Silverdell Share Discussion Threads

[rivaldo] 06/6/2013 15:34

Good to see a maiden share purchase of a decent amount of shares by the new non-exec director:



"Silverdell, the Specialist Environmental Support Services group, announces that it was notified on 6 June 2013 that, on the same day, John Matthews, a non-executive director, acquired 150,000 ordinary shares of 1p each in the Company ("Ordinary Shares") at a price of 14.7438p per Ordinary Share."

[rivaldo] 06/6/2013 12:49

Brief comment on Dow Jones:

"SILVERDELL PLC (SID.LN), an environmental support services provider, said Wednesday it sees significant growth opportunities in Canada and Australia and expects revenue from those markets to rise sharply in the next five years. "In due course, maybe in three to five years' time, those markets could both be as big as the U.K. for us," Chief Financial Officer Ian Johnson said, adding the growth is expected to be organic and customer-led. "

[fugwit] 06/6/2013 10:43

It is worth noting that none of the EDS revenue is from subcontracting and it has been confirmed that for the foreseeable that will remain the case. EDS revs make up a large proportion of SID revs overall. SID confirmed at the AGM that subcontracting is now a limited part of their business and likely to remain so. One would hope the Pembroke contract would be enough to keep them out of such work in the future.

On the contracts front I am curious as to whether there will come a time when SID are able to defer or partially defer upfront payments for taking on a site as a result of their reputation and limited competition. This would have a dramatic effect on cash flow.

[owenski] 06/6/2013 08:56

Muckshifter, I agree with your post. When I first met SID at a Fincap presentation I wasn't keen on the business because it looked like a subcontractor model with the cash flow problems to go with it. But since the EDS aquisition they do seem to be moving towards a prime contractor model with improved payment terms. Good post.

No longer a holder here, but at these levels it looks interesting.

[alter ego] 06/6/2013 08:42

very interesting observations, thanks

[muckshifter] 06/6/2013 08:22

Although I haven't studied SID in detail, had a quick look at them recently, and a few thoughts occured to me on the subject of the change to the need for working capital.

Firstly, did they start life as a subcontractor? I have a feeling that they did, and if that is the case they may be successfully making the transition to main contractor for the bulk of their turnover. That alone makes a huge difference to cashflow - it brings payment forward by a month at least and often two. So, if you take account of say a months income brought forward permanently when costs are still expended at the original time, it makes a big difference.

Then there is the change in contract mix to more cost plus jobs. On a standard lump sum, or bill of quantities contract, the profit margin may well be theoretically higher, and may end up being higher, but I suspect that the sort of work they do is plagued by major variations. The problem with major variations is getting paid for them. This is "usually" a slow and painful process of initially establishing that the changed work is a variation, with a client's Engineer often reluctant to concede that he didn't foresee something, and then a similar process in terms of evaluation of the variation - ie. it takes time, usually months at least. When you are a subcontractor, this situation is exacerbated - often the main contractor is hoping to drag things out to get the subcontractor to settle for X and then fight the claim more vigorously against the client so that he settles for 2X. Both these effects are serious drains on cashflow, and the change to the contract mix mentioned may have improved things more than you would expect.
Regards.

[shanklin] 06/6/2013 07:51

Might be worth asking the CE why SID has not addressed the funding situation in an RNS but he feels able to tell and sundry that all is OK on that front in interviews. Reminds me of IDOX's recent behaviour which led up to a profits warning.

Otherwise SID looks a bargain.

[rivaldo] 05/6/2013 14:17

Cheers dell1234, the article is pretty definitively good news:

"Today Nutley tells me that Silverdell no longer needs additional working capital to hit the 15% target. 'We've been able to get the right mix of business and right payment profile to meet our strategic targets,' he states. Additional money is only needed if the group finds a way to 'supercharge' growth beyond the 15% rate, adds the CEO."

"Analysts remain bullish on the stock and haven't found need to reduce their forecasts. FinnCap's David Buxton says: 'The shares have drifted on fears of a cash-call: management is adamant that it can achieve current forecasts with existing cash resources, with no need for a fund raise, unless an opportunity to "turbo-charge" growth arises. We therefore believe there is scope to move back towards former share price levels and for progressive medium outperformance' Stephen Rawlinson at Whitman Howard says he remains a 'strong buyer'."

[salpara111] 05/6/2013 14:06

Not good enough for me to invest, will stick them on my low priority monitor list for a few months.

