Smoove Share Discussion Threads

[makinbuks] 14/7/2023 10:42

Great point re their own valuation and the £10m cash. Kestrel clearly in the driving seat and I know nothing of their motivation or style but Harwood, or certainly Rockwood Strategic might be tempted to cash in on the recent uplift rather than wait a couple of years for more. Just a feeling, no knowledge

[aimsurfer] 14/7/2023 10:35

All true, if that was PEXAs position I don't see how an acceptable offer would be agreed. Smoove have 10m in cash and not desperate. You need to acknowledge loses were due product development, headcounts are now back down from 130+ to 90+. Econveyancer used by 80% of broker marker. DigitalMove can optimise optima legal. Cost efficiencies are there to be made by combining both businesses. Smoove pivoted successfully to remortgage transactions, those are not going way. Transaction volumes are less but company now has a broader reach whilst waiting for volumes to return. Pexa are trading on a valuation that is 10x their revenue. PE over 100. Valued at over 1billion sterling. They need to show growth to keep their investors happy and keep that valuation intact imo.

[makinbuks] 14/7/2023 08:55

Shares up nearly 10% indicating that the market now expects a bid. Current MV £26m. This is a loss making business which turned over £20m last year and we're on the verge of a recession and possibly the worst housing market since the early 90's. I think its very optimistic to expect double the current price

[aimsurfer] 14/7/2023 08:48

Synergy benefits makes me think pexa will be willing to pay up. I would be very pleased if the offer is close to £1. Broker target I believe is just over 90p. If I was to take a guess then I suspected they are negotiating in the 80-90p range.

[red ninja] 14/7/2023 07:37

Yeah, well it isn't the management that will give the go ahead for this it's the funds.
Kestrel bought plenty of these in the 70's, 80's and some at least in the 90's.
I'm not sure what their average is, but with the companies potential coming through I don't think they will want a cheap takeout.

I may be deluded, but I'm in the £1+ group.

[sidam] 14/7/2023 07:31

I also think it is quite positive. They would not go to the cost of formal due diligence unless they were close on price. So, if a bid were made, I would expect a minimum of 55p the low hurdle for management stock options and possibly 85p which is the high hurdle. Would due diligence take more than a month? I hope not so this may be the last extension.

[aimsurfer] 14/7/2023 07:18

Proceeding to this stage they must have agreed on broad valuation parameters, hopefully we'll get a leak before the bid is made to add some excitement here :)

[red ninja] 14/7/2023 06:45

It all sounds positive and the market is in the dark about any potential offer price, but I would't be supriced if the market maker raise their prices by a few pence at market opening.

[masurenguy] 14/7/2023 06:33

Extension of deadline

On 24 April 2023, the Company announced that it was in early discussions with PEXA Group regarding a possible cash offer for the Company. Discussions have advanced constructively between the parties and a formal due diligence process has now commenced. In order to allow for due diligence to be carried out the Board has requested, and the Panel on Takeovers and Mergers has consented to, an extension to the deadline by which PEXA is required either to announce a firm intention to make an offer for Smoove or to announce that it does not intend to make an offer. Such announcement must now be made by not later than 5.00 p.m. on 11 August 2023. This deadline can be further extended by the Board, with the consent of the Takeover Panel in accordance with Rule 2.6(c) of the Code. There can be no certainty that an offer will be made nor as to the terms of any offer. A further announcement will be made as and when appropriate.

Looks like the last leg of the process has begun with a further extension to accomplish DD. This suggests a provisional deal has been agreed but of course could still be scuppered by any negative revelations during the DD process. What could be a potential purchase price if the DD completes satisfactorily? Pure speculation on my part but it could be in the region of £60m, or £50m after deducting net cash, which would be circa 92p per share. Obviously we'll have to wait and see but August 11 should now be the final date to determine whether a deal can be consumated or not.

[earwacks] 14/7/2023 06:16

‘Due diligence procedure’ is the first positive step. Never seen a takeover process before an actual offer be quite this drawn out. I imagine there is quite a gulf between the market price and what would be anywhere near acceptable to institutional holders. They are clearly not going to entertain any quick cheap offer which in itself shows a confident board for the future which ever way it goes. Would expect they would want north of £1 per share which in turn will take Pexa some convincing to their shareholders. Will see if there is any market reaction to this statement. Makes me feel a little more optimistic.gl

[aimsurfer] 14/7/2023 06:10

According to Jesper With-Fogstrup, CEO of Smoove plc, 'Discussions with PEXA have been progressing well, and we are pleased to have entered into a formal due diligence process. We look forward to further updates and will make an announcement as and when appropriate.'

