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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Kinovo Plc | LSE:KINO | London | Ordinary Share | GB00BV9GHQ09 | ORD 10P |
| Price Change | % Change | Share Price | Shares Traded | Last Trade
|
|
|---|---|---|---|---|---|
| 0.00 | 0.00% | 42.00 | 26,818 | 08:00:24 |
| Bid Price | Offer Price | High Price | Low Price | Open Price | |
|---|---|---|---|---|---|
| 41.00 | 43.00 | 42.10 | 41.10 | 42.00 | |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Bldg Clean & Maint Svc, Nec | 63.2M | -548k | -0.0087 | -48.28 | 26.37M |
| Last Trade Time | Trade Type | Trade Size | Trade Price | Currency |
|---|---|---|---|---|
| 13:12:13 | O | 396 | 42.00 | GBX |
| Date | Time | Source | Headline |
|---|---|---|---|
| 25/3/2024 | 16:36 | UK RNS | Kinovo PLC Exercise of Options, PDMR Shareholdings & TVR |
| 11/3/2024 | 07:00 | UK RNS | Kinovo PLC Director/PDMR Shareholding |
| 08/3/2024 | 10:54 | ALNC |  Kinovo shares down but DCB Kent projects close to completion |
| 08/3/2024 | 07:00 | UK RNS | Kinovo PLC Update on DCB Discontinued Operations |
| 09/2/2024 | 09:02 | ALNC | Kinovo to meet revenue and earnings expectations; pens new contracts |
| 09/2/2024 | 07:00 | UK RNS | Kinovo PLC Trading Update |
| 28/11/2023 | 14:44 | ALNC | EARNINGS: Altitude swings to profit; Kinovo profit surges |
| 28/11/2023 | 07:00 | UKREG | Kinovo PLC Interim Results |
| 22/11/2023 | 07:00 | RNSNON | Kinovo PLC Notice of Investor Presentation |
| 07/11/2023 | 14:34 | ALNC | TRADING UPDATES: Kinovo expects revenue growth; Zotefoams sales down |
Kinovo (KINO) Share Charts1 Year Kinovo Chart |
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1 Month Kinovo Chart |
Intraday Kinovo Chart |
| Date | Time | Title | Posts |
|---|---|---|---|
| 05/4/2024 | 10:08 | Kinovo PLC - Specialist property services Group | 459 |
| 29/8/2023 | 11:11 | Kinovo - public sector housing services under the radar | 913 |
| Trade Time | Trade Price | Trade Size | Trade Value | Trade Type |
|---|---|---|---|---|
| 12:12:14 | 42.00 | 396 | 166.32 | O |
| 12:12:14 | 41.26 | 396 | 163.39 | O |
| 12:11:59 | 42.00 | 396 | 166.32 | O |
| 12:11:59 | 41.26 | 396 | 163.39 | O |
| 11:29:08 | 41.26 | 2,705 | 1,116.08 | O |
| Top Posts |
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Posted at 25/4/2024 09:20 by Kinovo Daily Update Kinovo Plc is listed in the Bldg Clean & Maint Svc, Nec sector of the London Stock Exchange with ticker KINO. The last closing price for Kinovo was 42p.Kinovo currently has 62,788,214 shares in issue. The market capitalisation of Kinovo is £26,371,050. Kinovo has a price to earnings ratio (PE ratio) of -48.28. This morning KINO shares opened at 42p |
Posted at 14/3/2024 09:17 by barnesian I've now watched all 54 minutes of the presentation and Q&A.The DCB fiasco certainly has the full attention of the management and they seem now to be on top of it. Eight projects have been derisked and the final one is a flat site project which is therefore less risky as there are no unseen construction faults as construction has not yet begun. All options for the final project are on the table including a early settlement without construction. As the Company is involved in negotiations on these options it is understandably cagey about disclosing figures. Overall I was reassured about the level of remaining risk which I judge to be small and manageable. What I don't still understand is how they got into this mess. I may have got this wrong so correct me if I have. In 2018 the Company was singing the praises of DCB Kent in their Annual Report. httxs://www.kinovopl Nevertheless, for reasons I don't understand, they decided to sell it to MCG Global in 2022 with guarantees on the execution of the ongoing projects. "MCG Global Limited acquired DCB (Kent) Limited from Kinovo plc (AIM:KINO) for £5 million on January 12, 2022. Under the terms of the consideration, £1.9 million will be payable on the successful completion of current projects, most of which are due in the calendar year 2022, £2.1 million will be payable on trade settlements relating to these current contracts and £1 million payable as earnout amount subject to DCB achieving £3 million profit before tax in 2023 and 2024 respectively." MCG was incorporated in May 2021 and went bust around June 2023 leaving Kinovo holding the baby with nine unfinished project with many hidden faults. I'm not clear whether the faults were caused by Kino before the sale or by MCG subsequently, or whether MCG was even a company with operations. Very odd. The management stated in the Q&A that the lesson they have learned is to stay out of the construction business and focus on their core business. I think there are many other lessons to be learned from this messy business! Be that as it may, I am reassured that the DCB liability is now under control and will continue to hold my shares. |
