Johnson Service Share Discussion Threads

[snobtimus shaime] 16/8/2009 12:46

i meant JSG :) typo!

[cockneyrebel] 16/8/2009 12:42

Look forward to reading it chrysippus. I've held these for some while now on the basis that there looks like huge potential value here. Of course that is just 'potential' but I'm hoping that the results show the management starting to realise that potential now.

CR

[chrysippus] 16/8/2009 11:53

SS - Thanks, appreciated... who are KSG mgmt?

I'm using JSG as as test company (with my money where my mouth is) to see if analysis of public domain info can have predictive power... and I'm enjoying it (sad, huh?).

Unless John Talbot is very different to what it says on the tin then it's reasonable to use the public statements of the co since Dec 2007 as genuine and honest accounts of an unfolding strategy.

My experience of 'side by siding' the various documents is of just this: here is a co with an unambiguously clear strategic framework that has taken its hit, made the tough decisions and handled some pretty brutal writedowns.

It's paid the price in disposals and dilution and the beneficial results of this will be seen either in these interims or in the 2009 finals. My money's on these interims, and I'll explain why when I post later.

So, two questions. First, do you trust the management (to mean what they say and get the job done)? For now, I do.

Second, if they mean what they say and are getting the job done, is there value in this company not yet reflected in the sp?

I think a case can be made that there is and I'll show a bit more of it later.

I'm no professional analyst, so DYOR NAI etc etc

Best wishes

Chrysippus

[snobtimus shaime] 16/8/2009 11:36

KSG mgmt should hire you as a consultant. Impressive analysis

[chrysippus] 16/8/2009 11:34

Katy/ CR/ jhigylen -

Useful clarification, good discussion. Thanks.

Now, to start the next week off with some more thoughts about JSG:

Q. What do you get if you cross unfocused management, disastrous IT procurement and a finance department swimming without its trunks on?

A. JSG in 2006.

Since the response to the analysis above about the prospects for the interims, I've been trying to develop a bear case. This was particularly in the light of Master RSI's comment that the 'numbers may be optimistic'.

Which got me to thinking about normal and adjusted profits, and how these have been treated by JSG. I was thinking that maybe I was comparing apples and pears by just looking at the operating profit of the divisions and perhaps ignoring some other factor.

A similar thing happened recently when Rainmaker's (absolutely reasonable) view of UNIQ's interims were blown away by 'exceptional items'.

So, I wondered what a look at the Annual Reports for 2007 and 2008 would show about divisional profits, exceptional items and group profitability?

It's very interesting.

And, I think, pretty bullish.

Not written it up yet - should be ready to post later tonight or tomorrow.

Thanks all for an interesting first week of the thread. Nice atmosphere and high quality comments for this interesting share imo.

Maybe it's gonna pay to buy British this autumn?

Best wishes

Chrysippus

[katylied] 15/8/2009 14:30

jhigylen... Thanks, that confirms it. I did look for the prospectus, but couldn't find it online. As you note, your link (though apparantly not the prospectus), does have the expiry information in para 4(b). Good. Nul problemo...

CR - No worries...

[cockneyrebel] 15/8/2009 14:14

OK Katy, sorry - have been using the other thread up until recently and missed the start of the issue.

CR

[jhigylen] 15/8/2009 14:09

Re Share Issue

See Notices of Special and Ordinary Resolutions (covering inter alia, the authority to issue new shares)-



The Special and Ordinary Resolutions passed at EGM on 4th July 2008

Authority to issue shares lasted until the next following AGM, which was 7th May 2009

So no overhang relative to shares in that authorisation that remained unissued by 7th May 2009

[katylied] 15/8/2009 13:49

CR - I think you have missed the point of my original question.
What you say is quite true, just not relevent. The shares in
question, have never been issued. My question concerned
whether the authorisation to issue had expired...

[cockneyrebel] 15/8/2009 12:22

Ok but any stock overhang whoever has it doesn't have a set limit that the shares cannot be sold at, as much as they may have been the original intention of the holder, events change.

JSG has been held back by an overhang but I expect this to clear as the results approach. The spread has been putting people off too but I think that's going to narrow too. Up untill now the seller has wanted more than the market would pay - now the market is paying a level that the seller is hapy to sell at. If the results match up to expectations that stock will go on the results if it doesn't go before imo and the breakout is saying 'before' imo.

CR

[katylied] 15/8/2009 09:55

CR - The open-offer was not underwrittem....

[bluesky1st] 15/8/2009 08:59

cheers for your thoughts chaps

[cockneyrebel] 14/8/2009 18:52

Why can't that other 20% reach the market sub 20p Katie-L?

There's no rule that an underwriter can't take a hit. In my opinion it's that stock that's held this back and if nearly gone JSG will be motoring on th results imo.

CR

[chrysippus] 14/8/2009 18:19

Bluesky -

Done lots on that very question recently - see posts 22, 45... and 55 :)

Katylied - appreciated, it was a good question (and well remembered - you were right that there was a 10m undersubscription but not on the institutional placing, just on the open offer). I'm pretty sure the Annual Report has to contain a full account of shareholder authorisations and I've been through the whole section and the numbers above are all that's there.