[aimsurfer] 14/7/2023 06:05

At least some progress, would have liked to see ball park price /valuation indication. Anyway hopefully this is the last extension we'll see and kestrel haven't sold out low.

[aimsurfer] 13/7/2023 10:06

I can image kestrel wanting exit on valuation based on normalised property volumes, growth potential and econveyancer sector reach. However PEXA want it as cheap as possible. Kestrel were happily paying 80p here last year, I can only think they will exit for less to reinvest elsewhere with more liquidity. I would hope if majority of holders looking to exit they invite additional bids and add some competitive tension to this process. Zoopla or RM could benefit from Smoove and their tech stack. Easy revenue growth and they have customers to sell to. Or private equity may decide to consolidate few players in this sector and take advantage of cheap UK valuations. I hope there is not another extension. This is dragging ?

[makinbuks] 13/7/2023 09:56

Yes I never like extensions, what it implies to me is that the offer is not attractive for holders and there is a painful process going on to talk the price up

[sidam] 12/7/2023 16:18

To be blindingly obvious. Three possibilities - bid, no bid or further deferral. Share price action suggests no bid. So I will have to remain a long term shareholder to benefit from the obvious medium term prospects.

[masurenguy] 12/7/2023 15:06

Next PEXA deadline is 17.00 on Friday. By then it will be almost 12 weeks since "The Board confirms that it is in early discussions with PEXA Group regarding a possible cash offer for the entire issued and to be issued ordinary share capital of the Company. Discussions with PEXA remain at an early stage. Accordingly, there can be no certainty that an offer will be made for the Company, nor as to the terms on which an offer may be made." 24 April 2023. One would have thought that this timeframe was more than sufficient for PEXA to determine whether to make an offer or to conclude any further discussions.

[aimsurfer] 05/7/2023 07:05

Good to see share awards don't kick in unless they achieve 13m gross profit."During the year the Board adopted new share option scheme rules applying to future option grants and a Long Term Incentive Plan ("LTIP"). The Group made awards of 3,400,000 ordinary shares "Performance Shares" under the LTIP to its two Executive Directors and other senior employees. The vesting of all Performance Share awards is conditional on meeting both a performance condition relating to gross profit and a share price performance condition, both of which are measured three years from the award date. The gross profit condition specifies a target gross profit for the year ended 31 March 2026 of £13,574,000. The definition of gross profit used by the condition corresponds with that used in the Group's accounts. Provided that the gross profit condition is met, the share price performance condition specifies that shares will vest on a straight-line basis if the measured share price is between 55 pence (33% vesting) and 80 pence (100% vesting). If either the gross profit condition is not met or the measured share price is below 55 pence, then the awards will lapse. The awards are subject to a post-vesting holding restriction by which the holder may not dispose or deal in more than 50% of the vested shares until the fourth anniversary of the date of the award."

[earwacks] 05/7/2023 06:42

There we have it. Half market cap in cash after acquisition and return of 3.7 million to share holders. Pexa would be bonkers not to go for it if they can

[masurenguy] 05/7/2023 06:19

Final Results for the 12 months to 31 March 2023

The Company continued to make significant operational advancements and traded in line with the Board's expectations during the Period, whilst investing in its product suite and routes to market, against a highly uncertain market and macroeconomic backdrop.

Financial Highlights

-- 7.4% increase in revenues to GBP20.6m (2022: GBP19.2m), despite increased uncertainty in the housing market

-- Gross profit of GBP7.8m (2022: GBP7.8m)

-- Underlying EBITDA loss of GBP4.8 million (2022: GBP3.7 million loss), reflecting investment in the core eConveyancer business and in new product areas. The effect of previously announced cost reduction initiatives was seen at the end of the period and will be more impactful in the current financial year to 31 March 2024

-- Underlying loss before tax of GBP5.6m (2022: GBP4.9m loss)

-- Statutory loss before tax of GBP5.8m (2022: GBP5.4m loss)

-- Net cash of GBP10.1m (2022: GBP20.0m), following the GBP3.7m return of capital via a Tender Offer in January 2023

Operational Highlights

-- Release of new eConveyancer user interface and APIs deepening integration with introducers.