Posted at 13/2/2024 16:45 by dyor2 Am not too surprised by the pullback in Kino’s share price since the trading update. News on the core business was fine as expected, but (fairly or not) the DCB update has shaken sentiment and re awakened lingering investor doubts over management credibility on the eventual outcome of DCB completion costs. Kinovo is a thinly traded share, and that, coupled with what looks like one of the institutional holders deciding to sell out, lies behind the subsequent 30% share price pullback.Personally, I’m not too bothered by this. The £1.4m increased DCB costs aren’t particularly horrific and can comfortably be funded over the next few months from cash generated by the core business, and as the projects complete (8 of the 9 are now scheduled to be complete by the end of May), the scope for further nasty surprises will markedly reduce. But the big question for me is what Tim Scott plans to do with his 30% stake. It’s fairly obvious that in due course he’ll either use it to launch a renewed bid, or sell to another bidder. Maybe he hasn’t decided yet, but I’d be surprised if he doesn’t do either one or the other later this year. Under Takeover Panel rules the soonest he can come back with another bid is late March/April this year. If that’s what he decides to do, then if I were him I’d do it as soon as he’s allowed to, whilst the share price is depressed. If he’s going to sell to another bidder, I’d leave it until later in the year after the 2023/4 full year results, when the DCB picture will be pretty fully resolved and he can sell to a bidder on the prospect of say £7.5m EBITDA for 2024/5. But the bottom line for me is that I can’t see him staying with a passive 30% stake forever, and the only way he can get full value for the stake is either to bid again himself or sell to another bidder. So one way or another I’m guessing that the fundamental value of the core business will lead to a bid later this year. I think a number of PE houses would bid at least 7X EBITDA, and on forecast 2023/4 EBITDA of £7.5m that gives an enterprise value for the Kino core business of £52.5m, which is 84p a share. IMV that sort of multiple would significantly undervalue the core business (because at £7.5m EBITDA the business will be generating circa £7m free cash flow p.a., which is a 13% p.a. free chas flow return on a £52.5m bid value - very juicy for a PE bidder). But regrettably the current share price weakness would make it likely to succeed. In fact, FWIW, if a bid were launched right now then I think it might succeed at as low as 75p. We’ll see, and I’d love to be proven wrong and hold this share for the longer term despite the share price pullback. But I’m increasingly feeling like I won’t get the chance. |
Posted at 30/11/2023 18:18 by dyor2 Some sizeable buying today. I’m not surprised, because I thought the results presentation yesterday was positive in a number of respects. Crucially, management made it clear that for all practical purposes they think the potential for any further nasty DCB related surprises is now behind us. Five of the nine DCB construction contracts will be completed in December and a further two by the March 24 financial year end. Of the remaining two, they conformed that one has now been terminated with no further liability (due to the client going into administration), and although the final remaining contract might not be completed until early 2026, Kinovo’s liability is capped at the £860,000 value of its performance bond. In terms of estimated net cash costs to complete the various contracts, there was £1.33m remaining at the end of September. Obviously there may be some adjustments up or down to contract values as the various projects reach practical completion, but probably no more than a few hundred thousand pounds either way, and in terms of cash flow they say there is c. £960,000 of customer retentions on the projects which could be coming back to Kinovo following practical completion. So, as I say, the major DCB uncertainties do now seem to be behind us, and this should become fully apparent by the time of the full year figures.So investors can now start to look to the value of the underlying core business without the drag of DCB uncertainty, and the prospects for the core business seem stronger than ever. Three year visible revenues have grown to £157m, of which they say £66m should be booked in FY 24/5 (turnover was £63m last year). But this does not include any potential revenues from the multiple framework wins which Kinovo has announced. Management said yesterday that at present Kinovo has £72m of tenders out for direct award, and historically has won c.50% of its tenders. There is the potential for a lot more than this over the next few years as the framework clients continue to put work out to tender, and Kino seems to be in the sweet spot of having more potential work than it can handle and is bidding on service