Paragon Entertainment Share Discussion Threads

[cautoussid] 04/1/2016 15:42

one buyer loading up at this lower price , which looks to be over sold ,nice for buyers loading up at this lower price

[1savvyinvestor] 04/1/2016 13:25

Definitely oversold in my opinion. The director buy in December clearly supports lack of dilution and the potential upside from £11m forecasts is huge

[1savvyinvestor] 04/1/2016 13:22

Oversold in my opinion. Looking to top up on this weakness

[cautoussid] 04/1/2016 11:18

happy new year to all investors , hoping 2016 may be a good year for investors have been able to buy more pel shares recently after the large drop in share price also good to see the chairman buying so many shares in December

[pj 1] 17/12/2015 19:28

Hi fugwit
I have always had 25% Gross Profit pencilled in but we were definitely guided towards 22% in the AGM, short term at least. However, I seem to remember the Admin costs had reduced in H1 2015, so maybe they are running a leaner ship? COO needs to be included though at some point.

I like quarterly updates by preference and PEL have committed to it, but Q1 and Q3 will I doubt be a full update but we will see.

Results- I have had conversations outside the AGM and was assured the 2015 Results will be March time-ish (subject to auditors off course), so much more acceptable. I remember H1 2015 were extremely prompt following 2014 results's painful delay. There is a definite agenda from PEL to relate more to PI's (''we are listening'' was quoted somewhere). Time will be the judge off course but I have no doubts myself they will keep to their word on that point.

Funding. I agree it looks very tight but my questions have been met consistently with a no and no plans for dilution. There has been a pre-payment from at least one customer, I suspect Dubai Parks but that's a best guess, so maybe that will be more regular?
Framework agreements can include pre-payments but that is just a comment from me, nothing has been inferred.

Hopefully we can glean more guidance on margins from 2015 results

Apols a little vague as only on mobile access at mo.

[kinbasket] 17/12/2015 17:31

It'd be a bit odd to see a massive director buy if a cash call was imminent.

If he knew a placing was in the pipe he'd wait for that.

[fugwit] 17/12/2015 16:54

Thanks for the AGM report PJ1, much appreciated as is the link to the AGM presentation.

Difficult to see their current margins as being worthy of the description "good" and I am doubtful after the recent reporting debacle that they will be able to post quarterly updates as part of their PI communications. Not entirely sure I want qtrly updates, I would happily settle for decent clear reporting as per regulations in a timely manner as a starting point.

Anyone else wary of the need for a rights issue here given the cash reduction of late?

Nice discussion on the board as ever, one of the more sensible corners of advfn.

[pj 1] 17/12/2015 14:58

Yes Ianb £90k in one hit reflects a certain confidence. In a way he has roughly invested his next 2 years remuneration from PEL in the Co.

My interpretation is that they have not (nor have any intention of)understated the order book, it is more a new measurement to reduce any further risks of Profit warnings, so they can in future use a % of the future 12 months confirmed orders as a projection.

My own interpretation is that in the past they have predicted all the order book and any delays then turn into a profit warning. Maybe they have even predicted more than the order book if confident at the time of them being forthcoming?

[ianb5004] 17/12/2015 14:32

Yes big director buy 5.5m shares.
He does have an avantage on the pi,s though. We know they under stated the order book at £11m, we dont know exactly by how much, he does ! Hes clearly confident though. All good

[phowdo] 17/12/2015 11:12

Quite the buy by the chairman.

[pj 1] 16/12/2015 16:21

Which sector will this get moved into any ideas? (currently financial services). Construction and Materials seems most logical

[ianb5004] 16/12/2015 16:14

Maybe mate there again it can change in a flip, pi,s so fickle.

Look at all the good stuff of late. Hamleys agreement, order book at its highest ever in pels history, dubai £5m......... 2016 profitable etc etc
And it gets hammered mainly becase pel didnt match 2015 forecasts as some contracts were delayed. Thats the nature of building work and its a wise move by the bod to underplay next years.

Nice £1.2 m buy this afternoon at a bargain price.

[pj 1] 16/12/2015 09:43

Ianb, not all the questions asked came from myself, however, I included in the summary
Hamleys looks IMO to be a £20m minimum opportunity over 5 years. Not all Hamleys Worlds will be franchised, some of the bigger ones will be directly managed, so if the pricing is agreed within the Framework agreement then they could be nailed on?

