Volvere Share Discussion Threads

[penpont] 24/5/2019 08:08

Simon Thompson update in IC yesterday:

The midas touch of Volvere’s (VLE:1,160p) founders, Jonathan and Nick Lander, shone like a beacon in the Aim-traded investment company’s latest annual results. In their respective roles of chief executive and finance director, the Landers invest in distressed and undervalued businesses with a view to turning them around and exiting at a hefty profit. They have a mightily impressive track record – Volvere’s book value per share has increased at a compound annual growth rate of 17 per cent since the company listed its shares, at 100p, on Aim in December 2002.

They certainly surpassed themselves last year, delivering a 90 per cent increase in the company’s net asset value (NAV) per share to 1,250p, driven by last autumn’s disposal of its largest investment, Impetus Automotive, a provider of consulting services to the automotive sector (‘Bargain Shares: On the M&A beat’, 22 October 2018). The company received net proceeds of £26.1m from that sale, representing 21 times the £1.25m capital Volvere originally invested in March 2015. Even after returning £6m to shareholders, the company still posted a record NAV of £40.4m, which includes a bumper net cash pile of £32.1m (1,000p a share) to target new acquisition opportunities with.

An improved financial performance from Leamington Spa-based food manufacturing business, Shire Foods, a company in which Volvere holds an 80 per cent stake, more than justifies the £6.9m carrying value of that investment. Shire’s pre-tax profit rose by a third to £854,000 on revenue of £18.3m in 2018. Volvere also owns a small software firm, Sira Defence, that develops products to help the police use CCTV effectively, which is in the books for £60,000.

Volvere’s shares have risen by 162 per cent on an offer-to-bid basis since I advised buying, at 419p, in my 2016 Bargain Shares portfolio and with the Lander’s scouring the market for their next turnaround situation, I would recommend running profits.

[eezymunny] 24/5/2019 08:00

Yes simso, it would make a great case study for market inefficiency. Actually my own view is that VLE tends to be priced below it's true worth because there are just sooooo many thicko PI's and there's no liquidity for instis. Absolutely wonderful for those of us that keep a close eye on progress :)

[simso] 24/5/2019 07:31

After this deal, VLE will have cash of £36.65m (£11.75/share)

Even if we value Shire on a very low multiple of 5 * 2018 Earnings (£850k Gross, £700k net), add the Freehold of £2.6m, then deduct minority interest and assume a 10% Bonus for the Landers...then Shire would be worth £4.5m (£1.50 a share).

Net working capital is positive c£1m (32p a share)

That would give a total value £42.1m...or £13.50 a share. That is using the lowest valuation for Shire I could think of...and also that valuation gives nothing for arguably the greatest asset...the Lander's proven ability to multibag every investment they have made to date.

[eezymunny] 23/5/2019 22:02

The clueless morons selling this at 15% below tangible book since results will be wincing in the morning I imagine. Durrr....

SIRA a 600 bagger? That's what I call a result!

[rivaldo] 23/5/2019 21:47

Wow, a very pleasant surprise. A great result - £3m for a company making just £60k PBT on £390k turnover :o))

Congrats to the Landers. If anyone ever doubted their acumen then this is yet another reason to think again.

Who knows, perhaps we'll be wrong footed once more with the sale of Shire. Or perhaps an acquisition.

Very happy to continue to hold for the foreseeable future in the knowledge that my shares could not be in safer hands.

[yamaha865] 23/5/2019 20:30

That should mean total cash of £34.1 at YE + £2.55m- £36.55m

Valuation of Shire? Well £0.85m pbt, but with I remember reading a third production line coming on stream, perhaps cautiously that could mean an additional 30% PBT- £1.15m or say £0.95m PAT. Put on a PE of 10, times 80% Volvere stake= £7.6m

Totals £44.15m or £14.15 a share. Hopefully see some more chunky share buy backs and an acquisition or two and this one could keep going!

[jg88721] 23/5/2019 18:47

that is an excellent result. now for an acquisition ...
(EM, lol, before CAKE could sell cakes it had to make them)

[hpcg] 23/5/2019 17:15

Cracking. Until mid last year I had been valuing at nothing, but when sales appeared I had put a nominal £1mm into the NAV. In the results out yesterday Sira + Shire was listed as a combined £6.3mm.

[zangdook] 23/5/2019 16:44

"Volvere acquired Sira in 2006 for a consideration of approximately GBP0.005 million..."

Why can't they just say £5,000?


What does this do to the NAV? Was it listed at cost?

[greyingsurfer] 23/5/2019 15:55

Excellent!

[ih_433513] 23/5/2019 15:49

Volvere has just sold Sira for a net £2.55m.

[yamaha865] 23/5/2019 15:47

Disposal of Sira for 2.55m net. Not too shabby :)

[eezymunny] 23/5/2019 08:52

What on earth has CAKE got to do with food manufacturing? It was a Patisserie chain. Durrrr...