quality rather than price. Management stated during the presentation that they don’t need to bid on price (they say they were not the lowest price bidder on any of the new contracts they’ve recently won), and hence they’re confident of maintaining gross profit margins at c. 26%. going forward. Quite apart from the growth prospects, Bullen emphasised in yesterday’s presentation that the key to valuing Kinovo is the strong underlying cash generation of its business, and this should become increasingly evident next year. They should end the current financial year with a small positive net cash balance and in a normal year expect to convert at least 90% of EBITDA into cash, so IMV they should be generating £6m+ p.a. of cash next year, and obviously this will grow as EBITDA grows. They have high visibility of forward revenue growth, and gross profit margins seem sustainable. So in terms of capital allocation, they will clearly have the potential, if they choose, to pay a significant proportion of free cash flow as dividend in 24/5. As I’ve previously posted, all this seems to make the current market cap of £30m look way too low, and if the market doesn’t recognise this then Kino will look very vulnerable to a bid from a Private Equity fund or a competitor. Personally, I’m hoping this doesn’t come too soon, because I’d really like to hold this stock longer term. I can’t find many stocks with Kinovo’s combination of seemingly assured growth potential, high cash generation and low market value. But I guess it will depend on the attitude of Tim Scott with his 30%? He could in theory bid again once six months from his last bid have passed, though I think that’s unlikely - more likely at some stage he sells to another bidder? I’m hoping he’s going to be patient! |
Posted at 19/9/2023 17:55 by dyor2 Just want to say well done to Nick Slater for leading the opposition to Tim Scott’s low ball “offer”. Without Nick kicking up a fuss this might have gone through as a recommended bid at 56p. The real reason it didn’t is of course that TS (and the Kino Board) became aware after the bid approach announcement (largely due to Nick and other PI efforts) that TS probably couldn’t even get to 50% at 56p, and more importantly probably wouldn’t have got to the crucial 75% (where he could delist the shares) even for a bid in the mid 60s.It’s been a fascinating episode, and an illustration that private investors can make a real difference to the outcome of these sort of bids if they get their act together - and if Boards listen, so well done too to the Kino Board for listening to their shareholders. So what now? Obviously in the short term the share price has dropped back below the mooted bid price (though I noticed it was well bid around the 50p level in the closing auction today). But if it drops back much further that’s probably a buying opportunity, because we now know that TS was keen to buy the entire company at 56p with his own money, and he still has his 30% stake. I guess it will depend on what TS decides to do next. Personally I’d prefer him to go quiet and just stay a shareholder along with the rest of us for the next couple of years and hopefully see 100p plus share price in due course. But he must be feeling fed up, so I suppose he might choose to commit his stake to a third party bidder who would pay a much more realistic price? If I were him, I’d just wait and see what happens over the next six months or so and make a decision then. But I doubt feels at the moment like he needs any of our advice! |
Posted at 13/9/2023 07:08 by someuwin Kinovo plc("Kinovo" or the "Company") Decarbonisation Direct Award Kinovo Plc (AIM: KINO), the specialist property services group that delivers compliance and sustainability solutions, is pleased to announce it has received a direct award with an anticipated value of GBP4.8 million over 19 months through The Greener Futures Partnership's ("GFP") Decarbonisation Framework. This is Kinovo's first direct award following the Company's placement on the GFP Framework as announced on 22 May 2023. The framework comprises five housing associations and over 300,000 homes, representing 9% of the total social housing market. Kinovo's two sub-lots cover two of the framework's five geographic regions, namely London and the South and East of England. In March 2023, the GFP was awarded GBP40.4 million from Wave 2.1 of the Government's Social Housing Decarbonisation Fund, which will be match funded by GFP by a minimum of the same value. Total investment value of around GBP95 million nationally is currently anticipated by GFP under this framework between 2023 to 2025. Kinovo's direct award is to undertake whole house retrofit energy efficiency works compliant with PAS 2030:2019 and PAS 2035:2019 for approximately 200 properties. Works are due to start in September 2023 for an initial term of 19 months until March 2025. Following this and other recent