It was also a positive meeting in many ways. MT looked much more relaxed and approachable than last year although MBarratt was much quieter. You never know if People are below the whether though do you?

I believe the Director buys were genuine and not some attempt to shore the price up as can often happen, but is one of those things many will latch onto.

It will be a big job to change market sentiment though at the Moment, particularly short term, we need a steady flow of positive news. Coupled with fickle markets generally as well.

[ianb5004] 16/12/2015 00:12

PJ - many thanks for the comprehasive write up of your agm notes. Whilst you are a shareholder it strikes me you are very balanced and present a very honest view.
Good work.

[love it] 15/12/2015 22:25

Not if it bounces from current price. Think it's oversold now so bought 2 x 100k at 1.6p late afternoon. It should turn soon most people who wanted out will be out now. New buyers should take back to 2p before new year is out.

[blueball] 15/12/2015 22:20

Breaking down on the chart.

[pj 1] 15/12/2015 21:05

Ive not looked too closely. I had wondered if Vesuvius was a holding co for a director (MT?). And assumed HSBC was an accumulation of nominees. Guess I've missed it..........never post under the influence of alcohol lol, nothing makes sense!
edit-if so it would be in the notes

[pj 1] 15/12/2015 21:01

edit- most of my holdings are via Investdirect i.e. HSBC but I do not hold 6.3% lol

[playful] 15/12/2015 21:01

Hint. Play snap with the shareholders list on the presentation.

[pj 1] 15/12/2015 20:57

come on playful, believe you are a Yorkshire man too? Speak your mind lol :-0 or maybe closer to home and stags land? Pull it too bits

I've missed any connection via HSBC........

[playful] 15/12/2015 20:46

The company should invite you to become NED they could do a lot worse. I think sharesoc can assist in pointing you in the direction for the NED training course.

Excellent write up and If MT had been kept waiting 20 minutes he can be forgiven for cutting things short.

The volatility kept 3 shareholders from attending! Speaks volumes....

Oh any idea who the HSBC holding is

[pj 1] 15/12/2015 19:34

My AGM summary below. The most relevant towards the end as its not in any priority order. Unfortunately, I do not have the full time need to write it up more fully.As always IMO and DYOR apply. Feedback/ questions welcome. PJ

Paragon Entertainment (PEL) AGM 11 December 2015 12:30 Venue- Head Office



Attendees
Mark Taylor Executive Chairman (MT)
Mark Pyrah CEO (MP)
Peter Holdsworth Production Director (PH)
Martin Barratt NED (MB)
Jarrod Marsden Financial Controller (JM)

X2 Private Investors, including myself and X2 PI’s via telephone connection.

No recording of the AGM was made and this is a representation of my notes and understanding of comments made including interpretations by myself. I am not, nor have I ever been, qualified to give financial advice and nothing in this article should be taken as such. All comments should be taken as in my opinion only (IMO) and as always it is imperative and vital to undertake and do your own research (DYOR). As per the 2014 AGM a presentation was given and questions allowed during the presentation. This resulted in some digression but relevant to the meeting therefore this article does not follow the exact route of the meeting, nor is it in any order of priority. At the time of writing (15th December 2015) I hold a long position in PEL.

NOTE- A 7:00AM RNS was issued on the morning of the AGM.


• Previous market guidance for 2015 EBITDA unchanged at £0.2m, though 2015 turnover likely to be approximately £8.5m and; (from £9m turnover)

• Board guidance for 2016: Turnover of £11m and EBITDA of £0.5m

• Mark Pyrah will now resume the position of Chief Executive Officer with immediate effect

• At the request of a major shareholder the Board will not now be proposing resolution 5 (allotment authority) and resolution 6 (disapplication of pre-emption rights). The primary purpose of resolutions 5 and 6 was to ensure that Paragon was able to meet all and any legal commitments it might have to issue shares

Recently over a number of months prior to the meeting (and continuing after) the share price had been subject to increasing volatility and increased volumes including both Amati and Vulcan Holdings (ex Director interest) reducing below the 3% notifiable level and exiting as shareholders. On the morning of the 11th December the shares actually opened up 4% but were quickly sold off and at one point were down over 30% on the day (with selling continuing post AGM date). Over this same period whilst the ADFN Bulletin Board remained quiet as it usually was, there was a noticeable large increase in the mention of PEL via social media in general. If the reduction in 2015 Revs was taken as another profit warning (although note EBITDA remains the same) or the £11m turnover guidance for 2016 being below expectations, or a combination of the 2, were perhaps the reasons remains to be seen?
The volatility on the day prevented at least 3 Private Investors missing the meeting that I know to.