Definitely a lot of shares out there at 20p, though...

Heavy selling at the end of the day today if ADFVN is right. Encouraging that the price held.

Best wishes

Chrysippus

[katylied] 14/8/2009 15:47

chrysippus - Thanks for that. The open-offer surplus was ~10million shares. Seems clear now they were never issued. My concern was that they might still be authorised for issue (at 20p). Probably not. Shareholder authorisations usually expire within 1 year (max) anyway. Still, alot of shares out there at 20p. Remains to be seen, just how much resistance there may be...

[bluesky1st] 14/8/2009 13:40

Any thoughts on what we are expecting from the interims due on the 9th September please ?

[chrysippus] 14/8/2009 11:12

Hi KatyLied -

Re your comment about the 20p shares and the under-subscription. You got me thinking about the situation with respect to past and potential dilution and whether there is a massive overhang somewhere. I don't think it's 'out there' for any particular corporate reason.

Here's what the horse's mouth says from the 2008 Annual Report (p. 76)


"Placing

On 11th June 2008, the Group announced a conditional non pre-emptive placing to institutional and other professional investors of 150,000,000 new Ordinary Shares at 20 pence per Ordinary Share. The placing duly completed on 7th July 2008, raising £30 million (£27.8 million net of expenses). The placing represented approximately 252.2 per cent. of the existing issued share capital of the Group as at 11th June 2008 and approximately 71.6 per cent of the issued share capital of the Group post placing.

Open Offer

On 6th August 2008, the Group announced that it proposed to raise up to approximately £10 million (£9 million net of expenses) by way of an open offer made to qualifying shareholders and warrant holders of up to 49,945,035 open offer shares at the issue price of 20 pence per open offer share. The principal reason for making the open offer was to provide qualifying shareholders an opportunity to invest in the Group at the same price at which the placing share were issued and to mitigate the dilutive effects of the placing. The minimum pro rate entitlement of qualifying shareholders and warrant holders under the open offer was calculated on the basis of 8 open offer shares for every 10 Ordinary Shares or entitlement to 10 warrant shares (as the case may be) held.

The open offer duly completed on 8th September 2008, raising £8.0 million (approximately £7.2 million net of expenses). The 39,828,824 shares issued as a result of the open offer represent approximately 19.0 per cent of the existing issued share capital of the Group as at 6th August 2008 and approximately 16.0 per cent of the issued ordinary share capital of the Group post open offer."

I'm not an expert, so it's just an opinion I think this means that the placing ('to institutional and other professional investors') at 20p got away fully subscribed (raising £30m gross = 150m/20p) and there was a subsequent open offer so that non-professional investors could 'mitigate the dilutive effects of the placing'. It was this that was 20% undersubscribed. I don't think this means they exist anywhere to come on the market, simply that they weren't issued.

From the same Annual Report (pp. 76 - 77) the whole story of the shares is told. To summarise:


Issued shares 249,302,482
Potentially exercisable in incentive or share schemes 15,221,923 (this is the theoretical maximum and many not exercisable until 2011 onwards or on achievement of stable share price increase)
Warrants to banks (issued during debt renegotiation April 08) 2,957,636

This makes the theoretical maximum issued shares now 267, 482, 041.

Basically, for the purpose of considering JSG as an investment, it's reasonable to use the 250m number as a rule of thumb that will rise as warrants, incentive schemes or saving schemes are exercised but probably only very gradually (e.g. in 2007, 350k were exercised, none in 2008).

You might think both the banks and the option holders will probably wait to exercise until the share price is higher than now.

As usual, if anyone else can take a look and see something different, please post.

2008 Annual report -



Best wishes

Chrysippus

[master rsi] 14/8/2009 09:41

The 50K buy has put a MM on the bid 18.50p, though the offer has come down to 19.50p and that make it more interesting as the spread can be too large some times.

[5dally] 14/8/2009 08:53

Nice finish to the week here folks :-)

[stnick] 14/8/2009 08:50

looks like the bid just moved up to 18p... starting to move again

[busthief2] 14/8/2009 08:27

Also remember different rules apply to the AIM before they were with the big boys....?

[katylied] 14/8/2009 08:23

"...there won't be much price memory in the market after a year...

Hmmmmmm... Hope you are right, but not so sure about that. By the by, the last 20p placement, the open offer, had 80% takeup. It was not underwritten. So what would have happened to the other suthorised 20% (~10m shares). Presumably, they cannot reach the market for less than 20p? Never quite been clear, as to what happens to surplus shares, in cases like that. Anyone know?...

[chrysippus] 14/8/2009 08:13

Morning -

Nice start definitely into breakout territory if it holds.

I'm thinking the bit of 'resistance' in the chart around 20p won't have that much impact since their won't be much price memory in the market after a year.

Also interested to see if the volume stays up.

One of those shares that has those vertical drops - be interesting to see how the rerating happens in the coming weeks and months.

Best wishes

C