direct awards and contract wins, the Company has invested further in its Renewables pillar, strengthening the team with three additional roles; a fully qualified Retrofit Assessor and Co-ordinator as our Retrofit Lead, alongside a Technical Co-ordinator and Retrofit Liaison Officer. These additions will provide further technical expertise and qualifications covering Domestic Retrofit, Domestic Energy Assessment and Green Deal Advisory services. David Bullen, Chief Executive Officer of Kinovo plc, commented: "We are pleased to have won our first direct award under the GFP Decarbonisation Framework, at a value of GBP4.8 million, and the latest in a series of new contracts and direct awards under our Renewables pillar. I believe Kinovo has all the qualifications, skills and experience to act as a "one stop shop" to support housing associations and local councils in meeting the Government's net zero carbon emissions target by 2050, alongside their objective for all social homes to achieve an EPC "C" rating by 2030." |
Posted at 01/9/2023 13:38 by farnesbarnes Welcome mark,They had a piece last week too on KINO thats worth a read. It is good to have balanced views, but should also question why Small Cap Life don't declare if they have a position or not in any stock they write about. Kinovo (KINO.L) - Potential Offer Kinovo…today announces that it has received a non-binding indicative offer from Rx3 Holdings Limited ("Rx3") which may or may not lead to an offer being made by Rx3 for the entire issued and to be issued share capital of Kinovo at a price of 56 pence per share, payable in cash. Rx3 and Tipacs2 Limited, (which holds c.29.89% of Kinovo's shares), are both ultimately owned by Mr Tim Scott. This is at very little premium to the share price prior to this news. Rx3 are keen to point out that the minimum price they can offer is even lower: Rx3 notes the announcement made yesterday by Kinovo in relation to its possible offer for the Company. It confirms that, ..., if Rx3 makes an offer for Kinovo, Rx3 is required to offer a price of not less than 40 pence per share So they appear to be setting shareholders up for the reality that it may not even bid at 56p. We suspect that the bid, if it comes, will therefore be somewhere between 40p and 56p and will be followed by them asking the board to recommend it. If they don't, then an EGM to remove the board? We expect lots of gnashing of teeth from shareholders who think the offer undervalues the company, and we have some sympathy with that, given the forward P/E is under 8. However, as Best of The Best showed, a 30% holder can easily force the issue if they really want to, and such companies rarely deserve a premium rating. If no offer is forthcoming, it is unlikely to be due to the price, but that Rx3 find something material in their due diligence. Given the issues in the past with DCB Kent, then this can’t be ruled out. As such, shareholders may be better off simply taking the current market bid and re-investing it into other cheap UK small caps, rather than risk a low-ball offer being pushed through, or some more contract issues appearing. |
Posted at 01/9/2023 13:02 by farnesbarnes You lot are just unsavvy, over-exuberant PI's according to the following piece from Small Caps Life (Don't shoot the messenger):Kinovo (KINO.L) - Possible Offer Potential bidder for Kinovo, Rx3, fill shareholders on their thinking about the pricing of any potential offer. On DCB Kent, they say: The exposure is therefore not a contract relating to £4.3 million but contracts equating to £18 million and until these have all been successfully completed and the £14 million expected receipts from DCB's clients actually collected, it will not be known whether the provision of £4.3 million is adequate. Indeed, this figure has already been increased from £4.3 million in the 2022 statutory accounts to £5.3 million in the 2023 statutory accounts, with this figure offset by a yet to be agreed claim against DCB's structural engineers of £1.0 million. On the market value of the shares versus the minimum offer of 40p: Despite Tipacs2's significant support in the placing of Western Selection's holding, Rx3 understands it was a protracted sale process, taking several weeks to place the remaining shares. Tipacs2 was prepared to pay a premium to what it regarded as the real market value at the time in order to maximise its strategic holding at 29.89%. The difficulty that Western Selection had in selling down its c.12.0% stake, even with Tipacs2 taking the maximum amount of the order that it was able to accept, clearly demonstrates that the current share price does not reflect the true market value for a significant seller of the Company's shares. Basically, they are telling other shareholders that they have bid the value of the shares up too high, given the major contract risks that remain, and the illiquidity of the shares. The point they are