Swallowfield Share Discussion Threads

[cautious investor] 27/3/2011 11:11

Markt

I think that we are now clear that you do not like LFI/WSE. Thank you for all this background information, but please can you leave this thread for SWL matters. You said that you did not have any shares in SWL. Why are you posting? To damage the value of your WSE shares? Or is it to wan us of the disaster that might come from having someone connected with WSE on the board. I do not see that this has been a disaster in Creston or Northbridge.

If you have some info that directly affects SWL let us know. If not, then leave this thread to others who have a more direct interest in SWL.

What matters to us is not how LFI/WSE are run, but SWL.

[topvest] 25/3/2011 21:27

All getting a bit desperate here - knocking WSE - also the company are calling holders to try and change their minds. I've voted against - I think it's probably all over bar the shouting. WSE and Gyllenhammer to get on the Board as they deserve! If you take a wider look at Marshall Monteagle, LFI and WSE they have some good businesses. I do agree that WSE and LFI investments are severely undervalued at the moment, but rather back them than others as they are a straightforward and prudent bunch of successful businessmen. They have made mistakes, but are a better bet than most. Just my opinion, but there you go. I'm not against Swallowfield, but I think the major holders need to be on the board. The existing board are clueless to deny them a seat given one owns 30% and the other nearly 20%.

[cautious investor] 25/3/2011 19:51

Markt

I seem to recall that a while back you said that you had shares in LFI/WSE. Since you seem to think them incompetent and/or crooks, presumably you have now sold these shares?

IMHO D.C. Marshall is one of the good guys. Yes he gets about 6 sets of directors fees, but then he sits on that number of boards. None of the fees seems excessive, unlike many NEDs. He is not one of these people that sits on too many boards either.

What do you think will happen if Gyllenhammar loses the EGM vote?

Share price of SWL reflects the fact that WSE keeps on buying shares so there is no liquidity. If Glyenhammar/WSL were to start to sell rather than WSE buying share price is likely to crash.

[markt] 25/3/2011 14:43

oh, and LFI rents out the 1.57M residential building to Monteagle Marshall, where Mr D.C.Marshall is the CEO, quite a big company, rental price till last year was only 27k/year. A return of only 1.7%

While LFI paid 5% to borrow the money !....a cost of 75k/year.

Is it used by Mr Marshall when he is in the UK ? the renters are not disclosed in the LFI accounts
D.C.M has at least 6 board meetings to go to at various companies

One assumes that Mr Marshall is flying back and forth to South Africa, where he is resident. WSE/LFI are paying for that ? and hotels ? LFI/WSE shareholders have, imho, no information.
====

Mr D.C.Marshall keeps the money from being a director in companies where WSE/LFI have invested shareholders money ?
Who knows !

I was told in writing and verbally, by the CEO of WSE, that the money was paid directly to Mr D.C.Marshall and not to LFI/WSE.
But !, for the money from Creston PLC, 30k/year I think, this story has just changed and apparently the money goes to LFI/WSE.
The changing stories gives the appearrance that no one knows what is going on.
And how can any auditor do his job if things are not known by the CEO ?

(the other company accounts where Mr D.C.Marshall is a director say "to a company in which no director has any interest". A more vague statement would be difficult to produce !
One company account reports that Mr D.C.Marshall receives nil payment, but in the paragraph it reports that 15k is sent to a company for him. Intriguing. 15k is not nil, 15k is 15k !. Perhaps the part that says nil is the part that they send to the taxman !

Company Act and FSA/LSE reqts. require transparency and information to be provided to shareholders. "true and fair".

[cautious investor] 21/3/2011 14:34

Good point markt. Cost of sales only increased by 3M, so if consumed inventories increased 8M, then other cost of sales reduced by 5M (from 10M to 5M). Does this mean less value added? If so how can they maintain margins? Maybe in part this reflects more products sourced from china JV where e.g. labour element becomes consumed inventories rather than other cost of sales?

Note 11 says "Wellington land portfolio only" was revalued, which implies that rest of Wellington site (factory?) was not. Presumably they did not want to revalue the factory as this would have increased depreciation. I agree this is confusing. They say "certain of the freehold land and buildings were revalued in 1988" giving 0.79m valuation, then they say that the "land portfolio" was revalued from "value" of 0.79M to 1.75M. Are both these revaluations of the same property?

