Sweett Grp Share Discussion Threads

[cc2014] 22/2/2016 13:17

I cannot see why they would possibly require a placing. Given the length of time they have to pay the debt most of it would be funded from free cash flow as they won't be paying £1m a year on fees but instead paying a fine.

Even if they did require a bit of cash given their future long profitability and the size of this fine compared to the profitability surely a short term bank loan would be sufficient. I can't see any reason to tap shareholders

[my retirement fund] 21/2/2016 23:10

Judging by odd shareprice action in the past I rather suspect they have sounded out the larger holders regards a discounted covered placing.

[norbert colon] 21/2/2016 20:41

Revenues for the UK / European business (the remaining business after the recent APAC sale and MENA closure) were circa GBP 51m in 2015 and if you look back to 2007 when the whole Group revenues were of a similar figure, their operating margin was in excess of 9% and eps >7p. On this metric and assuming a reasonable PE of 10 would give a share price of around 70p.

Also at revenue of circa GBP 50m and assuming a typical P/S ratio of around 0.7 would equate to a market cap of GBP35m. With 68.7m shares in issue this would give a share price of around 51p.

In 2007 they delivered PTP of circa GBP 4.5m; assuming a reasonable ratio of 8 x PTP derives a mcap of GBP 36m - again circa 50p share price

Yes, the P&L and balance sheet is not going to look great for YE Mar 2016 and we now know that they have ongoing liabilities re: the SFO case until YE Mar 2018 but taking a long term view and with Doug McCormick's intention to grow the business to GBP200m of revenue a share price of 50p seems perfectly acheivable.

Overall NAV of CSG will possibly end up in the GBP 8m area once all the known liabilities are accounted for and the lions share of that is goodwill (GBP 7.3m as of Mar 2015), so on that basis a GBP35m mcap / 50p share price seems pretty steep. That said, P/B ratios vary in this sector (for those listed) from around 1 x (RPS) to over 5.5 x (ATK). Clearly the balance sheet needs some attention but I am pretty sure the Board are fully aware of this.

There is a chance therefore that they do a small equity fund raise but I am not overly concerned about this.

The bottom line is that there is a now a very distinct possibility that CSG will be acquired by a larger player in the market as the services they offer are fairly specialist and typically offer good margins.

You only have to follow the company to see the large number of contracts they continue to win and with their efforts now fully focussed on their key sectors and without encumbrance of the SFO case, I am happy to remain a long term shareholder and look forward to some more positive news flow moving ahead. They remain my second largest holding behind Waterman (WTM).

Always keen to hear other investors thoughts.

[whum] 21/2/2016 08:53

jimmy wilson I think you are about right on the valuation.
been in this for 4 years, bought all the down my average is around 36p
so looking forward to a steady climb.

[jimmywilson612] 20/2/2016 23:45

Hi cyber, always good to have different opinions . This is my take on Sweet Group:

This is all from the last annual report in August

In Europe, which is where the business is very strong and which the focus is on now

Segment profits before non-core PFI/PPP operating profit, exceptional administrative expenses and amortisation of acquired intangibles was £5.9m (2014: £4.5m) representing an improvement in margin on this basis from 9.4% to 11.4%.

MENA (which is now being disposed)

Revenue in the year in MENA was £6.6m (2014: £10.0m), which accounted for 7.4% of the Group’s total revenue. Segmental loss before amortisation of acquired intangibles, goodwill impairment losses and exceptional administrative expenses was £1.2m (2014: £0.1m)

APAC (which has been sold)

has been a stable year in APAC, with revenue of £28.4m (2014: £28.6m), which accounted for 32.2% of the Group’s total revenue. Segmental profit before amortisation of acquired intangibles, goodwill impairment losses and exceptional administrative expenses was £1.1m (2014: £1.3m).

In conclusion, the report suggested an adjusted profit of 3.4M. The core business is strong and a focus on this market, clear the debt and pay the fines and you have, in my opinion, a very good business.
Now if we can get anywhere close to 3.4M profit a fair valuation would be around 50p

[cyberbub] 20/2/2016 22:18

True JimmyWilson, they will save a packet on those legal fees going forward. But adding those back in, still implies only a couple of million profit max. in future years, unless they are going to be expanding the business significantly (or reducing the eye-watering Admin costs).