making is potentially valid: that they chose to overpay for the shares at 40p to obtain control, that no one was particularly keen to take the rest at 40p in July this year, and that the only thing that has changed since then is a certain amount of private investor exuberance for the company developing on Twitter/advfn. For example, there were results in July and a couple of framework announcements, but these didn't really seem to move the price. However, this misses that the overhang itself seemed to cause the drop down to the low 40s, and the share price was approaching the current level prior to that. So, although 40p may be the clearing price for a large stake, the clearing price for the smaller investors that they want to vote for their deal is around 50p. Individual investors like us can often be the least savvy investors, especially when it comes to assessing risks within a business. However, if Rx3 don't want to bear the risks of DCB Kent's contract guarantees, then they don't have to make an offer for the whole company. But likewise, if the largely PI shareholder base is happy bearing these risks, then they don't have to accept the offer. Presumably, the 56p mooted price was calculated as a 40% premium to the 40p price they bought at last month, which may be reduced as they do their due diligence on the current state of the DCB Kent contracts. So despite the partial logic of the Rx3 position, this bid as a scheme of arrangement looks doomed to failure. Rightly or wrongly, smaller investors simply value this company more highly than Rx3 does. Rx3 probably realise by now that they won't get the 75% for a scheme of arrangement too and will have to make a normal offer if they want to proceed as they also said the following in their announcement: Rx3 has not determined whether any offer, if one is made, will be made via a scheme of arrangement or a contractual offer, and Rx3 is considering all options available to it. In the event any offer is made via a contractual offer and is successful, any remaining minority shareholder should be aware of the implications of being a minority shareholder of a company under majority control and the control such a majority shareholder would have. This is obviously the stick part of their attempt to get shareholder compliance. If they get more than 50% either from those accepting the offer or by buying in the market at or below the offer price, then they could make some aggressive moves. The first is probably to remove the board and put in their own representatives. There is no dividend to cancel here, so that is unnecessary. But they could have a large rights issue, thus forcing the holdouts to put in a lot of extra cash so as to not to be diluted out of their position. If they get to 75% acceptance, then they will delist, of course. They will also have to bid without the current board’s consent, as on Friday, the company announced that: The Directors have concluded that if the Possible Offer of 56 pence per share was made by Rx3 they will not be recommending it to shareholders. The Directors have undertaken a process of consultation with certain key shareholders and considered direct shareholder feedback in reaching this conclusion. Larger shareholders that can easily put in a few million pounds more to back their position, and are willing and able to hold a delisted stock for as long as it takes, may then be able to find out whether their assertion that this is worth much more than the mooted offer price is correct. Everyone else may just end up capitulating to a hostile offer eventually. The other thing to consider is what Rx3 may do if they don’t choose to bid or a bid fails to get 50%. They may just keep holding, but with the price still above what they consider fair value for a non-strategic stake, they may just flip the shares they bought at 40p for a nice turn. Especially since their DD on DCB appears to have yielded a worse situation than they initially thought. If they choose that route, it is unlikely that the non-institutional shareholder base could absorb all the selling and still see the price rise, and with the share price becalmed in the 40s for a couple of years, most will have got bored and moved on. They may even be able to buy back more sub-40p at various points when equity markets are weak. Come 2025, the risks of DCB Kent's contracts will have been resolved, and they may be able to make the offer again at the same price with lower risk. All in all, this doesn’t seem to be a great situation for anyone. |
