Leeds Share Discussion Threads

[arthur_lame_stocks] 14/10/2005 10:47

CR

This is a post I just stuck on the Fool which is my rough take on it.

Leeds Group have just announced the disposal of their leasing business to Bibby Asset Finance Ltd for 3.7m in cash. Bibby will also assume the 1.35m inter company loan which is repayable on completion of the disposal.

So in total it appears that Leeds Group will be paid 5m in cash if the disposal proceeds.

The net assets of Leeds Leasing at 30 Sep 2004 were 3.85m so the disposal is at a slight discount to NAV.



The curret market capital of Leeds Group at 15p is about 5.5m pounds.

Following this disposal the balance sheet should also be transformed as almost all of the group's debt is held by Leeds Leasing.

At the last set of results Leeds group had total external debt of 14.5m of which 13.5m was held by Leeds Leasing. The holding company had 1m in net cash and the remaining operating company, Hemmers in Germany had 2m in unsecured debt.



It appears that since this time the holding company has lent Leeds Leasing a further 500k so presumably if the full 5m is received Leeds Group will have approximately 5.5m in cash in the holding company (about it's current market capital) and one remaining profitable operating subsidiary, Hemmers, which distributes fabric in Europe.

I think the value in Leeds will become apparant soon. The current market capital appears to reflect only the likely cash value of the holding company with the profitable Hemmers subsidiary thrown in for free.

I've held these for quite a time on and off, but I think that the end and a profitable exit is in sight.

[hugepants] 14/10/2005 10:42

I think Im right about the creditors. If you look at the finals then nearly all the debt is associated with Leeds leasing

[langland] 14/10/2005 10:39

HP..You are right about the debtors. MMs must be short now..can only buy 5k online. Surely, the current price must be wrong since the mkt. cap is covered by cash? 18-20 would seem fairer for the s/term.

[cockneyrebel] 14/10/2005 10:38

that's how it looks to me on first glance. I suspect the leasing debtors were off putting to investors that might not have realised that's a necessary evil of that type of business - I think they do go with the sale of the business.

CR

[hugepants] 14/10/2005 10:35

The balance sheet should be a lot cleaner. I think most of the creditors should disappear and of course all the leasing debtors (someone correct me if Im wrong)

[cockneyrebel] 14/10/2005 10:18

I bought in this morning, only 20K as I haven't had time to fully grasp everything but these look potentially very cheap.

Care to give me a resume of where they stand Arthur Lame?

CR

[belize1970] 14/10/2005 10:02

I've been watching from the sidelines for some time - this deal ought to be really positive for the share price IMO.
Time to dip my toe in (once again though my purchase through TDWaterhouse fails to show on the trade screen).

Good luck to all.

[langland] 14/10/2005 09:54

I tend to agree, Arthur. Muted response is probably down to general mkt. and the fact that people aren't too sure whether we get 3.7 or 5.00. It is the latter of course. Now that Leasing has gone I am hoping that it will be much easier to lose Hemmers and I wonder whether they will sell this at a discount to the family just to get rid of it and leave us with close to 10mn cash. This would be the equivalent of nearly 28p and I would personally take 25p if it could be fairly quick.

[arthur_lame_stocks] 14/10/2005 09:48

That's my reading of it too at first glance langland. They're getting net assets value (well nearly) plus Leeds Leasing owed the holding company 1.35m and this debt will be assumed by the purchaser.

I'm delighted with this deal, it's going to transform the balance sheet by totally eliminating the debt and leaving them with net cash and Hemmers still to go. I guess it also shows that there is real value in Leeds assets which is what we've been hoping.

I must admit i'm a bit surprised at the markets muted response to this deal, I think the shares should be nearer 20p on this news personally.

[roomey] 14/10/2005 09:47

so if correct holding co. excluding hemmers would have


cash at interim £812k
payment leasing £3200k
debt repayment lease £1350k
hemmers inter debt £1028k full year 04
total £6390k
plus
escrow £500k
hemmers book value £4243k full year 04

[langland] 14/10/2005 08:32

I reckon they are receiving about 5mn in total. In the last report and accounts(in the notes under segmental analysis) the assets of LL are shown separately at 3.84 and under the head office section there are items for intercompany debt. So my reading of the situation is that 3.7mn is being realised plus 1.35 of the intercompany debt. So, all in all, a pretty good deal in the circumstances with a realisation of 5mn out of the 11mn assets shown at the last accounts. So, if they can realise anywhere from 3.5-4mn for Hemmers, the shares should be worth 25-30p. That's my first shot at this...maybe more later.

[roomey] 14/10/2005 08:22

can anybody confirm.are ldsg recieving £3.7m less £0.5m held in escrow for 18 months and £1.35m of inter co. debt or £3.7m in total inc inter co. debt

[arthur_lame_stocks] 11/10/2005 12:48

Merkel's the new German Chancellor, although as head of a 'grand coalition'. I hope they can kickstart the German economy. Tax cuts would be great, Hemmers pay 40% and I don't think the tax losses Leeds have can be offset against this, although i'm not sure.

