Leeds Share Discussion Threads

[arthur_lame_stocks] 13/3/2009 18:49

I thought Dawsons results were good, although this year is going to be tougher, a cash sale of the spinning business should leave them well placed to see out the next couple of years.

EET's NAV is just a guess, but if we can get anything back from that it'll be a bonus.

I undestand that the German economy is a bit of a mess at the moment so that doesn't bode well for Hemmers, although it may also see off a competitor or two.

I wonder if we can get a trading statement from Leeds before the end of March , the excuse that they're usually seen as bad news so they don't do them is an appalling one IMO.

[deswalker] 13/3/2009 17:45

These two recent RNS's make pleasant reading IMO ...

Firstly, DWSN's Finals announced this week:



They are excellent IMO (altho the outlook is much more uncertain) and are worth some study. Of particular note is the Current Assets minus All Liabilities of 7.25p per share vs 2.25p share price. Pension and other uncertainties aside. Arthur, what think you ?

Secondly, this from EET dated 2/3/09:



where they give a post-restructuring NAV at 31/12/08 of EUR 5.377 vs a current share price of EUR 0.77 !!

If both these holdings can get somewhere closer to their NTAV's then they will add quite a kicker to LDSG's NTAV. Nice to see what appears to be quite a bit of real embedded value in the portfolio beyond just the usual "Cash + Hemmers" focus.

[poacher45] 01/3/2009 19:07

I have attended at least the last 5 AGM'S perhaps even more. On one occasion when I was the only shareholder to attack W. M. Cran for his bad management and excessive expenditure I was accused by another shareholder of simply jumping on the fashionable band wagon to attack directors. To be fair to Mr W. M. Cran he told the shareholder immediately that I was entitled to my opinions. On another occasion I asked JC a question and the company solicitor told him he did not have to answer. JC said if he wants to know I will tell him.
Last year with my wife we were the only shareholders there. When Mr.W. M. Cran was in charge perhaps because he was local and popular there could have been between 20 and 30 shareholders there. I have become a lot happier about the situation over the last couple of years. I think the results would have been a lot better if it had not been for the poor business climate. However I still think that they are capable of increasing the asset value each year and eventually it will pay off.

[deswalker] 01/3/2009 12:36

Hi poacher,

Just to clarify, you were the person who asked about the bad debt situation and said you disagreed with me about the share price if the JC and PG held only 15% right ? If I'd known I'd have introduced myself.

I think I'm right in saying that you've been to quite a few LDSG AGMs before ? If so I'd be really grateful if you would add your thoughts. A few questions ..

- How did this AGM compare to recent others in terms of questioning and Director answers and body language ?

- Are you more or less confident in your investment since this time last year ?

- I don't recall you saying you were a "happy shareholder" previously so I'm encouraged and intrigued that you appear to be warming to the situation. Is that a fair reflection of your views or have you always been happy with the situation ?

I agree with what you say about the salaries. I certainly believe that we small shareholders are currently getting very good value-for-money from JC and PG but that makes me worry that they are doing it for ulterior motives. Remember they don't like divis because of tax so perhaps the same could be said for large salaries ? They know that they effectively control the cash anyway so keepng it in the business rather than paying it to themselves may simply be a tax ploy ??

I only have a 2-3 year history with this share so my knowledge of previous management shenanigans is limited. I'm not interested in what's gone for before and any axes that ex-directors have to grind. Clearly any talk of £3 per share is 20 years out of date - I just want to see 30-35p at some point in the next couple of years.

Please let me know your thoughts.

Des

[poacher45] 01/3/2009 11:05

Having seen the previous board literally throw their money away. Perhaps you can understand their anger with the previous chairman. I think that having got onto the board a lot of other unscrupulous people would have paid themselves £200000 each just to get back some of their losses. £10000 each for their experience seems cheap to me.

[poacher45] 01/3/2009 10:53

Des Walker
Thankyou for doing such a good summary of the Leeds AGM. I am the happy shareholder. Unfortunately because of our directors high shareholdings we must believe that they are honest men and since they have taken control they have done nothing to make me believe otherwise. I think it is worth considering the salary's in the last year of the previous boards reign compared to today.
In 2001 and making a loss of of 2.7million and later on giving Nemesis away for a £1 which I think cost £7 million pounds. Here are the actual salaries:-
M. J. Wilson £108,000 including pension.
J. Z. Beardsley £114,000 " "
C. J. Marsden £152,000 " "
J. Kidd £148,000 " "
R. D. Wade £31,000 non exec no pension
D. C. Macpherson £19,000 " " " "
C. F. Openshaw £5,000 " " " "
This makes a grand total of £577,000 compared to this years total of £45,000

[arthur_lame_stocks] 26/2/2009 22:29

I hope so Des. It's become a real value trap. Like you I don't think there's any chance of action until the Swedes have bought back another 2.8M.

[jonak] 26/2/2009 22:22

Des, thank you very much indeed for your report on the AGM and your follow up comments, much appreciated !

