React Share Discussion Threads

[jeanesy] 23/6/2022 07:15

all very quiet here on the news front. I was hoping for some new contracts ..oh well

[rivaldo] 14/6/2022 09:35

REAT are featured positively here:



"My first pick was cleaning services firm React Group at 1.4p. Small caps can be volatile, with the stock trading above 2p only to close as low as at 1.10p recently. The company raised its market capitalisation in cash for the acquisition of LaddersFree – a capital-light business that the board believes can be integrated into React’s offering then scaled up. Shareholders may be smarting from this, but the board believes this is an incredible opportunity given LaddersFree’s service partner network and its impressive gross margins of more than 50% in the last two trading years.

Chair Mark Braund believes this can even grow – LaddersFree recently won a competitive tender which apparently came in “significantly below” the price of the next competitor. The deal is materially earnings-enhancing and none of the board are taking large six-figure salaries from the company (unlike many Aim shares), instead aiming to be remunerated through their options. Put simply, there is no reason to do this deal unless the board believes in the long term. So while there may be short-term pain, the investment thesis hasn’t changed."

[vikingben] 10/6/2022 19:47

The results should be the month of June 2022

[ged5] 10/6/2022 12:55

An impressive list!

Are the half year results up to 31st March due soon?

I think there were seven contract wins in the period 30th September to 31st March although some of them weren't due to start until April. Even so, there should be plenty of positives to report.

Meanwhile I too was checking on their website. It's easy to forget some of the work they do. Latest blog:-



The link to the Sun article isn't for the squeamish!

[rivaldo] 10/6/2022 10:02

Catching up on research, the latest major shareholders list is pretty impressive now for such a micro cap:

Shareholder Number Ordinary shares %

Octopus Investments Limited 163,344,667 15.56
Canaccord Genuity Wealth Management 103,333,333 9.84
Helium Rising Stars 97,329,362 9.27
CRUX Asset Management 66,700,000 6.35
Premier Miton Group plc 44,539,177 4.24
Mr. Justin Korinek 41,666,666.5 3.97
Mr. Jason Korinek 41,666,666.5 3.97
Harwood Capital LLP 39,926,396 3.80

[superhoop2] 09/6/2022 16:57

Next contract win will be very revealing regarding share movement. Hope there is one or two in the pipeline!

[vikingben] 09/6/2022 14:19

All the trades today are buys, I was quoted 1.117 for 1 million at 10 AM

[rivaldo] 31/5/2022 10:15

Per Singer Capital's new note, they have initiated coverage as a Buy with a 2.5p target price.

They forecast 0.14p adjusted fully diluted EPS to this September, rising to 0.16p EPS next year.

Basic EPS is forecast at 0.16p EPS, rising to 0.17p EPS.

They summarise:

"Shares attractively valued

React is trading on a Sep. ’23 P/E rating of only 6.5x or 4.2x EV/EBITDA, which we believe substantially undervalues the Group. We target a 15x P/E multiple, which implies a target price of 2.5p. Given the M&A strategy and opportunities to grow LaddersFree ahead of our forecasts, we see scope for the price to exceed this level over time."

And:

"React is a leading specialist commercial cleaning, hygiene, and decontamination company. We believe it is well placed to build scale in terms of both its earnings and market cap. The business has a highly attractive proposition – largely non-discretionary, specialist services, a high proportion of recurring revenues (FY23E: 80%), attractive and improving margin profile (FY23E operating margin of 12%), and a capital light model (low working capital and capex requirements). It has a clear strategy to deliver double digit organic growth, alongside selective, earnings enhancing M&A.

The most recent acquisition of LaddersFree is transformational and offers potential for significant earnings growth beyond its current, consistent run rate. Against this backdrop, we view a Dec. ’23 P/E rating of 6.5x as very undemanding. We believe the share price is well placed to outperform, driven by both strong earnings growth and re-rating potential as the business scales. We initiate with a Buy recommendation and 2.5p target price."

[serratia] 30/5/2022 18:45

It's a common tactic seen it before. II's asked if they will support the fund raise. They say yes then a few days before launch pop in and say still interested but now only at a lower price.

[rivaldo] 30/5/2022 11:09

Mark Braund presented at Mello and came across very well imo.

The reasons for the 1.2p placing are in summary (as I understood it) that the LaddersFree acquisition talks initially went well with the share price at 1.6p-1.7p. But then negotiations got a little stuck, and with Ukraine and the markets worsening, completion got delayed. A major - well known - institutional investor came in with a take it or leave it offer of funding at 1.2p. REAT believed the acquisition was so transformational that they took it.

