Volvere Share Discussion Threads

[rivaldo] 08/3/2018 11:21

It's worth reiterating that Impetus was bought for just £1.3m. Amazing.

I'm really not bothered about dividends, particularly gestures for the sake of it. In VLE's case either pay a special divi or none at all.

I'd rather VLE retained their cash pile for further acquisitions. At this stage I'd like them to really go for it (by their standards anyway!) and perhaps pay £5m+ for something, which would still leave them plenty of cash for investee w/capital and for other potential acquisitions.

[simso] 08/3/2018 11:20

I was also reflecting on the overall stock market weakness this year, ostensibly due to a change in perception about the future growth path for Interest Rates which triggered a big sell off in the Markets in February. Vle obviously took their hit from it, and our fall through Feb from 1020 to 890 was actually larger than the FTSE All Share and Aim declines.

How completely illogical for "Mr Market" to treat VLE in this way, on two counts. Firstly one can understand why a steeper forward interest rate profile is bad new for heavily indebted companies...and most companies have some debt. However, for VLE and its huge cash pile...a 1% rise in interest rates should lead to an increase in profit of £200k pa...if everything else remained equal. More importantly, a rise in interest rates could could increased distress for decent companies with unsuitable Capital Structures...and that plays right into VLEs hands with an increased flow of opportunities.

[russman] 08/3/2018 10:55

More tenders; but give all shareholders the opportunity.

[hpcg] 08/3/2018 10:45

Buybacks / tenders for me, if anything at all. Small companies paying a dividend is a nonsense IMO.

[simso] 08/3/2018 10:26

In terms of the dividend, I have attended their last AGM and also the Blackthorn Focus even where they presented in November 17, and the dividend question was raised. I think they will definitely have an internal conversation about instituting a dividend this year. They may decide not to, and if they do institute a divi I would expect it to be modest. I am certain it would not be a "special" dividend of large size, as it is not a Tax Efficient way of distributing cash. Given the illiquidity of the shares and the tax position, I would hope for a repeat of the Buy Back they did last Autumn.

[eezymunny] 08/3/2018 09:54

There simply won't be a dividend IMO unless that becomes the most tax efficient way/best use of surplus cash.

Why people keep going on about dividends is entirely beyond me. Show me a Berkshire Hathaway dividend...

[melf] 08/3/2018 09:43

I wonder if a dividend could be on the cards in the near future? There's certainly enough cash being generated and it may attract some more interest from investors.

[eezymunny] 08/3/2018 09:19

I've jiggled some numbers.

At 960p I reckon the market cap (£35m) is about 6.5 x 2017 post tax profit above cash/investments, and 3.7 x post tax profit above tangible NAV. That's cheap by any standards, no?

That's all trailing 12 months profit of course. Hard to know what to expect this year. A bit better from Shire I guess, and flattish for Impetus would be my guess, but we can only guess.

They say "Whilst the decline in new car sales in the UK has affected the scale of some manufacturer programmes, there remain many opportunities for Impetus in what is a very large sector".

Hard to interpret that. My guess is don't expect more fireworks in the short term, but we're working on some sizeable opportunities.

The opportunity is clear. Impetus half year revenues have been £m 8.2, 8.2, 9.2, 12.2, 14.9 since VLE acquired. Impressive stuff.

[xajorkith] 07/3/2018 13:52

Excellent summary as usual simso & totally agree with your updated analysis.

One of my largest holdings & will be very surprised if this isn't (at least) £15-20 this time next year.

[simso] 07/3/2018 12:34

Checking back to my Sept 17 SOTP Forecast, I think the final PBT numbers have come within £0.2m. I had £3.7m in for Impetus and £3.4m has been delivered. I suspect there is a little bit of "seasonality" between the halves, to recognise and refelct in a 2018 View. Shire's underying PBT of £0.8m was £0.1m better (ex the one off non-cash impairment).