In fact, the last interims in December indicated only £496k profit for the 6 months (ignoring the legal fees). So maybe a couple of million profit is optimistic?

And they still have to pay the fines announced yesterday.

To me a market cap of £15M for a company making not much more than a million profit seems fair value, not much upside.

I will admit that I haven't done a huge amount of research on this, but am I missing anything? What is going to drive this to say 40-50p in the next year or two?

Cheers.

[jimmywilson612] 19/2/2016 18:38

Cyber, as copied from the August 2015 Annual Report:

"The Group’s loss before tax of £1.1m in the year was influenced by three major factors:
£1.7m of exceptional administrative expenses, incurred in the main in investigating the
Wall Street Journal allegations and in connection with the SFO investigation"

I assume some admin costs will be incurred for:

The disposal of Middle East business
The sale of Asia business

[whum] 19/2/2016 18:19

given time should tick back up to mid 50's

[cyberbub] 19/2/2016 17:29

Just had a quick look at last results. The gross profit margin was quite good for a consultant, but there seemed to be very high administration costs (£7M for the half year! ignoring the bribery legal costs) which more or less wiped out the gross profit.Am I missing something?Am looking for an investment but needing to make sure that it is copper-bottomed (as far as possible!).

[cyberbub] 19/2/2016 17:04

What are the financial prospects for the company now?

[norbert colon] 19/2/2016 16:47

Large glass of wine for me tonight and congratulations to Douglas, the Board and all shareholders like myself (and various others known to me) who have stuck with the company throughout this ordeal.

Onward and upwards.

Good weekend to all.

[battlebus2] 19/2/2016 16:07

Yes not a bad result.

[jimmywilson612] 19/2/2016 16:01

What outcome? I havent heard anything?

[cc2014] 19/2/2016 15:58

Pretty happy with that outcome. Expected really.

I'm hoping price will now rise given issues now clarified

[my retirement fund] 19/2/2016 08:21

That will be the board throwing the kitchen sink at the situation to ensure none of them are criminally implimented in their mistameaners.

[norbert colon] 19/2/2016 08:08

CC you make an relevant observation as indeed they have incurred legal and other related costs of at least £2m since this case came to light around 2 years ago.

[cc2014] 18/2/2016 22:54

Here's my view.

Potential fine seems to be unlikely to be higher than £2.5m and could be less.
It has been suggested that approx. £1m would have to be payable immediately with the rest open to discussion but perhaps over 5 years.

I'm sure I've read somewhere they having been paying £1m on legal/investigation fees a year.

So, the highest possible fine is less per year than they've been spending defending/understanding the case.

Have I missed something??

[battlebus2] 18/2/2016 22:12

Thinking about being brave and buying in the morning before the outcome.

[norbert colon] 18/2/2016 21:35

Jimmy - actually not as I feel I have a good measure of the likely outcome after attending last Friday. Shame you cant listen in on-line but unfortunately not and court transcripts are very expensive. Will have to wait for press coverage and / or RNS.

Lets hope for a fair and reasonable outcome.

[jimmywilson612] 18/2/2016 17:26

Are you going Norbert? Will be an interesting Friday afternoon!

[norbert colon] 18/2/2016 16:21

Final sentencing confirmed for 2pm tomorrow at Southwark Crown Court.

[norbert colon] 15/2/2016 13:43

My Retirement Fund

The confiscation order will be in the order of GBP 850k and will need to be paid quickly; the remainder of the fine may be able to be paid in instalments over periods of up to 5 years depending on what the Judge deems is affordable to CSG.

I hence do not expect a fund raise although this may be a possibility.

[battlebus2] 15/2/2016 13:03

Some buying this morning.....

[my retirement fund] 15/2/2016 11:02

Its certainly going to put them on a knife edge perhaps equity fundraising will be in order after the hand slapping.

[jimmywilson612] 14/2/2016 22:58

Thanks Norbett

How much have they spent on legal costs as well!

The reputation is key in a business like this and hopefully the incident will not affect the UK markets which is the core