The meeting was delayed by 20 minutes for a late arrival (PI), opened and chaired by Mark Taylor. Mark Pyrah then did the presentation and I have tried to comment from the questions raised in the order of the presentation.



Page 3. No current focus on the Attractions division although not ruled out medium to long term following exit from Quest Merry Hill. Main focus is on the Design and Build (D&B) as this is the bread and butter and what PEL currently do best. Licenses are secondary; however there could be some future overlap similar to Hamleys license with NERF for example. Whilst Quest failed financially it did open doors to Hamleys and other (unknown as not divulged to us yet) relationships.

No further accounting needed for Quest exit (I assume that meant post 2014 write offs)

Page5.Trail of profit warnings needs to stop and has contributed to little sentiment towards the Company in the Market, also compounded by covenant breach and late 2014 Results due to disputes. (Kidzania?). Covenant breach is now in the past and trading with terms, although currently in overdraft.
BoD looks light as MP has sales and design strength, MT and MB managing attractions strength but no manufacturing. New COO to have more manufacturing experience to compliment the team and release MP and PH more to their relevant levels of strength and focus (Note COO is accounted for in any 2016 projections)

Page 9 &10. Main focus going forward on Hamleys, Lambda, Majif Al Futtaim (MAF), Olympic Committee, Dubai Park (motiongate, DreamWorks), Golden Hall (Lamda) as all offer substantial repeat projects. Note-Hellinikon Athens (Lamda project, LOI signed but nothing expected for 2 years due to size of project and Greek Government involvement)

Page 11. Current D&B capacity around £12m to £13m not space constrained although the set up is spread over a number of Sites (far from ideal), and it does seem on easy in/out and short term lease’s. Currently no problems recruiting direct staff.

Project Managers are included in cost of sales (i.e. in Gross profit)

Strategic alliances, framework agreement and partnerships are starting to bear fruit but have taken longer than hoped. For example Hamleys has taken over 3 years to get the framework signed.

Page 12.Order book at record high. No figures were given for (contracted) order book or overall Pipeline. It was stated PEL need to be consistent in reporting these in future.

Page 13. Licensing. Target for some growth but secondary to D&B. Note Funlandia is the old ‘soft play’, HiLo challenge domes still includes possibility of Bear Grylls but some capex required so on a back burner.

Page 14. Emphasis was placed on advising the Co. to move to and include eps predictions along side EBITDA as soon as possible

EPS and free cash flow positive by end 2016.

Margins- Guidance was given for 22% Gross Profit. This is lower than previous guidance at the 2014 AGM of 25%; however, as repeated by the Co Margin improvement is a key target.

Headcount has reduced from 100 to roughly 80. However that is just a headcount, No of part time etc not included. More use of stated Freelance may explain it

No major use currently of use of sub contract. Any major project sub-contracting reduces to 10%margin so PEL trying to keep all in house.

Page 15. Note Co has increased turnover in 4 out of the last 5 years. 2013 peaked at circa £9.5m

Page 16- Rough 26% Management and 26% II holdings

Page 19- Note Framework is for Hamleys World. Pi’s have found to date 11 possible Hamleys worlds for next few years. Also plans for expansion via smaller stores but unlikely any work for PEL (airports etc) Note any Hamleys over 3 for 2016 and/or 4 for 2017 will be above any current forecasts

LAMDA-Possible 4 projects excluding Hellinkon Athens

MAF-significant opportunities above and beyond 2016 (INCORP)

Page 22. High profile customers and relationships. Hopeful of new representation deal early in new year.

Page 28. Targeting 20% growth per annum over the next 5 years. Turnover has doubled since 2010

Communications/ Strategy/Performance.
As the meeting progressed there was quite some digression and discussion. The feeling from PI’s was that the good news ref. Hamleys and Dubai Park had not been communicated in an effective way to maximise the share price and deliver share holder value. It has to be said though that this news has been tempered with a string of profit warnings from the Company all related to delayed or rescheduled contracts. There was also an undercurrent of feeling that PEL do not understand the working of the Market. This will always be a live threat the PEL turnover as they are not often in a position when if one contract is delayed that another can be pulled in to its place. However it also needs to be stated that bespoke short term contracts for quick delivery can be forthcoming, but generally a risk to turnover remains.