[dasv] 05/6/2013 12:42

I get the impression cash conversion on hydro quebec is faster than expected freeing up working capital.

[alter ego] 05/6/2013 11:50

dell1234, thanks for the link - it works if you highlight it and then right click to open it in a new window.

The essence of the piece is that SID haven't explained how they can achieve 15% growth without new funding and the market is still wary of a cash call. iT also explains that the CEO has today said to the author that they now believe 15% is achievable without further cash due to the right mix of work and payment terms whereas a couple of months ago they thought differently (as per Edison article).

Really just a case of not informing the market of this. If you believe the CEO, this may be a good buying opp.

[hippo] 05/6/2013 11:39

To EBITDA, more than 8%, I thought this was a specialised sector, so they could do better, I will have a detailed look at the accounts and notes later to see exactly where the money is going.

Problem is, they have little room for error and seem to have a record of making mistakes on contracts, which was one of the contributing factors for the loss this time around.

Did they put a timeframe on any of the objectives. When for example are they hoping to achieve 10% margin to EBITDA.

[dell1234] 05/6/2013 11:19

Shares mag article just published: http://www.sharesmagazine.co.uk/news/silverdells-communication-challenge#.Ua8QJkA3s_w

Gives clarification on future working capital requirements

[dasv] 05/6/2013 11:02

Adj EBITDA Margins are about 8% - 2.7% better than las year's six months to march:-

Unaudited months Audited
Six months ended
ended 31st
31st March March
2013 2012

Adjusted EBITDA margin* 8.1% 5.4%

The pipeline of opportunities supports our view that we can fulfil our key strategic objectives of year on year revenue growth and increased EBITDA margin."

They are targetting a 10% EBITDA margin

"With regard to the deliverability of "Changing The Landscape", we have set the following objectives:
1. To grow revenues by at least 15% per year.
2. To achieve and maintain a 10% EBITDA margin.
3. To have an order book worth at least two years' revenues.
4. To maintain the payment of a progressive dividend "

Outlook:-

"Summary and Outlook

The Group's result has been encouraging through a difficult first half and the performance of our overseas operations, coupled with the strength of the UK order book and current margin run-rates gives the Board confidence in the achievability of its forecasts for the full year results.

Looking beyond the second half, the Board also remains positive about the opportunities for growth, especially in Canada, Australasia as well as Continental Europe. "

what margin would you expect in a business of this type?

[hippo] 05/6/2013 09:27

Also if you do strip out the non-recurring, it is not exactly a good revenue to net profit margin. imho.

[hippo] 05/6/2013 09:25

^yes, but who is to say there won't be a whole new batch of one-off's in the next results. In my books you either make a profit or loss, you can't start ignoring items because they are one-off, and I don't like the effort they have gone to, to imply that is what we should do.

I accept that if they have no such items in the next 6 months, they should announce a decent set of results, but they are now starting from a position of a 1m loss.

[dasv] 05/6/2013 09:18

yes and as a discounting mechanism the market should price according to future earnings. By definition non-recurring elements on the balance sheet will not be a factor in the next figures released by the company. I'm not selling just because they are reporting figures on non-recurring expenses though of course like anyone here I wish they could have been avoided somehow - but the majority date back to 2010. How long should the SID share price be punished for events 2-3 years ago?

[rat attack] 05/6/2013 09:06

Nothing that wasn't already flagged some months ago!

[hippo] 05/6/2013 08:41

I don't think the results are great, despite the increased revenue they have slipped into a loss.

It is good to ignore the non recurring items, but at the end of the day they occurred and pushed them into a loss.

[kinbasket] 05/6/2013 08:00

Narrative suggests H2 will be significantly better than H1 in a number of places. e.g. 66m of order book expected to fall in H2 and blended margin expected to improve.

very happy with these results.

[rivaldo] 05/6/2013 07:34

An excellent set of results with 0.8p EPS in H1 alone, particularly given the deferral of a major contract and the general economic landscape.

I note that their targets include 15% revenue growth and progressive dividends, with no need for mentions of financing etc.

The excellent order book means investors can be confident about the year-end outturn, and the outlook reflects that confidence:

"Summary and Outlook

The Group's result has been encouraging through a difficult first half and the performance of our overseas operations, coupled with the strength of the UK order book and current margin run-rates gives the Board confidence in the achievability of its forecasts for the full year results.