Posted at 27/8/2023 10:45 by dyor2 I’ve been doing some research into Tipacs2/Rx3 and their ultimate controller Tim Scott. I’ve concluded that he’s a serious and extremely competent businessman, not a financial speculator, and probably really does want to acquire 100% of Kinovo rather than “turn” his 30% stake. IMV he won’t succeed with a 56p offer, but could well afford to increase the offer if he chose to. But whether he will or not, I have no idea!Tim Scott is a 73 year old Jersey resident who built and owned (via a family Trust) a substantial Combined Heat and Power (CHP) business called ENER-G Coven which he sold to Centrica for a reported £145m in 2016. In addition, he built (and his family Trust still owns) a major biogas and landfill gas project operator called Ylem Energy which had 2022 sales of £27m and which has installed over 150 megawatts of gas-to-energy projects - the majority in the UK but also in Poland, Mexico and South Africa. A search through Companies House and Jersey financial records indicates that Mr Scott’s financial structures are highly sophisticated from a tax point of view but legitimate. He seems to employ reputable and competent advisers, and for the putative Kinovo offer he is being advised by Zeus Capital. The Jersey company through which he has made the indicative offer (Rx3 Ltd), is owned by his family Trust and was incorporated on 28 June 2023, the same day that Tipacs2 (also owned by his family Trust), increased it’s stake in Kinovo to just under 30% following a share purchase at 40p from Western Selection. I estimate that his average purchase price for the 30% of Kinovo he already owns is a little under 25p per share, taking account of earlier purchases prior to his most recent purchase at 40p. If he began discussions about bidding for the rest of Kinovo immediately after his last purchase in late June (the incorporation of Rx3 at that date suggests that), then a possible bid at 56p must have seemed to be a reasonable premium to the then 40p share price. He will have also seen that it was actually quite difficult to place the rest of Western Selection’s share stake at 40p (I know because I took part in the placing, which took several weeks to complete). I can therefore see how he and his advisers might have concluded that a 56p bid would have a good chance of success. However, the Kinovo share price subsequently rose towards 50p, and his advisers likely underestimated the strength of the substantial retail client shareholder base in Kinovo. The Takeover Panel will only have allowed discussions with major institutional shareholders (and possibly Nick Slater with his 5%?) prior to the bid approach announcement last week, and I imagine that the major institutional shareholders (representing 15% or so?) were in favour of the bid (though I imagine that Nick Slater, if he was consulted, was vociferously against!). It’s only following the announcement last week that Kinovo has been able to receive the views of retail shareholders (including myself), and I think they have been pretty unanimous in their rejection of a 56p bid. This leaves Mr Scott/Rx3 and his advisers with a problem. I think they would much prefer to bid via a Scheme of Arrangement rather than a conventional offer, because a Scheme of Arrangement would give them 100% control whereas there is always the risk of a 10% hold out minority with a conventional bid. But a Scheme of Arrangement will need the Kinovo Board to recommend it, and it also needs a 75% vote in favour. Mr Scott’s trust could not vote their 30% on such a vote (because they are the bidder), so if 20% of Kinovo’s shareholders voted against then the Scheme couldn’t pass ( because 20/70=29%). And informal chat amongst Kinovo retail shareholders already indicate that there are at least 20% saying they would vote against. So what now? Well, firstly, Mr Scott’s trust could increase the 56p offer if they really do want this business. It appears that they certainly have the financial resources to do this if they choose to. And although Kinovo’s statement last week said that Rx3 had indicated that 56p was their final and highest offer, the statement was expressly issued without Rx3’s prior approval, which I think under Panel rules means Rx3 will not be bound by it. Alternatively, Rx3 can pursue a conventional bid at 56p. I think if they were to do that then, sadly, they would have a good chance of getting to 50% control - because Tipacs2 could accept with their 30% and the 15% or so Insitutional holding plus odd and ends would probably take them over 50%. But the problem with this is that Rx3 would then run the risk of a 10% minority “hold out” which they couldn’t automatically buy in, so they’d have 50%+ control but might have to live with minority shareholders - and Mr Scott doesn’t seem to me to be the sort of guy who wants to live longer term with pesky minority shareholders. Alternatively, of course, Rx3 could simply drop the bid. I think they might possibly do that, but there’ll never be a cheaper time to buy Kinovo than now given Kino’s growth prospects, so what would Mr Scott do with his 30% stake then? He could keep it as a long term investment, or maybe he would consider selling to another bidder? I think there would be no shortage of alternative bidders who would pay more than 56p, particularly as time passes and the remaining DCB projects are completed. And in this respect there’s a little detail deep in Kinovo’s web site which was pointed out to me over the weekend which I’ve been puzzling over. If you go to the “Possible Offer” section and look at the email text of a Section 2.11 notice of the offer to shareholders, you’ll see that in the penultimate paragraph it says that “there can be no certainty that Inflexion will proceed to make an offer for the Company”. This is almost certainly a typo mistake as the reference to Inflexion appears nowhere else in the documentation. But coincidentally Inflexion is a large Private Equity buy out fund. I wonder whether this mistake is significant? |
