Utilitywise Share Discussion Threads

[glasshalfull] 09/4/2017 11:17

UTW

Firstly may I declare a position in UTW's peer INSE, so simply look in periodically to compare relative valuations & execution of their strategies.

I checked back, & found that I last posted on this thread in August 2015. This was on the back of finnCap downgrading earnings, dividend forecasts and slashing the year-end net cash balance (post 1538 for anyone that cares to look back).

At the time I suggested that UTW would not command a strong rating until they were in a position to demonstrate positive cashflow. Share price at the time was c.225p

Let's travel back. finnCap had forecast net debt of £0.4m at the end of FY 2015 (31.07.2015) & the full year results for 2015 highlighted net debt figure of £6.7m which was a considerable miss in anyone's book.

Now fast forward to the latest interim statement & it appears that UTW are still dealing with the same issue. finnCap released a note last week that indicates,

"We have factored in a higher interest charge due to the higher net debt. Our net debt forecasts have increased by £24m in FY 2017 split: £5.5m from prior year adjustments, £16.4m from the reversal of supplier advances, £1.1m from exceptional costs and £0.7m from higher and reclassified interest. We have also reassessed our working capital assumptions in FY18 and FY19 assuming the level of extensions seen in H1 17 continues at 23%."

Wow! A £24m increase in net debt! That places the 2015 increase in net debt of £6.3m in the shade.

While finnCap have left earnings & PBT forecasts relatively unchanged, forecasts for the cash position of the company has taken a significant hit over the next 3 years: -

2017
PBT £18.8m (old £19.3m)
EPS 19.5p (old 19.8p)
Net Debt £19.7m (previously net cash £4.5m)

2018
PBT £21.0m (old £21.6m)
EPS 21.8p (old 22.3p)
Net Debt £13.7m (previously net cash £11.6m)

2019
PBT £23.2m (old £23.6m)
EPS 24.1p (old 24.3p)
Net Debt £8.4m (previously net cash £20.9m)

Other commentators, such as the excellent Paul Scott, have produced more extensive reviews that question a number of aspects of the business. To be perfectly honest though, I & others have questioned the revenue recognition policy in UTW previously and I reckon that we have simply observed this playing out with a dramatic fall in cash since the t/s in August 2015 which I alluded to at the beginning of this post. The market accordingly have afforded the company a lower rating as a result.

I wish UTW holders well, but I reckon they won't do quite as well as the departing Geoff Thomson who pulled off a masterstroke by selling down 5.4m shares at 290p in June 2014 (13m shareholding reduced down to 8m) when the group employed a different revenue recognition policy. It's been downhill ever since!

Thanks, but I'll stick to INSE meantime.

Kind regards,
GHF

[bennywin] 08/4/2017 07:49

I would not be surprised if Woodford buys some more.

I see Geoff Thompson has other things on his mind at the moment.

What a great story.

/southshieldsfc.co.uk/mariners-visit-wembley-for-first-time-as-fa-vase-final-plans-stepped-up/

[ddubzy] 07/4/2017 18:46

I doubt he looks at the daily moves of the share price ..Its all about the long game. Buy low, sell high or buy low & hold.

[shawzie] 07/4/2017 16:30

I wonder what is going through the mind of Neil Woodford.

[tratante] 07/4/2017 09:52

For what it's worth, IC has UTW as a buy. Thinks the negativity is over done.

[bennywin] 07/4/2017 09:51

Re posts that are removed.

I am all for hearing the negatives, but I do think a line has to be drawn when a poster brings the honesty of the company into question or as was the case, talked about 200 staff leaving at once.(Which obviously was not true )

In todays litigious climate, posters could find themselves in legal trouble if they get too carried away.

[tratante] 06/4/2017 09:53

Agree they haven't helped themselves, but think CEO has the right intentions even if some pain first. Not many places you can get return of 5% on divi ignoring capital for the moment.