Looking beyond the second half, the Board also remains positive about the opportunities for growth, especially in Canada, Australasia as well as Continental Europe."

[dasv] 05/6/2013 07:22

I note that in relation to the whole working capital/debt/equity debate, the RNS is at pains to point out that working capital burden for hydro quebec is 2013 h1 rather than h2 - and that the project is progressing well - i.e. they can convert recycled/recovered materials into cash.

There is no mention of funding requirements in the RNS perhaps suggesting sour grapes from Edison?

Any thoughts on working capital and debt after reading the (impressive) half year report?

[rat attack] 05/6/2013 07:17

Summary of first half figures which at first glance look ok, some slippage at old Silverdell but more more than made up for at EDS. Target 15% revenue growth cannot see any additional funding requirements!!


RNS Number : 3033G

Silverdell PLC

05 June 2013

Silverdell PLC

("Silverdell" or the "Group")

Interim results for the half year ended 31st March 2013

Silverdell, the Specialist Environmental Support Services group, reports unaudited interim results for the half year ended 31st March 2013.

Financial highlights

Highlights (Note: 2013 numbers include the acquisition of EDS Group Holdings Ltd completed on 18 June 2012)

-- Revenue up 103% at GBP63.9m (2012:GBP31.4m)
-- Proforma revenues up 15% (2012: GBP55.4m)
-- Order book at GBP238m (2012: GBP133m)
-- Adjusted EBITDA* up 206% at GBP5.2m (2012: GBP1.7m)
-- Proforma adjusted* EBITDA* up 33% (2012: GBP3.9m)
-- Adjusted operating profit up 157% at GBP3.6m (2012: GBP1.4m)
-- Adjusted EPS* up 100% to 0.8 pence (2012:0.4 pence)
-- Net debt of GBP15.8m, including finance leases of GBP8.1m (2012: GBP6.7m)

Unaudited
Six
Unaudited months Audited
Six months ended Year
ended 31st ended
31st March March 30th September
2013 2012 2012
GBPm GBPm GBPm

Continuing operations:
Turnover 63.9 31.4 82.5
Adjusted EBITDA* 5.2 1.7 6.2
Adjusted operating profit
* 3.6 1.4 4.8
Operating (loss) / profit (1.1) 0.6 1.3
Adjusted pre-tax profit * 3.3 1.1 4.3
Adjusted EBITDA margin* 8.1% 5.4% 7.5%


Pence Pence Pence
Earnings per share
Adjusted* diluted 0.8 0.4 1.3
Basic (0.3) 0.1 0.0
Diluted (0.3) 0.1 0.0


*Before intangible assets amortisation of GBP1.6m (2012:GBP0.1m), non-recurring items of GBP3.2m (2012: GBP0.6m) and share-based payments of GBP0.1m (2012:GBP0.1m). From September 2013 this table will not include Operating Profit, as the key performance indicator is considered to be adjusted EBITDA

Unaudited Proforma Results for the period ended 31(st) March:


2013 2012
Silverdell
Silverdell EDS Group Combined GBPm EDS Group Combined
GBPm GBPm GBPm GBPm GBPm
Turnover 34.7 29.2 63.9 31.4 24.0 55.4
Adjusted EBITDA* 1.2 4.0 5.2 1.7 2.2 3.9
---------- ----------- -------- ---------- ----------- ----------

*Before intangible assets amortisation, non-recurring items and share-based payments

Operational Highlights

-- EDS successfully integrated into Group with scope for further synergies
-- Record level of over GBP300m of total pipeline opportunities
-- Strong performances from Canada and Australia contracts
-- GBP20m of new contracts secured in H1 are performing in line with expectations
-- New Non-Executive Director appointed
Commenting on the results, Chairman Stuart Doughty said:

"The strength and breadth of our service offering and the international spread of operations have once again provided the foundations for a resilient set of results and good revenue growth, despite challenging conditions in the UK. With GBP66m of work scheduled to fall in the second half as at the period end and a record pipeline of opportunities, the outlook remains positive and our expectations for the full year are unchanged. The pipeline of opportunities supports our view that we can fulfil our key strategic objectives of year on year revenue growth and increased EBITDA margin."

[sirmark] 03/6/2013 22:03

Took some profit today the 150,000@15.11 was me

Have a feeling this may drop and create a lower entry for me long term prospects not in doubt just trading the share