[hugepants] 06/10/2005 14:18

Arthur , Thats quite encouraging feedback from Malcolm Wilson. Im sure LDSG is a bargain , I just cant convince myself to buy any more just now.

As regards debtors I know some companies, FWY for one, take out insurance to protect themselves from bad debts

[arthur_lame_stocks] 06/10/2005 11:03

Fair point cg1953. You should have tried to sell them a week ago!!!

I sent Malcolm Wilson an email yesterday asking a few general questions and received the following reply (I don't think there's anything in there that should upset anyone from the point of view of content or price sensitive info).:

Dear Mr Lame-Stocks

Most of the EU quota restrictions on imports from China relate to
finished apparel. Hemmers imports "running meters" - fabric on rolls of
between 30 - 70 metres in length. There have been some anti-dumping
measures imposed on running metres where the polyster content exceeds
85%. These affect a very small proportion of our business, and we have
been quite easily able to find alternative sources of supply.

The board have bought back a total of 450,000 shares to date, believing
it is in shareholders' interests so to do given that the price paid
falls so short of net assets per share. If similar buying opportunities
arose, we should be keen to continue this policy.

I would not wish to make direct comment on trading performance so soon
after our year end and before our annual report is produced. However,
the board is aware of its obligations to issue trading updates where
there has been a material change in circumstances affecting the group or
where the likely outcome for the year is materially different from
market expectation. We consider this obligation on a regular basis and
have decided no such statement is necessary.

At the half year they reported earnings of 0.7p a share. They said of the outlook.

Leeds Leasing - With a level of new business approved and awaiting drawdown comfortably more than double that of twelve months ago, we believe that a busy second half-year is in prospect.

Hemmers - The order book for our winter collection is greater than it was this time last year and, although we expect the market for basic products to remain demanding for the rest of the year, the overall outlook for the second half of the year is more encouraging than the experience of the first half.

So I reckon there´s a good chance they will at least match the first half meaning eps of 1.4p a share. Which will leave them on a p/e of a bit less than 10 and at a >50% discount to NTA.

Maybe there'll be some good news here at last, but I won't hold my breath.

Arthur

[cg1953] 06/10/2005 07:46

my brokers apparently did approach there brokers, but were told it was the 'close' period and therefore unable to buy in there own stock.

[arthur_lame_stocks] 05/10/2005 15:30

Bad debts are a risk for both businesses as I guess they are for any business. Maybe you're confusing bad debts with the debt profile.

If Leeds are telling us the truth then none of the debt of the subsidiaries is secured on the assets of either the parent or each other. So it should reduce the overall risk quite a bit.

[arthur_lame_stocks] 05/10/2005 15:30

Bad debts are a risk for both businesses as I guess they are for any business. Maybe you're confusing bad debts with the debt profile.

If Leeds are telling us the truth then none of the debt of the subsidiaries is secured on the assets of either the parent or each other. So it should reduce the overall risk quite a bit.

[hugepants] 05/10/2005 14:36

Are bad debts a risk with Leeds. Or did I read somewhere that Leeds are protected in some way from bad debts?

[arthur_lame_stocks] 05/10/2005 11:14

cg1953

Why don't you try contacting Leeds directly and telling them you have stock to sell at 13p. They might buy it from you and if they don't at least we know for sure that the small buyback is over.

[cg1953] 05/10/2005 10:15

i tried to sell a few the other day at .13p but market maker would only take 10000 at that price. pathetic.what a terrific vote of confidence. NOT.
this company now fills me with a dead dread.

if management were truly optimistic about prospects and there skills then i feel sure they would have tabled an MBO in the last 6 months. all imo.

[langland] 04/10/2005 11:09

I would have thought we should have had a warning BEFORE year end if things had gone pear shaped. But, like you, I am not willing to tempt fate. However, if things are going much better, as the interims led us to believe, then we should see 20+ again.

[arthur_lame_stocks] 04/10/2005 10:58

Perhaps I shouldn't post this but; we're now past the year end and no profit warning. Does this mean they actually are going to report a profit for the full year for a change. Perhaps even eps of 1.5p.

Or am I being too optimistic knowing Leeds as I do.

I see that the share buyback has stopped and the market cap is under 5m.

I'm wondering whether the holding company has lent more of their cash to the Leeds Leasing to fund expansion and they don't have the spare cash to buyback any more shares.

Otherwise they really ought to pay a bit more attention to shareholder value, the Swedes don't own the whole company, or even a majority of it.

Arthur

[arthur_lame_stocks] 26/7/2005 11:38

Anybody notice that Siemens AG have been mad an offer for Broadcastle?



I thought at one time that Broadcastle might have been interested in Leeds Leasing as a bolt on.

Anyway, perhaps there's interest in consolidation in the sector, it would be nice if Leeds could sell off both those businesses for a good price, we might really see some value out of these shares then.

[hugepants] 04/7/2005 13:32

More share buybacks.


Downside must be limited if company happy buying at this price.