There is one unit in Bideford that has been for sale for over a year (note 16), so value of rest of Bideford land and buildings not likely to be high.

[markt] 20/3/2011 18:31

1 unusual thing in the accounts for 2010...from page 64

consumed inventories of 40M in 2010 compared with 32M in 2009.
So an increase of 25% but sales nor inventories of products for sales did NOT increase by 25%.

Hence, where did the inventories go ?

[markt] 20/3/2011 18:27

Value of Bideford site
Anyone know anything ?

Wellington site was valued at 1.75M in 2005 , with historical value of 0.79M.
And ...historical cost of all land and buildings is 6.3M excluding depreciation.

That would infer, I think, that the Bideford site is worth millions.
But the accounts are almost meaningless..including mention of 1988....so much for informing shareholders...

If land is a large part of the total ...and 'if' it was bought before 1988....then (adding 'ifs' !!) it should be worth much more now.

Alternatively if large part of the cost has been for buildings then the value may have increased or reduced depending if the buildings are now getting 'tired'.

[markt] 20/3/2011 18:19

EBIT in 2010 was only 2.5% while turnover was up...and lower than the year before...and not able to pass on all of increases in cost of materials to customers

"Perhaps" that is one of the reasons that an EGM has been called

Very low profit margin, as SWL shareholders will already know.

[markt] 20/3/2011 17:47

Another point ref. SWL

Order book for 2011 was reported as up 14% compared with prev. year. Very good.
BUT
company says that material costs are up and that will reduce the impact

"by passing these costs on to customers as appropriate"

...which makes we worry that placing sales contracts for volume orders but without including the price of the materials in the calculations !,

(Finsbury Foods reports say the same sort of things)

===

If you get an order for say 1M cans of spray...then you need to have in place a contract or option to buy the parts for that order...and imho to pass on ALL of the costs of the parts that you have to buy. There should be no need imho to "negiotate with customers" the increase in price of materials. (company report wording gives the impression that SWL takes the hit from increases in materials and then asks customers if they are willing to 'chip in' something towards those increases !)
If the orders do not include enough profit...then imho don't accept the order....and profit margin has to include for the costs of overheads, and new production rooms....etc.

The increase in turnover is good, but it needs to produce a profit imho.
(I think that last numbers showed an increase in turnover but lower profit or lower profit %).

[topvest] 20/3/2011 17:46

markt - yes, fair points, but Marshall has been involved in a number of successful companies. I think the mistake they often make is not selling a company when valuations are high. Nevertheless, companies they are involved with creating normally do pretty well. I'm confident that when WSE and LFI eventually get broken-up, there is lots of value to be had. NAV of WSE is 71p, but if their underlying investments were given an average market valuation it would be significantly in excess of a £1/share imho. They have some cracking investments at the moment - Creston, Hartim (not given a market value), Swallowfield and Northbridge. Not one of these are valued at anything like fair value by the market!

[markt] 20/3/2011 17:18

farmingrpg
You seem close to SWL
You know anything about the land value of the 2 sites of SWL in the UK and possible sale price of the 1 site (Bideford I think) that they are interested to sell but little interest in last few years.
(I see that it is on a small industrial estate...so no change of use would be allowed I think...and I guess that not much demand in Devon for industrial space...)

And do you know if there is enough space at the other UK site (Wellington) to accept the functions from the Bideford site building if it was sold ?

Would any sale wipe out a lot of the SWL bank loan ?

[markt] 20/3/2011 17:15

Hi Topvest
(Apologies to any SWL readers...as I wander off thread a little with this post)


I disagree when you say that "WSE has generally good investment record, if not spectacular"

WSE share price and NAV is lower now than it was 10-15 years ago.

2006 warrant exercise price was 64p, X millions exercised
if my memory is correct a South African mining Pension Fund bt 2.7 millions of new WSE shares at 56pin 1996-1997 (converted for 4:1 consolidation later). Warrants issue shares of 2007 resulted in 50p/share effective price, millions of shares exercised; 2 new for 5 old. . Total number of WSE shares has increased from 11M to 18M now. All of those shares are showing a notable loss, so the performance has not been spectacular.

