Inspired Share Discussion Threads

[runthejoules] 31/3/2017 14:51

Good for you Big Fella, from one of those short term investors who should have sold the spike but was away. You never know why someone's selling. Unless I'm selling. If I'm selling that's because it's about to go up.

[the big fella] 31/3/2017 14:21

I had been invested for a number of years. Is that short term?

[hjs] 31/3/2017 14:19

Short term investors are taking profit. I am a long term investor and I can see the potential for this company to grow and reward investors who can wait.....

[the big fella] 31/3/2017 10:22

Well for once I sold near the top. If it fell back to the 13/14p level I would be tempted back again.

[cheshire man] 31/3/2017 09:59

Gives long termers a chance to top up tho :-)

[runthejoules] 31/3/2017 09:50

It's the curse of Midas' touch. DM article ramps share price in a good or promising company, when it falls again all the Maily Dailers rush for the door at the same time and it ends up lower than when it started. (See also SFR, PHE recently).

[mfhmfh] 31/3/2017 09:38

Can't believe share price has been reversing recent gains. I'm still holding and looking to add.

[diesel] 31/3/2017 09:17

Riv, agree, can't think of many companies with their track record, and a good divvy!

[rivaldo] 31/3/2017 09:06

I must have imagined that INSE for last year:

- increased PBT by 38%
- increased the dividend by 29%
- reduced debt by 21%
- increased EPS by 27% to 1.27p
- increased its order book by 14% to £28m
- now sit on a current year P/E of just 10.6 given the 1.5p EPS forecast

And INSE will benefit from the deregulation of the non-domestic water market which is beginning TOMORROW.

There are truly some desperate sellers out there :o))

[pj 1] 28/3/2017 11:28

Maybe after the break of 14p we will consolidate in this area for another 18 months? lol

[rivaldo] 28/3/2017 11:07

LOL runthejoules!

Interesting to read in that Shares Mag article that there are around a dozen acquisition targets in the pipeline - I'm guessing we won't have to wait too long for news:

"It has acquired seven firms since inception and has around 12 possible targets in the pipeline so all going well, growth seems a certainty."

[yump] 28/3/2017 08:48

1gw

I think your last post just about sums it up. ie. if the all the trends from year to year are in the same positive direction, that pretty much puts a stock way above loads of others, in terms of investability. I'm not sure its possible to do any better than that without doing your own head in !

[nurdin] 28/3/2017 08:44

I am playing blind :o)

[runthejoules] 28/3/2017 08:41

Great results, tipped again in Shares, falls 1.5%. I hate the stock market!

[runthejoules] 27/3/2017 23:37

I'll see your Panmure note and raise you a Shares article: hxxps://www.sharesmagazine.co.uk/news/shares/heres-why-we-remain-positive-on-inspired-energy

[rivaldo] 27/3/2017 23:02

A couple of points from Panmure's note today FYI....

Firstly, "Sharply rising energy prices are likely to drive demand for INSE’s services in our view. Electricity price volatility is at its highest level since 2003, and power prices have risen 30%+ over last 12 months."

Secondly, they already forecast 1.5p EPS this year, but "consider the strong order book growth as supportive to the possibility of upgrades to revenue consensus in due course".

Finally, INSE "trade on an unmerited c.20% discount to the market. Our 21p
target price suggests a 2017 PE rating of only 14x, an undemanding multiple for INSE’s strong organic growth, impressive margins, rapid deleveraging and high-visibility. The shares replaced those of SMS.L recently as our top-pick in the energy services subsector, after the latter doubled last year."

[1gw] 27/3/2017 16:15

I think one of the great things about INSE is the encouraging multi-year trends across a lot of the financial metrics, not just the "adjusted" ones. Basic eps, ops cash, pbt all look good, which you often don't see with companies which are growing by acquisition.

So as investors we seem to be in the nice position of trying to decide how good the company is rather than whether it is all smoke and mirrors.

[nurdin] 27/3/2017 16:01

I prefer to look at operating cashflow which does away with depreciation,amortisation and other non cash items. 2016 operating cashflow was £4.45m which compares with £1,73m achieved in 2015.

[valhamos] 27/3/2017 15:47

In my previous post for "customer lists" read "customer contracts". INSE do capitalise customer databases but not internally generated customer contracts and customer relationships.

[1gw] 27/3/2017 15:37

Valhamos - there isn't a lot of discussion on this board, so it's good to have something related to the business to talk about even if it probably isn't the most-obviously gripping aspect to most investors.

[valhamos] 27/3/2017 15:20

1gw

At risk of turning this thread into a discussion of intangibles and eps adjustments, the reason why there is a difference between software and other intangibles identified at acquisition is that internally generated software is capitalised (if it meets the criteria) whereas things like internally generated customer lists and customer relationships are not.

For some reason STC Energy did not capitalise software development (perhaps at the time it did not meet the criteria e.g. doubts about its commercial viability) so INSE ascribing £3m value is more akin to harmonisation of accounting policies and therefore the associated amortisation is normal in that it writes its own software off over its 5 year useful life.

Adding it to goodwill might appear to be one way of avoiding the issue but it merely adds pressure on the valuation of goodwill which is subject to impairment review.

[1gw] 27/3/2017 13:31

Valhamos - if you look at total amortisation (i.e. the £771k) of computer software then, as we have both said, the vast majority of that relates to past acquisitions. The exclusion of amortisation relating to the intangible element of past acquisitions is absolutely standard isn't it in the presentation of "adjusted" earnings? And if they hadn't allocated so much of the STC acquisition price to intangibles (which are then amortised), wouldn't it have just gone to "goodwill" which would be sitting on the balance sheet without any amortisation?

[yump] 27/3/2017 13:15

I tend to think that if a company wanted to give investors a clear comparison year to year, they could, although its not in the interests of the accountancy profession to make accounts clearer and easier.

[valhamos] 27/3/2017 13:12

Computer software whether internally generated or acquired diminishes in value over time and then requires further development or replacement.

Of the £771k 2016 software amortisation which has been excluded in arriving at the adjusted eps £600k relates to software acquired as part of the STC Energy acquisition in 2015 which is being written off over 5 years. I would say that was a normal business expense.

[1gw] 27/3/2017 11:52

I suppose with amortisation of the computer software and customer databases I think it's a question of whether they have been incurring "extraordinary" costs in these categories related to their recent acquisitions or whether there is a material ongoing cost of maintaining and developing them. I think it is reasonable to exclude amortisation of such costs from "underlying" numbers if the costs are largely transient while the business integrates the various recent acquisitions. I would agree it is not so reasonable to exclude amortisation of such costs if they are essentially expected to continue at this level.

On computer software, they added a relatively large £0.7m in 2016 "internally" (vs £0.1m in 2015). It is amortised over 5 years on a straight-line basis, so the £0.7m internally generated in 2016 would mean £0.14m amortisation (in addition to what is being amortised from previous years spend). So relatively insignificant compared to the £4m PBT.

On databases they added £0.38m in 2016, a bit less than they did in 2015. This is amortised over just 2 years, so the amortisation from this year's additions would have been £0.19m.

Combined, about £0.33m amortisation from this year's additions to internally generated computer software and customer databases, if I have the numbers right. Most of the amortisation excluded from the "underlying" numbers comes from the amortisation of recent acquisitions, which I think is reasonable.

On share-based payments I agree. I have never understood why these are sometimes omitted from underlying earnings numbers if such share-based payments are an ongoing feature of the company's business model.