[buffetteer] 06/4/2017 09:53

Inspired energy make 22.5% profit margin - slightly more than UTW without dodgy/ inflating accounting. A simple,
Honest approach is what's needed. Maybe the new CEO is getting all the dirty washing out , clearing away the aggressive accounting of his predessessor Jeff and trying to get the investing community on his side . It's probably worth sticking with it at these depresssd levels.

[cockerhoop] 06/4/2017 09:17

I agree that the new CEO looks to be moving the company to less aggressive accounting standards but it's going to be a painful process because previous actions were designed to inflate profitability, the unwinding of them will obviously do the opposite.

[tratante] 06/4/2017 08:42

Hoop. As I said above, no I don't think it's reasonable. I am not defending the company what may, just making an observation. Better to be heading in the present direction I would have thought.

[cockerhoop] 06/4/2017 07:47

Tratante,

The problem is that lots of investors weren't aware they were aggressive with their accounting so when they announce a cash flow hole and increase in debt they get caught out.

They've still booked £20m of revenue that they won't receive the cash for for over 3 years! Do you think that's reasonable?

The failed investment in T-Mac may have also dampened enthusiasm, £13m down the drain!

[tratante] 06/4/2017 07:30

Previously the company was criticised (rightly in my view) for booking earnings before they had actually materialised. Now they are trying to make the accounts more transparent they get hit on again. Damned if they do and damned if they don't it seems.

[bennywin] 05/4/2017 21:13

A very valid question.
There is also another negative post that was referred to on there by another poster that has also been removed.
One could be forgiven for wondering if there is a bit of skulduggery afoot ?

[ddubzy] 05/4/2017 17:07

Angel....Any reason why LSE deleted our posts this afternoon?

[freddie ferret] 05/4/2017 15:31

Deramp going on IMHO.

Interesting that the share price fall started before the announcement.

[angel81] 05/4/2017 15:23

Let's see...

[angel81] 05/4/2017 15:08

Good luck, this wouldn't be the first stock to put forward large targets as a goal it would be unusual for a new CEO to state things are going backwards. I genuinely wish you and all those still in good luck...

[petewy] 05/4/2017 14:45

I was in UTW and bought and sold and did well but got out last year and switched into INSE which is a steady riser.
It trades on cheap fundamentals but with trustworthy management, prudent accounting policies and consistency of performance.

[its the oxman] 05/4/2017 14:34

Has the potential to get nasty at next set of results, but at least you will get a better idea of whats going on then. Luckily i resisted the temptation and have no position here but will wait and watch. Does feel like a lot of the fear is in the price now though.

[bennywin] 05/4/2017 14:27

That's a reasonable answer and I am open to all opinions so appreciate yours.


Sure, there are some concerns, but on a positive note, I have been following the various UTW twitter feeds and am led to feel quite upbeat by some of the content.

It appears that the new CEO has focussed on developing a great work culture and I don't detect too much stress from the employees shown in the various posts, so amidst all this doom and gloom, I see it as a chance to go against this weeks dreadful sentiment.


There are quite a few you can look at but here are a couple of examples.

You might think that all this is meaningless, however, a stressed out boss will soon affect the demeanour of the entire company (As everyone starts to get it in the neck), and I don't believe this shows to be the case.


twitter.com/hashtag/uteam?src=rela

twitter.com/hashtag/lifeatutw?src=rela



It has taken them a while and a lot of investment to get there monitoring/control equipment and software up and ready, and I believe this will start to help sales over the coming years.

[angel81] 05/4/2017 14:01

Mine is a cautionary tale Bennywin, i was seduced by this stock, indeed if you check my first post you will seed i was very supportive. I invested watced it rise, fall, rise then crash and lost out. Some others on here only seem to publish positives despite the facts in front of them. How you invest is your call but i personally am always happy to gain all the facts good and bad as always you can ignore me or point out where i am wrong, very happy to debate and sorry if you don't appreciate but there a clear issues here...