Sprue Aegis Share Discussion Threads

[gnnmartin] 10/5/2018 08:29

The terms of the settlement seem to me (on a quick skim) to strongly favour BRK, so I guess Sprue must have done something wrong. Anyhow, it seems the market's reaction is relief.

[gnnmartin] 24/4/2018 09:56

They bought on 20th (reported today), so they are still buying post the RNS on 19th.

[the big fella] 24/4/2018 08:54

Yes. Interesting to see whether they are still keen to buy following the latest newsflow.

[masurenguy] 24/4/2018 07:57

The various Downing Funds have increased their shareholding by 83% over the past 3 months. During this period they have acquired 2.1m shares and they now collectively hold 4.6m. This currently makes them the second largest shareholder with a 10.0% stake.

[deanowls] 21/4/2018 09:36

I’m expecting that they have had to pay quite a bit up front for stock. At the half year they had 13m of stock, is expect product infill, wanting to ensure stock was onshore at least six weeks prior to changeover And a supply line of product for at least the next four months is manufactured and in transit that this is where the money is sitting. I do not expect a new manufacturer would absorb or take the risk of this on 90 days terms. The main risk which was known is them not being able to shift the stock. People more nervy on the FD going but they do not organize that loan unless they maybe see a need to utilize it in this changeover. Is that good planning but poor communication?

[fozzie] 21/4/2018 08:23

Well I am down 49% on these now having been in profit fairly recently. I intend to buy some more but will stagger in my buys. There is a good business here and I believe it will come again even allowing for accident prone management. Last chance saloon though and as GHF says there are questions that need answering. I have emailed a few to Sprue.

[pyemckay] 19/4/2018 22:06

bargepole job here until results out. pure gamble otherwise.

[glasshalfull] 19/4/2018 20:48

Evening everyone,

I agree with many of the points raised by posters here today. Until SPRP are able to clarify the cash position & reach a resolution or compromise then I feel the share price will only come under further pressure.

Main questions for me: -

(1) New FLEX & Far East distribution networks undoubtedly required ramp up in WC (previously they had a 90 day landed agreement through the DA). I’d hope this large WC requirement a one off. However, the £3m drawdown caught us all by surprise & I too thought they had a sufficient buffer with £10m net cash per last results?

(2) Will the dividend be maintained? All depends on Q1.

(3) BRK & SPRP continue discussions & we can only hope that a settlement is agreed, as I wouldn’t welcome a prolonged legal battle over the DA stock or, even more importantly, any further litigation surrounding any alleged breach. Let’s hope they can reach agreement to place a line under all of this rather than the beginning of claim & counter claim.

(4) Why have Newall engaged in this manner? What is their ultimate goal? Is this the prelude in a further attempt to acquire Sprue or simply a partner scorned that is employing a scorched earth policy?

(5) I now question the resignation of John Gahan. It appears highly coincidental that it occurred just weeks prior to the shenanigans of Newall???

Needless to say I have reduced my holding significantly & it is no longer a material position.

With the battery issue in 2016 I loaded up substantially, recognising that although a scesmic event it appeared that they were able to contain. This time round ... well, I’ve ansolutely no idea on the likely outcome!!! Preservation of capital is my main concern.

Pity that these events now preclude Sprue from attending Mello 2018. I have a great deal of respect for the Sprue team & it’s been an exciting & ultimately rewarding journey for the last 11 years. Just hope that GW and team are able to resolve sooner rather than later.

Kind regards
GHF



EDIT - Altered a few typos. Still on hols using phone with predictive text playing havoc. Also, forgot to mention that Stockdale have also suspended forecasts until conclusion of the DA issue.

[cockerhoop] 19/4/2018 18:11

Whilst the cash/debt situation has yet to be definitively spelt out at the Interims they had £10m in cash. Today we're informed they've drawn down £3m of a working capital facility. On the basis that they will have spent the cash prior to using the debt we have a potential cash outflow of £13m over the last 9-10 months.