2014 resulted in 2 profit warnings which I assume to be kidzania related. Looking at the opening of that project in London I suspect KZ also fell into 2015 through no direct fault of PEL. I am also of the opinion that PEL have always predicted their then total contracted order book for that year. I.e. contracted order book for 2014 £10m so prediction equals £10m. So any delays equals a miss and profit warning, Pel are left with no where to go. In fact looking at 2015 I wonder if they predicted more than the then current order book as it appears Dubai Park was delayed until Q3 hence profit warns in 2015?

In some ways it was not an easy meeting as the BoD were hit around the head with previous profit failures a number of times, despite increases in turnover. It appears (please refer to previous notes) that ‘unofficial’ market expectations for 2016 projections were much higher than the £11m predicted, and that a significant % of the Company was in the hands of short term traders, hence the sell off on the day of and following the AGM? PEL have reviewed part of their procedures and strategies which I understand to be-
• The Management will not focus on short term share price movements. They commit to generating shareholder value as has always been the goal over the medium / long term
• No immediate dilution (Note- if my understanding is correct then it would require an EGM for that to happen before the next AGM). Nor are their any plans for dilution.
• They are looking at ways of reducing reliance on overdraft from a number of ways including pre-payments. One customer offered a substantial pre payment (I believe Dubai Parks) up to £1m but this can be counter effective as a Bond as ‘insurance’ needs to be entered. The full pre payment was not taken up, but indication some of it was.
• The Company is usually under a Non Disclosure Agreement (NDA) with contracts and Frameworks which greatly restricts the amount of particularly financial detail which can be communicated, as it could compromise the position of the Client (customer). Hence no direct financial detail with Hamleys.
• RNS will be forthcoming as per Market regulations and taking advice from the NOMAD (Finncap) including any NDA restrictions, and within the remit of their Q& A statements on the web site
• Whilst no current contracted order book figure is available the Company strives to reduce the chances of further profit warnings as they realise the effect on sentiment and share price performance this leads to. To that end the BoD are endeavouring to find a % of order book to predict with the goal of eliminating future profit warnings to a minimum by allowing for a certain amount of contract deferral. It was stressed that both contracted order book and total pipeline are both at record highs. (Note x10 fold increase in pipeline since listing at end 2014). It was stressed the Co needs to communicate the order book and pipeline in future communications in a uniform way. Therefore my understanding is that the current contracted order book for 2016 is well in excess of £11m.
• My understanding is that 2 years of revenue visibility is not currently realistic. However ,my understanding is that some works are already contracted for 2017.
• The BoD will endeavour to promote the Company via presentations and meetings etc.

Proposed Resolutions. All were passed but note as previous Resolutions 5 and 6 were withdrawn at request of a major shareholder. My understanding is that this prevents any dilution other than at an EGM. Please also note that the Company have verbally committed to bring the next AGM forward to a more logical date of June 2016 (6 months away)

The meeting was closed but unfortunately MT had to leave promptly which can be annoying to attendees and hope is not repeated next year. (Unless personal reasons prevailed off course)

[dontsweatit] 15/12/2015 13:41

I also has added quite substantially but from a small holding.i have checked back as best I can and can not find another of my shares that have ever been sold so much after an increased projection for the next year.the reduced again2015 turn over is a worry so quickly after previous profit warn but EBITDA s stays unchanged so is that at better improving margins i am not sure yet.I now hope for an update at end January or feb to update turn over and EBITDA for 2015 and expects fully for Co to give trade update soon after first 3 months. Warner bros FOX Hamleys all offer major opportunity.after speaking with posters and see pelboss comments it would be assuring to see some more official guidleines towards funding positions in the new year. i hope current selling is not by major share holder

[ianb5004] 15/12/2015 12:55

Good to have those reassuring posts from pelboss. Some loyalty has clearly been lost which is a shame and i suspect a degree of selling in anger/emotion intially which caused a drop and the sheep followed as they do and then the herd followed the sheep and it perpetuates...

The company remains a buy for me. At this price it looks a very good buy for those who can hold for more then the 5 minute crowd.

[pelboss] 15/12/2015 11:27

Thats what we intend to do. Thanks playful.