And the WSE share price now is 37p-43p.

Definitely not spectacular !!.
On the plus side, the WSE NAV and share price has been increasing since the market low of April 2009.....and if it manages to continue then the share price will hopefully increase.

(the investment is Northbridge, I would agree has performed in spectacular way, from 1 pound cost to be in the 2 pound region now....but !!....imho, WSE did not take up all its rights in the rights issue at 125p !; turns out it was not a rights issue but a private placing, why ?)

(WSE and LFI have sufferred drastically by staying invested in companies when the share price was falling, MWB, CRE..loss of millions of pounds...a major -ve factor of the LFI/WSE investing model/strategy imho. MWB was 300p, now it is 43p, LFI did not sell out, result, LFI share price crashed from 50p to 15p)

Although one must admit that the last 10 years have been difficult times for investing, with market ups and downs, the 2007-2009 economic crash and banking collapse being the biggest for many decades. And with hindsight any analysis is of course very easy. And LFI/WSE are still around with NAV in same region as in the past, so there is the chance of recovery. While many companies have gone bust over the last 10-15 years.

Hence at "this exact moment in time", the conclusion imho is that the the WSE/LFI investment strategy/model does not work. In the future hopefully it will be different.

WSE and P.G. are trying to make things happen at SWL, eg. the EGM....hopefully we will see more news over the coming months...and hopefully the SWL share price may increase over time. WSE and P.G. have big investments in SWL so any changes they try to make, one can assumes that they expect to be beneficial to themselves, and hence to all shareholders.

P.G. and WSE/LFI have lots of contacts and contacts of contacts....so I am hoping that any future changes at SWL that WSE/P.G. want would be beneficial to all SWL shareholders. P.G. owns around 30% of approx. 20 companies (or more) so he clearly has a lot of contacts with other directors and chairmen.
Just a case of waiting to see what unravels I think.

[topvest] 20/3/2011 14:49

WSE have a generally good investment record, if not spectacular. Doctor's Direct being a notable exception.

What concerns me is that many of WSE and LFI's investment are at a SIGNIFICANT market discount. Look at Creston, Northbridge and Finsbury Foods. It's almost as if their blocking long-term investment takes the valuation down a peg or two. That could happen at Swallowfield, but the valuation is already pretty low.

Swallowfield will have a more stable future with both bigh holders on the Board. That will lead to the Chairman (and probably others) leaving. That's life - those who own the most shares ultimately will get their way.

[markt] 19/3/2011 21:51

farmingrgp
...you seem very attached to the current chairwoman

That WSE/P.G. want to remove/change the chairman is no big deal imho.
WSE/P.G. own 44-46% of the company.

If they think it is in their interest as shareholders then they are entitled to call an EGM if they have enough votes, as any shareholders are.

If they were very impressed/happy with the existing chair person then they wouldn't have called the EGM to remove them. They must have their reasons and one assumes that they may have a new chairperson in mind and don't want to leave a vaccuum.
Any director can be removed by the shareholders voting, it is a healthy part of democratic company operation.

But I can understand that the other directors may then also worry for their own jobs or feel secure with the existing chairperson or maybe they play golf together....c'est la vie.....but the company does not operate for the directors...

[markt] 19/3/2011 21:42

One thing I don't understand about the SWL development approach....

Why develop a new factory in the Czech Republic (where labour costs are much lower) BUT also plan to develop the UK factory.

If it is best to operate the factory in the UK then why open a factory abroad ?

And if production is best done in the Czech republic then why plan to develop the 2 UK factories ( new manufacturing rooms at Wellington and Bideford are coming on line now) and operate 2 factories in the UK and 1 in the Czech Republic (extra management costs, security costs, more tax complication, extra inter factory transport costs etc) ?