[eeee1] 19/4/2018 17:45

I was thinking about it as well and why the market is discounting so much. Is it the fact that they lost this supplier could mean lower revenue next year although they have signed new MA and DA?

[pldazzle] 19/4/2018 15:58

cc2014 (your post 1654): There's something I can't put my finger on either, but what's doubly puzzling is the position re BRK stock.

Logic would suggest:

1) If they have to write off £3.4m of BRK stock instead of selling it back to Jarden, the P&L takes an [exceptional] £3.4m hit, but there's no impact on cash, it's just a paper entry.

2) If they were able to sell it to Jarden at book value, cash would INcrease (other things being equal) from £11m to £14.4m.

3) There may be some wiggle room between these extremes.

What am I missing?

[greasynut] 19/4/2018 15:18

I am not clear why the Newell problems are causing a delay in the reporting of the 2017 results. Presumably they will take a write down in 2018 if necessary. Can anyone enlighten me?

Also, if SPRP are left with the BRK stock, should that imply a full loss? I would expect them to sell it on somewhere even if closer to cost price.

I note that Newell Brands are having a torrid time in the US. Fights for control etc. No reason to expect rationality from them for the time being.

[the big fella] 19/4/2018 12:54

Well the dividend may be in trouble and certainly there is some uncertainty!

[eastbourne1982] 19/4/2018 12:49

Worth noting in 2016 the business had circa 22 million in cash, two years down the line I would imagine the net cash position is 5 - 7 million, if this trend continues the business is obviously in trouble.

[cc2014] 19/4/2018 12:29

There's something I can't put my finger on here.

Net cash at H1 2016 14.7m
Net cash at H1 2017 10.0m

Amount of stock sitting round they can't sell = 3.4m

So, why does a company turning a profit according to the accounts need to borrow 3m

Net cash at H1 + 9 months profits = approx £11m cash - 3.4m they can't sell tied up in inventory = 7.6m net cash.

Even with some stock build or delaying payments by a day to make the accounts look good they should still have loads of cash.

I note the FD resigned in early March and no replacement in place.


I have only done 15 minutes research on the finances so I must have missed something? Any thoughts?

[eastbourne1982] 19/4/2018 11:44

Exactly, why not put that cash to use, I don't hold any, in the past I would have been tempted after the recent drops however the waters seem very muddy here now.

One thing I have learnt over the years is small caps get absolutely battered when finances become a question mark, in six months £1.20 may look cheap or very expensive.

Not worth the risk.

[shanklin] 19/4/2018 11:15

So, how close are they to being insolvent? It's not something I have ever previously considered to be a risk with SPRP.

P.S. H1 results show them as having £10m net cash!

[horndean eagle] 19/4/2018 11:06

A bit puzzling that cash position is so weak and they have taken out and drawn down a fair chunk of the RCF. The FD going looks like a significant event in hindsight. Lots of questions abound.

[eastbourne1982] 19/4/2018 10:42

What is the debt position here these days, balance sheet used to be decent, must be hell of a lot weaker now.

[the big fella] 19/4/2018 08:34

Glaws - agreed. The one thing they musn't do is take their eye off current trading. They have managed to trade their way through previous set backs and I have no doubt they will get through this. But it will not be without pain. Just looking at the share price valuation there will certainly be a big whole in the numbers that were announced in the guidance. Fortunately the market values based on a forward PE these days!

[glaws2] 19/4/2018 07:59

I believe they actually already own the stock - BRK was supposed to buy it back. I suspect the increased funding is cover the gap in expected revenue from BRK - they need to the working capital to buy the new products from Flex.

[martinthebrave] 19/4/2018 07:53

Sounds like they are getting ready to buy the stock back. Probably the best way out of this.

[the big fella] 19/4/2018 07:43

That’s a lot of stock. Anyone else concerned that the dividend will be axed this year. Certainly no compelling argument to top up just yet.