-- 85% of applicable cases now enabled on DigitalMove

-- Significant growth in remortgage segment driven in part by the new fees-assisted remortgage product line through Lloyds Banking Group

-- Conveyancing completions in the Period grew 44% to 53,224 (2022: 36,965). This is composed of transactional completions of 18,382 (2022: 21,837) and remortgage completions of 34,842 (2022: 15,128)

-- Conveyancing instructions in the Period grew 5% to 69,662 (2022: 66,394). This is composed of transactional instructions of 26,877 (2022: 35,917) and remortgage instructions of 42,785 (2022: 30,447)

-- Significant contractual wins including Mojo, Legal & General, Chimnie and Unbiased

-- Pivoted the Smoove Start sales effort to focus on a conveyancing-led offering to emphasise the fee earning potential to estate agents

-- Launched Smoove Complete, the Group's platform for self-employed Consultant Conveyancing Lawyers ("CCL") - 11 CCLs contracted at Period end

Post Period End Highlights

-- Strategic partnership with Mortgage Advice Bureau (Holdings) plc ("MAB"), significantly enhancing market reach by positioning Smoove to provide conveyancing comparison services to MAB's 2000+ Advisers through both Smoove's web platform and Connect APIs

-- 18 CCLs are now contracted with Smoove Complete, an increase of 7 compared with the Period end

Current trading and Outlook

The current year has started positively for the Company. The remortgage segment has been buoyant with instructions up strongly year-on-year. The transactional segment has been stable with instructions lower year-on-year, in line with the Board's expectations and the overall housing market, but supplemented by various contract wins and the recent strategic partnership with Mortgage Advice Bureau. The Board reaffirms the profit outlook announced in its trading update of 2 May 2023, which stated that the outlook for FY24 profit is in line with the Board's expectations, but with a different composition than previously expected. As previously announced, the Board expects the Company's cash burn to reduce significantly during the current financial year as a result of the initiatives it has put in place.

Whilst the Board is mindful of ongoing volatility in the macroeconomic, housing and interest rate environment, it is nevertheless confident in the Group's future prospects, underpinned by successes in new business development, increasing yields in eConveyancer as well as the growth potential of new businesses such as Smoove Complete.

Discussions with PEXA Group Limited

On 24 April 2023 the Company announced that it was in early discussions with PEXA Group Limited ("PEXA"), regarding a possible cash offer for the entire issued and to be issued share capital of the Company. Discussions between the parties remain ongoing and the Company remains in an "offer period" in accordance with the City Code on Takeovers and Mergers.

As announced on 16 June 2023, under the requirements of the Takeover Code, PEXA is required to either announce a firm intention to make an offer for Smoove in accordance with Rule 2.7 of the Code or to announce that it does not intend to make an offer, in which case the announcement will be treated as a statement to which Rule 2.8 of the Code applies. Such announcement must be made by not later than 5.00 p.m. on 14 July 2023. This deadline can be further extended by the Board, with the consent of the Takeover Panel in accordance with Rule 2.6(c) of the Code. There can be no certainty either that an offer will be made nor as to the terms of any offer, if made. A further announcement will be made as and when appropriate.

Jesper With-Fogstrup, Chief Executive, commented: "The financial year ended 31 March 2023 was another volatile period, presenting both opportunities and challenges. The growth in our remortgage volume demonstrates our ability to adapt to market conditions while the development of a new user interface and APIs for eConveyancer provides a strong platform for future growth of that business. Smoove Complete's early results are promising and suggest latent demand among conveyancers for a way of working that is flexible, innovative, and customer focused."

[masurenguy] 04/7/2023 06:30

Cheers rambutan2 - be interesting to hear any comments they may be in a position to make.

[rambutan2] 04/7/2023 02:22

One of the Harwood stable. So 2nd largest holder. And no easy pushover.

[masurenguy] 03/7/2023 16:04

What insight would Rockwood Strategic have? They are not listed as a significant shareholder in Smoove - see listing in the header above.

[aimsurfer] 03/7/2023 13:13

There must be a route to getting this deal done otherwise why keep negotiating. I wonder if they were waiting for q1 numbers to come out and pexa potentially needing those to finalise financing. If that's the case we might hear something soon. Rockwood strategic presenting on Wednesday, I've asked a question on Smoove, will see if they give a response.

[earwacks] 01/7/2023 05:36

Must be a tricky one. The disparity between the market value and potential value of the business must be one of the largest on the uk stock exchange. Pexa whilst not wanting to ‘overpay’; will have to recognise the potential worth and the risk of paying it or miss out on a bargain that could add enormous value via entry into an as yet untapped market. This is terrible timing, but at the same time why this opportunity has presented itself. If they have a ball park figure and can raise the money I feel they will have a go. Leave it for a year or two and they may have to bid against more serious competition at a much higher price. For those of us shareholders that can wait this out and have the patience it should be win win either way