this year: 1.8p EPS, 0.7p dividend
next year: 1.91p EPS, 0.8p dividend

That's a current year P/E of 9.4 and a 4.3% dividend yield.

Incidentally, the Corporate Division provides 84% of revenues now, with INSE having a £53m Corporate Order Book and £26m secured 2019 revenues relative to last year's total £32.7m group revenues.

[ygor705] 18/4/2019 02:34

Big turnover after hours ..... should be an RNS out soon on this level of turnover

[yump] 17/4/2019 23:30

Better off buying a cheaply rated business that hasn't got vast exceptionals and adjustments. They're not that difficult to find.

That's probably the reason for the 'cheapness' here. Plus the smaller businesses in retail energy going bust. Plus the business model - there's no real USP unique to INSE, just as there isn't to a double glazing business.

[riverman77] 17/4/2019 17:20

Yes certainly cheap - I've got a few others in my cheap basket that I think run it close - DGOC, RFX, OSB, NAH and AFHP. All on single digit PEs while generating good profit growth (with the exception of NAH which is not currently growing but is about to, in my view).

[winnings1] 17/4/2019 17:13

At 16p cheapest stock on the market. Please step forward anyone who disagrees.

[brucie5] 17/4/2019 16:13

Picked some up for an income folio. Good dividend, well over average, and raised by 18%.

[rivaldo] 17/4/2019 12:25

Whoa - 10.2m shares traded in the last 10 minutes. Hopefully the closure of an overhang.

[1longshorts] 15/4/2019 15:42

thanks rivaldo. A good time to buy more I suppose. I don't just have the necessary at the moment.

[rivaldo] 15/4/2019 15:25

When the share price reached 25p it fell back when an institutional seller dripped out stock over time to take profits, when at the time the resulting share price fall seemed overdone/unexplained. I suspect that there is again a seller (or sellers) out there whose position is (for them) relatively small and which they simply want to get out of.