[deswalker] 26/2/2009 19:52

It's diffcult to disagree with the question of "where's the outer ?". Clearly if there was an outer then the share price would be higher.

This is not so much a traditional value investment as a special-situation. At some point the two main shareholders are going to want to see a return on their investment but they don't particularly want it yet. Currently they are busy developing the portfolio and buying back shares to increase their stake before they do eventually decide to pull the trigger on outing the value. I am pretty sure that there is considerable value here in due course.

The big 24-thousand-dollar question is "are they going to take us along with them when that happens ?". Personally I think they'll do the right thing either via a liquidation and distribution or more likely an MBO pitched at a level that isn't great but still quite a bit above here.

In the meantime they'll try and hoover up the remaining 2.8 mill shares to get JC to 29.99%.

[arthur_lame_stocks] 26/2/2009 19:08

Well I learnt something today: an oubliette - a forgotten place - a type of dungeon.

I think the Swedes put our dividend into an oubliette.

[the diviner] 26/2/2009 16:18

Thank you for the report Des.

As has been pointed out, the lack of a dividend is just holding down the share price.

I have put the LDSG shares, that I have left, into an oubliette.

[marben100] 26/2/2009 12:55

Ultimately, the question, and what's deterring me from investing, is "what's the outer"? Without a dividend, how will PIs see a return on their investment?

ISTM that this has been the question for the last few years.

[davidosh] 26/2/2009 12:35

Are there strong independent non execs .....Maybe that would help perception ?

Des Walker nominated and share price goes up 30% I bet !!

[bracke] 26/2/2009 12:27

Des

Many thanks for your report. It it was very good of you to do so.

[deswalker] 26/2/2009 08:12

david - re Yeadon I clarified that there are two separate issues, the precedent in the south of england and the other issue closer to home. Both sounded positive but I didn't ask for more details.

I have no doubt that from an operational perspective this company is being run very well (except for the crazy first foray into EET). Both major shareholders are putting in the effort IMO.

It's purely a case of lack of investor interest and uncertainty about their intent that is holding the share price back. However I'd suggest that the valuation gap to NTAV is getting so large that it is worth the risk IMO.

[davidosh] 26/2/2009 01:03

Excellent stuff Des and as with Marben I am watching from the sidelines having given up about a year ago. My view is that a mix of dividend and buybacks would be ideal. Incidentally why could EW not give more detail regarding Yeadon and the two reasons behind the resubmission ? They are presumably not confidential if a public application is being made and an explanation to owners would surely help in understanding the delays.

[arthur_lame_stocks] 25/2/2009 23:46

Thanks again Des. I must admit if there is one thing the Swedes are to be commended on it's taking such a small salary.

[deswalker] 25/2/2009 23:28

Arthur,

No real quizzing from me on Hemmers. My raison d'etre was the corporate governance issues so I left any questions on Hemmers to the other small shareholders. I expected profits to be down for no other reason than they are virtually everywhere else so it didn't jump out at me as an anomaly. The Chinese angle was sufficiently exciting to keep me sanguine about current trading. As I mentioned in my long post, PG said that they needed to work on working capital issues going forward.

One shareholder asked about Note 17 of the accounts (the bad debt situation). The reply was as in the AR, namely "times are tough at the moment, taken provisions etc etc ". Nothing else to add.

The problem with the divi situation was that this was hijacked by the vociferous ex-director shareholder. He went on and on about no divi, why bother holding the shares, ... and it was quickly brushed aside with the ususal "wanting to grow the business, looking for investments, buybacks are our preferred method". I could have asked again but it had been done to death by the time I got round to my questions.

I got no indication either way about longer term dividend policy but I'm not holding my breath. Infact I got no indication about any sort of long term strategy. Their line is very much one of "We're working for all shareholders now. Don't try and pin us down over the medium/long term about anything such as dividends, MBOs, de-listings etc".

JC made a big play of just how smart they had been in not blowing the cash when he viewed asset prices as too high. Both he and PG were keen to point out how cheap their involvement was.

That's about it.

Des

ps you are welcome Mark

[arthur_lame_stocks] 25/2/2009 22:35

Des

I notice in the AGM report today they mention that Hemmers's profit is down. Did they give any particular reason? Is it just turnover higher on translation to sterling but lower in terms of volume. What about bad debts? The annual report shows bad debts rising.

They don't seem to have answered the dividend quesion very well. Did they give any indication on whether or not they ever expect to pay one?

Thanks again Des

[marben100] 25/2/2009 19:43

Des,

Even though I'm not currently a holder, I am keeping an eye on this and want to thank you for attending and for the comprehensive & informative report.

Many thanks,

Mark

[arthur_lame_stocks] 25/2/2009 19:38

Thanks Des

[deswalker] 25/2/2009 17:14

Well I'm back from the AGM so here's my report ...

Attendees: JC, PG, Ewan Wigley, Malcolm Wilson, two from Seymour Pierce, one from auditors, one from solicitors, four small shareholders, one unknown.

Formal business, statement read out then quite a lot of questioning from the small shareholders.