Posted at 19/7/2023 16:22 by dyor2 So it looks like that’s the last major seller cleared out. FWIW I bought 400,000 of Western’s shares at 40p, increasing my holding to c. 2% of the company. At 40p Kinovo is capitalised at c. £25m, and that seems good value to me. When I’m looking at share prices I try to ask myself whether I’d want to own the entire business at that valuation, and that’s how I look at Kinovo (certainly not intending to bid though, can’t afford it!). Anyway, the core business made £5.5m EBITDA last year, and looks on target to increase to well over £6m this year. The nature of the business is capital light, so in a normal year Kinovo should generate at least 90% of its EBITDA as free cash flow. A substantial proportion of this year’s free cash flow will be utilised in completing the remaining DCB contracts (7 of the 9 are already on site and scheduled to be completed this financial year), but nevertheless I would expect Kinovo to end the year in a small positive net cash position. Thereafter it will be a “clean” business generating over £6m p.a. in free cash, with strong growth prospects.There are several interesting aspects to the business. Firstly, it has £146m of the three year visible revenues from its existing contracts, 98% of which are recurring, and £64m of which are expected to be recognised in the current financial year. This is more than last year’s total revenue of £63m, so any new contracts would lead to significant revenue growth. Secondly, the majority of its contracts have price index linked clauses. Thirdly, the markets in which it operates (regulation, regeneration and renewables for local authority and housing association housing) appear to have substantial growth prospects due to more stringent regulatory standards, the urgent need to update aged housing stock, and major new central government funding. For example central Government earmarked £778m in March this year of new funding for local authority work in this area, and some £140m of this falls within Kinovo’s existing client base. There are several other such new funding programmes, and Kinovo seems to be in a strong competitive position due to its leading position in accreditation framework agreements, and the depth of its technical expertise compared to some of its competitors. The company is currently bidding on a significant number of new contracts, and I’m hoping that a number of wins will be announced over the next few months. One final point about the business is that despite the enormous clanger they dropped with the DCB disposal I do rate them highly in the management of their core business - it’s impressive that they managed to increase revenues by 18% and EBITDA by 29% last year despite the huge distractions of extricating themselves from the DCB debacle. Tipacs 2 have taken the opportunity of the Western Selection sale to increase their holding to just under 30%. IMV they are a well informed and shrewd investor rather than a potential bidder. I think their 30% stake should protect Kinovo from an opportunistic low ball bid in the short term, but medium and longer term I’d guess that they will be looking to sell to a bidder once the business is finally free of the DCB contracts and they can obtain a full valuation for the underlying business. This market is attractive to private equity buyers due to its growth and cash flow characteristics. For example last year Sureserve was taken private by Cap 10 partners in a £214m deal, on a p/e of 13 and an EBITDA multiple of 9. Applying a similar valuation to Kinovo on conservative assumptions of £6.2m EBITDA in the current financial year would give Kinovo a valuation of £54m, i.e. 90p per share. So that’s the sort of exit price I’m hoping for, maybe some time during the second half of 2024 once the 2023/4 results are out. Though I guess if the results and growth prospects are strong enough by that time then Tipacs (and indeed the Board) might decide to hold out for longer for a higher price? Well, we’ll see and of course I could be hopelessly wrong about all of this, but the above is why I’ve bought more shares. |