(SWL have been there before, with a factory in Belgium...which they then closed)

The Czech factory has problems of production volatility. (if UK and Czech factories were 1 then there would be less volatility, the volatility has been created by the directors opening a factory in a distant country and moving some product lines there......so, volatility created by the directors). Production volatility reduces profitability (if production team are waiting since have nothing to produce.....or lightly loaded....; recent results show turnover up but profitability down !!)
====

WSE and P.G. can see the costs for the new manufacturing rooms arriving in this reporting period....and see that profitability remains low.....that is perhaps part of their reasoning for calling the EGM (my guess)...seeing that increasing profitability is very slow in arriving, or not at all.

They are perhaps not so happy that the last report announces that the profit margin will reduce, when the aim of the company is to increase the profit margin. (and as big shareholders they want the see that profit margin will go up)

Perhaps they are also concerned about the cosy image of the board. That is the image I have anyway. The current chairwoman was an ex-director if my memory is not wrong. And the board has recently called up Mr Organ, another past director. I can't see ex-directors as being likely to arrive and shake up the company or being willing to make significant changes to increase the profitability.

(personally I would prefer a higher % of the dirs. to be like the ex-L'Oriel chap..with direct sector experience.....).

=====

If I was WSE/P.G. (noting I have no experience in the SWL sector, and no interest in the sector !, yes I am invested via WSE) I would want the total value of Inventories and Receivables to be reduced. 18M pounds and cap. value of the company is only 15M !. 18M is high number imho compared to profit of approx 1M/year. Too high imho, especially if profit margin is small.

And 2 customers are 35% of the revenue. If 1 customer from this 18M of Inventories/Receivables does not pay, or can only pay 1/2 then profit for the year would be killed. If 10% of receivables was not received = 1.8M, equals 2 years of profits ! One of the risks with SWL.
====

SWL share price has gone up since WSE invested....and other companies where WSE has invested the share price is now lower, X years later. So SWL has done better than some others.

Doctors Direct went bust I believe, 750k or so lost, from WSE. (way over valued when invested imho, crazy).

====

Interesting imho that P.G. is receiving a high % return via the dividend. Nice to see that one of his investments has performed, so many have not !
(P.G. paid around 40p for large number of his shares, and dividend is around 6p I think, so a good return....but not so important, the past is the past).

The dividend that is paid to WSE is consumed by the running costs of WSE. The WSE shareholders never get any of it.

The money that WSE/LFI receives by having people sitting on the boards of companies where they invest helps pay the running costs of WSE/LFI. (Except for Mr D.C.Marshall, his pay for being on any board goes direct to an un-named company (I assume Mr Marshall's company, to avoid tax perhaps), not to WSE/LFI).

[farmingrgp] 19/3/2011 19:55

I suspect the Board and its advisers have been spending vast amounts of valuable time trying to find a solution that will satisfy the needs of the two major shareholders and also dealing with the possible takeover panel investigation. Let us not forget that any Takeover Panel investigation is a direct result of the activities of the two largest shareholders. Will Western Selection flag up its problems, other than they don't like Shena Winning? This company has done much better than McBride in dealing with 'Raw material price increses'. Attempting to cull the Chairman on such a trumped up charge reveals the paucity of their argument

[markt] 19/3/2011 19:44

...it interesting to note imho that WSE and P.G. own a total of around 44-46% of SWL

hence
I would have thought that they would have had little problem in winning the vote, since they only need approx. 4-6% to get over 50%.
And there are a number of SWL shareholders with around 3-7% so with just 1 voting for WSE/P.G. then could about get 50%


But !
they had a vote in the past and WSE/P.G. did not win

(a number of the large shareholders are personal names, perhaps ex-directors or something....)

...interesting the sudden growth in the number of non-exec. directors in recent months...gonna need a bigger boardroom !

[topvest] 18/3/2011 20:41

Maybe they know that they are going to lose!?

Given they knew this was coming it underlines the board's incompetence that they haven't got a response already drafted.

[cautious investor] 16/3/2011 21:30

Does anyone know what to make of the Board's comment in the notice of General Meeting that they have had "insufficient time to put together a full document advising shareholders of the background" to this vote?

Where's Mr Gyllenhammar's reasoning why we should vote in favour of these resolutions and where's the board's counter arguments?

Are we just expected to vote based on rumour and prejudice rather than (someone's view of) facts?