2018 SOTP Valuation

Impetus

The 2017 PBT number of £3.4m was £1.9m higher than 2016. We will only get a true split of that growth between "Organic growth" and the large new contract which commenced in April 17. For now, I assume £1.5m is 9 months of New Contract, and £0.4m is Organic Growth. This means we have a profit building block of £0.5m for 2018 as we will have the Contact for a full 12 months in 2018 rather than 9 in 2017. I (hopefully!) prudently assume lower Organic growth of only £0.1m..and we get to the £4m Rivaldo mentions above and derived through a different route. Hopefully scope to do better than that, especially with the news in Dec 17 of the new Partnership with Auditex.

If I deduct the 17% minority, a further 10% for Bruvva's Bonus on any sale, and assume 19% Corporation Tax, and then apply a Market Average 14 times multiple to post tax earnings, then Impetus would be worth £34m.

The Multiple of 14 times is debatable, and a bear might argue it as too high because its in the Automotive Industry, but a Bull would point the exceptional growth, and contractual earnings giving certainty. I think 14* is a fair compromise.


Shire

I agree the point that second half underlying of £1.07m (vs £1.02m in 2H 2016) gives validation to the argument that some price increases have now been put through to mitigate cost increases caused by Currency/Brexit etc. On that basis I think it legitimate to assume the FY 2016 of £1.15m is the least we should hope for in 2018. A forecast of £1.15m is basically a roll forward of second half 17 run rate with no further growth assumed, perhaps too prudently discounting their Statement today that VLE " are investing in Shire so that we have the capability to grow. We expect revenues to increase in 2018 and with that, profitability" Given how careful and prudent the Bruvva's usually are, perhaps upside potential on taht number?

I have also been cautious in the Multiple applied of 5*, having deducted the 20% Minority, 10% Bruvva Bonus and 19% Corp Tax to give a value of £5.3m.


I assume Sira has no value in my SOTP. Having made £30k profit it is perhaps worth £200k or so at most.

I would expect net Cash Generation of c£2m (2017 was £1.7m excl the Buy Back), to finish 2018 with £20.4m. Other net Assets of £2.6m is mostly Freehold Property, so will add our 80% share of that in to SOTP Valuation at par.

That gives me a total SOTP of £59.8m. With shares in issue of 3,668k, that gives £16.30 a share.

I would be delighted to hear anyone's alternative views of any assumtions here.

[russman] 07/3/2018 11:49

Good news.

[glawsiain] 07/3/2018 10:46

the current price is still very cheap (even if results didn't quite reach the £3.7m PBT simso expected for impetus; it made £3.04)

Here is rivaldo's post from January with Simso's SOTP calculations:

rivaldo - 24 Jan 2018 - 13:34:21 - 2739

Indeed Melf - now around a six-bagger for my original purchases from memory. I bought quite a few more around 200p and 330p.

Glawsiain, the thread header post is out of date as subsequently the interims showed Impetus doing far better than was expected. I'll update the header post after the 2018 results (or perhaps any trading update).

After the interims, Simso produced a "sum of the parts" valuation as follows which gave an NAV of 1,389p per share:

"1. Shire: My profit assumption for H2 is that it will match last year's H2 of £1.02m. We are now past the anniversary of sterling devaluation, so the negative impact on margins has worked through. The re-pricings they have progressively done through H1, and also the fact that sterling in H2 may actually be better than H2 last year, may make the out-turn better. A full year out-turn PBT of £0.78m, I apply a lowly rating of 5* Post Tax Earnings to derive a value of £3.1m.

2. Impetus: I am hoping for at least £3.7m PBT as already explained. I would value this much more highly, and think a market average P/E of 14 times is prudent given the growth and contractual backing for the earnings. Value £41.4m.

3. Perhaps harshly I give no value to Sira.

4. £2.6m of NTAV given that it is mostly freehold property.

That gives a Gross Value of £47.2m, from which I deduct 20% for Minorities and a further 10% for Bruvva's Bonus for the increase in value created....so net net £31.2m. I would expect year end cash to be at least £22.5m, so my total SOTP valuation of the business is £56.6m (£13.89 a share)."