Posted at 19/5/2022 14:16 by dyor2 I’ve been trying to look past the anger and mystification we’re all feeling at the DCB debacle, and the resultant collapse in the share price, to work out what Kinovo might out actually be worth in enterprise value. And my overriding feeling is that the underlying core business is worth very substantially more than any potential liability under the DCB guarantees. The core business made EBITDA of £4.2m in the year to March 22 and generated cash of over £500,000 per month. Kinovo had net cash of £0.4m at the end of April, despite having paid out £3.7m to DCB. Cash generative, and operating in a growth market, I’d say the core Kinovo business is worth a minimum £30m (7x EBITDA) to a private equity buyer, and possibly significantly more to the right trade buyer. Set against this, I can’t see the DCB guarantees resulting in a further liability of more than £10m, and possibly significantly less. It depends on the nature and enforceability of the guarantees and the state of the underlying DCB contracts, but the outstanding contracts can’t be much more than £20m now at original contact value, so even if it costs the end clients up to 50% more to get them completed and they can reclaim all of that from Kinovo in due course (both big “ifs”), that’s not more than £10m.So I just can’t foresee circumstances in which the value of the underlying business doesn’t very substantially exceed any potential liabilities relating to the DCB guarantees - to an extent that makes the present £7.5m market cap seem way too low. But getting that value reflected in the share price is another question. There’s also the problem that the year end audit is underway, and the auditors will want comfort that Kinovo can fund any likely DCB contract liabilities, as will Kinovo’s bankers. Capping the DCB liabilities would be a good start, even if it requires a share issue to fund a pay out to the DCB end clients. But with multiple end clients and complex contracts it might not be practicable to negotiate a cap in the short term, even if the liability ultimately turns out to less than investors currently fear. So what about soliciting a bid for the whole of Kinovo? The problem there is I can’t see anybody bidding for the whole of Kinovo while the DCB liabilities are uncertain, much though they might want the underlying business. Selling the underlying business? Not really a solution, because you’re left with a £30m+ cash shell which can’t distribute the cash until the DCB liabilities are sorted out. Hmm…..my best guess is that they’ll provide for a substantial (say £5m) potential DCB liability sum in the forthcoming full year figures, say that they hope it’ll be less than this, and do a quick ordinary share placing to raise £2m or so to give the bank and auditors comfort (£2m or so is the maximum they can raise at the current share price from a quick ordinary share placing without getting shareholder approval). This won’t be ideal, because it won’t give investors certainty on the DCB liabilities, but hopefully they’ll be able to give enough information on the potential liabilities and how they got into this mess in the first place, for investors to support it. Particularly if it’s accompanied by a strengthening of the Board, which I imagine the major shareholders will be insisting on. But I do have an alternative suggestion, which Kinovo and their advisers can have for free if they’re reading this board. It’s to issue £5m worth of convertible preference shares, convertible into ordinary shares at 20p, with a coupon of 9% and redeemable at par at the company’s option at any time after three years. This would provide a substantial equity cushion to cover any DCB liabilities, give the auditors and their bankers a lot of comfort, and it would minimise dilution for ordinary shareholders. I’d certainly subscribe for a substantial slug of such an instrument, because it would have first priority call (above ordinary shareholders) on the equity value of the underlying Kinovo business, the coupon would be attractive and easily funded from cash flow, and effectively investors in it would be getting a free option over ordinary shares at a price well under what they are likely to trade at when the DCB liability is eventually sorted out. The three year timescale before Kinovo could redeem it would give plenty of time for the DCB liabilities to be sorted out and for this to be reflected in a (hopefully) substantial uplift in the ordinary share price, which would result in the pref investors converting into ordinary shares before the end of the three year period. I’d get these pref shares quoted to make them even more attractive, and offer them to ordinary shareholders on a pro-rata basis, with a few major ordinary shareholders underwriting any not taken up. Canaccord, if you’re reading this, you’ll probably think WHAT??? But think about it - sometimes complex situations need creative thinking! |
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