The board have had 3 weeks to put together the notice of EGM. Surely they could have spared some time to put together a "full document". It should not take 3 weeks to find out whether a compromise is possible or not.

The Board say their reasoning will follow, but they are asking us to vote before we get the reasoning. This is not good corporate governance. I thought one of the reasons Mr Hagen was recruited was for his corporate goernance skills. Maybe they want us to lose the proxy form while waiting for the reasoning so that we do not vote.

[baner] 12/3/2011 21:06

# farmingrgp

as you are a large shareholder in Swallowfield with a significant portion of your personal wealth locked up in this investment, poor man, i can understand that you are deeply concerned re the value and potential exit possibilities of and for your Swallowfield shares - you should be, not the least given the seriously disappointing recent Interim Report that the company again has presented.

but to suggest that Western Selection could be forced by the Panel to make a bid for the company at circa 145p is not only naive and maybe a bit desperate - it smells of "devious and deliberate distribution of groundless rumours" - and if the intention behind this is to influence the Swallowfield share price - you are walking on very thin ice! there are, one must assume, regulatory bodies interested to look into that type of action.

oh, you had not thought of that......

the possible removal of Shena Winning will certainly not give any shareholder "control" over the Swallowfield board - and that is indeed the only resolution at the forthcoming EGM, when it comes to changing the structure of the Swallowfield board.

having read the announcement re the EGM request - which i recommend you to do again - how have you come to the conclusion that any shareholder is trying to "capture control" of the Swallowfield board? what factual grounds have you found for such an accusation? why do you disturb the Take Over Panel and the Company with this non-sense?

please appreciate that "rumours", "gossip" and your "personal and subjective conclusions" are not good enough to be ´counted as "factual grounds" in this respect.

oh, you had not thought of that..........well maybe you should then be a bit more careful throwing your accusations and spreading your rumours around?

no shareholder "control" Swallowfield´s board today - why would the removal of Shena Winning in your mind change this situation?

oh, you have no answer.........?!

if a company is not performing well it is indeed the owners/shareholders entitlement, and maybe also duty, to take action with the objective to hopefully better the chances going forward.

if the population of the UK is not happy with Gordon Brown as PM, we vote him out of his position - but that does not at all suggest that a certain individual citizen/voter, is taking "control" of the country post-election. the majority of the votes support the initiative of throwing out Brown, in order to instal a person better suited for this task and representing the best interest of all voters, but no individual voter/citizen "control the country" as a result - after all, we are not Zimbabwe.

and this is exactly what should hopefully happen with Shena Winning: she is not doing her job well and accordingly she is thrown out and replaced with a more competent new chairman.

but this process certainly does not hand over control of the company to a single shareholder, or as you suggest, any group of shareholders. maybe in your fantasy, but certainly not in the "real world".

you seem to have great difficulties to understand these mechanisms - assuming you do indeed write your comments yourself.


if you are so impressed with the company and its performance, why don´t you buy more shares in the company, allowing you to further support Shena Winning as chairman?

or maybe you are indeed the keen and rather desperate potential seller of your major investment, that your writings above implicitly in fact may suggest?!

i must say i am increasingly inclined to believe that the latter conclusion is the correct one - poor man!

but this is of course only my personal and subjective conclusion, not based on "known facts".

[farmingrgp] 12/3/2011 14:20

Hi Topvest.
I understand that PG (or the Viking Raider as the Investors Chronicle label him) was offered a seat on the Board. I understand that he would only accept a Board seat if WSE also had one. If WSE were given a seat then Tony Wardel should have a seat (At least Mr Wardel would bring some industry knowledge to the table). Perhaps all shareholders should have a seat on the Board. If you want to know why PG is called the Viking Raider do some research on companies that he has been involved in, such as Chapelthorpe.

[topvest] 12/3/2011 08:17

Is there a date for the EGM? I will support the requisitioner with my small holding - Swallowfield have missed a trick here - both shareholders should already have someone on the board given their significant holdings. The Chairman has obviously made some errors by ignoring major holders and letting the situation deteriorate to where it currently is.
WSE (and Gyllenhammer) don't have a record of treating shareholders badly and I think Swallowfield will be in a better place with these holders on the board working from inside the tent.