Simso's valuation is nicely prudent, but increases to around 1,500p per share if you assume a reasonable 10% growth rate for Impetus, introduce any value at all for Sira Defence etc.

[ih_145721] 07/3/2018 09:52

Even though we are all rightly excited about Impetus, I thought there was also good news on Shire which it would be easy to miss!

The FY profit of £640k was struck after a one off impairment of old equipment of £190k. Clearly that impairment is one off, non underlying, and non cash. The true underlying profit for the year was therefore £830k. By deduction, the second half was £1.07m....compared to £1.02m in the Second Half last year. Growth of 5%!

THis is important as the Bruvva's did say after the Brexit/Currency impact on H1 (Loss of £0.24m vs profit of £0.13m) that repricings were gradually being pushed through. On the evidence of second half I think it fair to hope that Shire's true "run rate" of profit is at least 2016's PBT number of £1.15m pa.

[rivaldo] 07/3/2018 09:27

Impetus made £1.83m core PBT in H2 alone (before intra-group interest and charges) with a full 6 month contribution from the new contract (I got my figures wrong earlier, apologies).

So certainly Impetus looks as if it can make say a core £4m PBT this year, even without any contribution from those new "opportunities". Call that £3.2m PAT, or £2.7m for VLE's 83%. Then give this a not too demanding multiple of say 13, and that covers the entire current VLE £35.77m m/cap.

Then add on £18.4m of cash - which represents 502p per share - plus £2.3m of freehold property - 62p per share - plus the value of Shire Foods as a business, plus Sira Defence, and it would seem there's substantial upside from here.

[melf] 07/3/2018 08:37

If Carlsberg did trading updates :-) ...........Anyone care to estimate IAL's value as a separate entity given that we could see PBT of £4.5m+ this year (VLE's share 83%)?

Could 83% of IAL be worth the £35m market cap on its own?

[greenroom78] 07/3/2018 08:15

Excellent read. I added some on the drop at 910p. I was beginning to think I'd dived in too early when it dropped into the mid 800s, I'm less bothered by my poor timing now.

I know we've had the 'growth' vs 'dividend' chat before but I would still like to see a dividend introduced at some point (even if it is a small one).

[scooper72] 07/3/2018 08:13

Thanks Rivaldo for getting me thinking about going back in

[scooper72] 07/3/2018 08:07

Looks like it. Wish I had gone back in with a bit more now. But 10k isn't too shabby I guess.

[boadicea] 07/3/2018 08:06

scooper72 - Have you joined the "Just-in-time" school of investing?

[rivaldo] 07/3/2018 07:14

Terrific trading statement :o))



- £3.22m PBT, 66% up on last year
- £18.4m cash pile
- Impetus is absolutely flying. H2 was even better than H1, with a £2.2m PBT meaning this year could show £4.4m+ PBT if continued, and the outlook is promising given the "many opportunities" outlined today
- Shire is nicely profitable and also appears to be looking at an improved 2018 with increased revenues and profitability. Have they won another contract or two perhaps?

Great stuff. Congrats to the Landers once again.

[melf] 06/3/2018 09:17

Nice to see plenty of recruitment activity at IAL.



I particular like this excerpt from one of the job details:

"Due to expansion of one of our current teams we are now recruiting".

:-)

[scooper72] 05/3/2018 20:29

I think Rivaldo's dust analogy got me. I decided to go back in today with £10k. Came out around the 850-900p range in Feb having first gone in last spring. So obviously would have been more economical to just stay in but got a bit nervous in the mini market correction last month. To be honest I think sometimes I feel more comfortable in something illiquid like Volvere compared to being in something like Glencore which has got some massive volume.

[melf] 27/2/2018 14:40

Last year's trading update was on 20th March. I think 2017 was the first year they provided a trading update.

[rivaldo] 27/2/2018 13:37

You gotta be in it to win it.

Another decent trading update in March - or news of a sale of Shire - and you won't see the share price for dust.