Buyback Authority

Why 3,200,000 authority ? Because it gets JC up to 29.99% and things change after that. Nothing we didn't know there.

Yeadon

Slow progress but there are a couple of small bits of good news. Firstly, they were waiting on a similar case elsewhere in the country as a sort of precedent. This has either gone or is going in our favour. Secondly, we were due to have a court hearing last month but we canceled it because something has happened in our favour that has made us change tack a little and resubmit the claim. This is not the same as the precedent above but EW didn't specify what it was. Slow but certainly not dead.

EET

Disquiet from all small shareholders about this. JC said it was a mistaken investment and was bought as a € denominated cash cow. I asked whether they had viewed this as an investment or whether it was to gain some influence at EET in the subsequent restructuring. They said that it was the former as buying 1% of EET wasn't going to get any influence. Fair enough I agree but thought I'd ask anyway.

We've bought more in the recent restructuring and JC is confident that we should get some if not all of our money back.

Hemmers

Very little said. Afterwards I asked PG about it and the possibility of a sale. He said that JC spends much time working on it (for a pittance) purely because he is a shareholder. That small shareholders were getting a good deal as a result. That Jorg Hemmers is a great guy and that a sale might be possible in the future when it has put on a bit more size, was sweating its working capital more efficiently (too much stock) and when the economic situation improves. Make of that what you will.

DWSN

Disquiet from one vociferous shareholder (see below) but the Directors were bemused at this and stayed tight lipped. They gave the impression that they were very happy with events at DWSN. Nothing was said about any corporate action over there.

Afterwards I asked PG about the pension deficit and he said it was a concern but overall they give the impression of being very happy with that investment.

The Shareholder

One particular shareholder who was formerly on the LDSG board for 30 years and has sat on a lot of shares for decades was very disilusioned with how things are going. He travelled from the south of England and asked numerous questions.

Q Why EW has no shares ?
A Wants to avoid a conflict of interests as he's doing the buybacks (!?)

Q Why no dividend, share price performance terrible ...
A buybacks are returning funds to shareholders, share price would be lower if not, look at elsewhere on AIM, company being run very efficiently (JC and PG taking very little money), things much better than in your day etc etc His reply ... the share price was £3 then, it's 15p now. yadayadayada ...

Q Said he couldn't even find EET anywhere in the FT or Telegraph pages ?
No answer

My Question

A lengthy discussion along the lines of ...

- What can you say to small shareholders to convince them that your interests are alligned with theirs ?
- Effect of buybacks is to increase control
- Why is the buying volume of this share just about the lowest on the entire market ? Why do you think private investors aren't interested ?
- Are shareholders right to be concerned about MBO or delisting ?
- Saying that you're providing liquidity at 14.5p isn't the same as working for the benefit of all shareholders.

You get the idea ...

The replies ...

- Yes we are alligned with small shareholders. share price would be much lower without buybacks.
- No answer to the lack of buying interest in the shares. PG suggested that maybe I should try and convince PI's otherwise. I said that was crazy and that a clear statement of intent from management would work wonders.
- JC said that a delisting could have been effected long before now if they so wish. He also stated that there were heated discussions between him and PG about things and that they weren't always singing from the same hymn sheet. (Cynical me wonders if that might have been said for the crowd of lawyers, accountants and analysts in the room etc or it might actually be the case).
- JC wouldn't discount any possibiity of taking it private in the future. But neither would I in his situation.

Anyway, a good discussion. Afterwards PG said to me that it was tough questioning because it was challenging their integrity. I said we were adults and that I'd expect him to do the same if positions were reversed. He emphasised once again that they were acting for all shareholders.

Two final points.

EW seemed to think (or at least he said) that it wasn't possible for him to buyback more aggressively because he's not allowed to influence the price. I know the AGM resolutions talk of the maximum price payable as being linked to the current share price but I don't know why this should be so and instead can't be fixed to a particular discount to NAV like for investment trusts. It's the first I've heard of not being allowed to manipulate the price though. Surely that's what buybacks do in other shares ?

I told the Diretors that I watched the share closely, that the lack of buying interest spoke volumes and that if JC and PG only owned 10-15% between them then the share price would be double its current level. Another small shareholder (who seemed the most happy of all of us) said he totally disagreed with that view.

Anyway, that's my brain dump. Make of it what you will.

On balance I am more optimistic about the fundamentals of the company and marginally more comfortable with the management structure having spoken to JC and PG in the flesh. The trouble is that it is easy for them to say they are currently working for shareholders whilst implicitly keeping all options open. In their position I would probably do the same.

Rgds,

Des

[deswalker] 23/2/2009 22:16

Arthur - yes I'm going.

I'm going to ask about Yeadon Banks and also about their general intentions re small shareholders. It will be the first time I've seen them in the flesh so I'm hoping to get some vibes.

[arthur_lame_stocks] 23/2/2009 21:06

Des

Am I right in thinking that you're going to the AGM and if so are you going to ask the board any questions?

If you do i've got a feeling you'll be the only shareholder there.