The acquisition will be earnings enhancing on its own terms, but REAT can add significant value and accelerate LaddersFree's organic growth:

- by increasing sales and marketing, which to date has been minimal
- the model is scalable "by introducing services to other companies and through new and existing relationships with other FM service providers"
- diversify current service offering, and up-sell and cross-sell the company's other services
- "up-sell national services to existing customers who use the company's services locally or regionally"

[effortless cool] 26/5/2022 17:22

vikingben,

You've got to pay to play with Singer research, which is published on Research Tree. They won't let PIs get access directly.

[superhoop2] 26/5/2022 17:00

Must of impressed at the Mello presentation today and the Singer note will be revealing.

[vikingben] 26/5/2022 16:09

Where can I read the Singer update?

[robow] 26/5/2022 13:36

and presenting at Mello today

[effortless cool] 26/5/2022 13:33

New research note from Singer.

[vikingben] 26/5/2022 13:30

News on the way??

[trcml] 20/5/2022 13:26

Some time ago one of my clients had a car cleaning business, t/o 12M a year, which I reckon a good fit for React. I've another client which was a quoted plc until taken private and am going to tell the MD (acquisition-oriented) to check out Reach and ask if his co would be interested in buying React. I contacted Ladderfree out of curiousity, for domestic customers window cleaning involve leaving name address and tel number on R's voicemail and someone in my area would call me. I already have a reliable window cleaner whom I've used for years and charges me £25 a time, 4 times a year, so I wouldn't want to pay more or use anyone else. Something the Ladderfree do is gutter clearing using a gutter vac: I searched for a gutter vac (similar) website and for around £1000 I could buy the equipment and clear my own gutters (currently my window cleaner does that for free), also clean moss of the roof - for that I rely on the wind and rain! Apparently I could make approximately £1,000 a week offering to clean gutters for others - no mention however of what it would cost me to repair a gutter that I'd accidentally broken off the gutter board!

[yump] 19/5/2022 09:52

This would be viewed differently if they’d got the placing away at say 1.7p. Thats the difficulty - separating that from the business and those results look like they might be to blame

[yump] 19/5/2022 09:44

On the positive side... and on a less gloomy note...

In theory the longer term and extra contracts with the same customer, as a result of cross-selling should lead to significant revenue increases without much increase in admin. cost.

ie. to some extent the contracts run themselves, especially if they are routine and not on-demand.

If that works, then it would certainly be a good cash generating business - the profit level from the acquisition shows that.

Plus it should lead to decent earnings increases. Could take a few years though.

I wouldn’t call managing an AIM cleaning company a “lifestyleR21; business - thats going a bit too far !

[jeanesy] 19/5/2022 08:11

these look to be heading sub 1p again .. yikes !

[1gw] 18/5/2022 10:19

That's just one of the terms of the acquisition - paid partly in shares.

"£1.0 million through the issue of 83,333,333 ordinary shares of 0.25 pence in the capital of the Company ("Consideration Shares") on Completion to Jason Korinek and Justin Korinek (the "Founders")..."

[superhoop2] 18/5/2022 10:01

Hasn't the founder of Ladders-Free not just purchased approx 4% of React ... see the RNS this morning?

[74tom] 18/5/2022 09:46

Indeed. There is a fundamental reason why you don't have many start up window cleaning businesses listing as public companies...

- Very low barriers to entry
- Minimal economies of scale (unless it's a robo cleaner)
- Little pricing power, otherwise someone will undercut you
- Little value creation, it's simply doing a job well.

I'd argue that the barriers to entry are significantly higher for a cleaning company as trust & reputation are important.

Had the majority of the acquisition been paid for in shares with the placing cash used for expansion then MAYBE I wouldn't be so negative, however as with Fidelis they've paid significant cash up front & also committed to a large (versus market cap) amount of deferred consideration. All cash generated for the foreseeable future will go straight out of the door...

Given directors own practically no shares and didn't buy any in the placing, it's fairly obvious this is an attempt at prolonging the listed company lifestyle. So as another poster said earlier, I'd expect a large chunk of zero cost options to land at some point...

As a private investor why would you possibly want to own shares here?

[yump] 18/5/2022 08:38

Perhaps the reason the market is fragmented is because nobody has bothered to consolidate it, because there isn’t a financial case for it that would lead to increased earnings and/or dividends.

Nice to run a bigger business for the BOD though.

[yump] 18/5/2022 08:31

They keep mentioning cross-selling.
Also that its a capital light business.

Both of those sound positive but cross-selling only works if you’re increasing revenue with relatively fixed costs.

“Capital light” is a red herring - the other side of that is that its labour intensive.

So adding contracts doesn’t gear up profits. Its not like having a (capital-heavy) production line running at 50% and then selling more product that gets it to 70%, which then rapidly ramps up profits.

If Reat have to raise money to buy businesses and there’s no economy of scale, then profits will rise but earnings won’t.

It will just get bigger.

This is going to be a long slog.