[jg88721] 22/5/2019 21:30

"nowt wrong with the food sector. The most reliable repeat business of all, no?"
Food businesses might achieve reliable sales, but attractive returns to shareholders are harder. Just ask CAKE holders

Eezymunny, despite calling my most daft (I think you need to re-read it, BTW) your post kind of makes my point (but you seem oblivious to that).

We agree that Impetus was an outstanding investment - as that big gain you reference has been made extremely quickly (since March 2015). Which is the aim with turnarounds.

In contrast, Shire has been owned a long time (since July 2011) - a very slow turnaround/development. Even if it makes your 1m forecast profit, VLE's investment in it is far greater than 0.5m you imply it cost as VLE has made significant additional investment (both financial and time/opportunity cost) in Shire since 2011. More investment is forecast and probably an another acquisition too (and therefore more time and effort to realise synergies etc). The history of VLE's involvement with Shire is not the outcome turnaround companies typically seek. (No criticism of VLE here, the outcome is still acceptable, and hopefully improving, just not as good as other investments in other sectors might have been).

In terms of acquisitions, I would prefer they cast their net more widely than the food sector. It is tough place to make good money, and no one is going to pay up on exit.

Finally, as for the comment that "Nobody thought automotive consulting was exciting" I think you need to look around you more as there are plenty of excellent business in that space. Apologies for boasting but I have successful investments in two. I haven't had (or seen) much success in food manufacturing businesses.

GLAH

[zoolook] 22/5/2019 12:16

I was responding to Eezy’s comment that there was “nowt wrong with the food sector” because there is plenty wrong (and he’s a bit of a grumpy git these days).

I do think food manufacture is a low quality business in the Buffet sense (see what I did there) but I’m confident that the Landers will continue to add value with their specific investment decisions. Hope so anyway as it’s by far my largest holding at 30% of portfolio.

I understand the synergies rationale but acquisition integration is also a risk. I would be more comfortable with another sector but if the Landers are seeing the best current opportunities for acquisition as being in that sector I’ll live with that.

Still a good entry point for new investors as it always seems to be..

[rivaldo] 22/5/2019 11:42

If VLE can buy a complementary business, they can reduce overheads by sharing with Shire and extract whatever production and other synergies there are.

Above all, VLE have managed to increase Shire's turnover by over 50% since the start of 2015 via Aldi, Lidl, Iceland etc. They can utilise their contacts with these growing chains to the benefit of the acquired entity.

[zoolook] 22/5/2019 09:11

Food manufacturing isn’t attractive to me per se as theres no big moat and the concentration of purchasing power in the supermarkets is bad for margins and big contracts can be pulled. There’s health scares too as a risk.

Doubt anyone is invested here because they are drawn to the food industry.

The Landers obviously believe that continued investment in Shire is money well invested and they’ve scarcely put a foot wrong so far. If bolt on businesses offer similar opportunities I trust them.

[eezymunny] 22/5/2019 09:02

Daft comment jg

VLE paid 0.5m for Shire foods and it might do, what, £1m profit this year?

VLE team are very canny. Nobody thought automotive consulting was exciting but "Disposal of Impetus Automotive Limited, acquired in 2015 for £1.3 million, for £31.3 million, of which the Group's share was £26.1 million"

If there's one team in the UK that I'd trust to invest shareholder funds wisely it's VLE. Nowt wrong with the food sector. The most reliable repeat business of all, no?

[jg88721] 22/5/2019 08:20

thanks Rivaldo

the most interesting comments for me were these:

"The overall environment for Shire continued to be quite challenging in 2018. ... our customers continued to face consumer-led pricing pressure. Our raw materials ... have seen rising costs. In addition, labour costs have increased ... To remain efficient and increase capacity, we are investing in new plant and have already committed approximately £1.5 million in 2019. ... Shire is expected to face continued margin pressure."

WOW. Ugly (as one might expect in food processing!) Nothing very appealing about any of that. I'd personally be happier if they bought a distressed business or two in a different sector, ideally one which is experiencing some decent tailwinds, and didn't double down on food.

[rivaldo] 22/5/2019 06:37

Results out - £34.1m cash and £12.50 per share of net assets:



As already flagged really. Perhaps the most interesting line for long-term shareholders is:

"We continue to look at targets in all sectors but, in particular, we believe there is an opportunity to build a larger group of food businesses, leveraging our competencies in this area."

I also note that most of the 2018 investment in Shire was funded via external debt rather than using VLE's own funds. The comment about being at the heart of their customers' business "over the longer term" perhaps suggests that Shire will be retained for a while yet, especially given the remark about building a larger group, but I'm sure this wouldn't rule out an opportunistic sale at the right time.

[rivaldo] 20/5/2019 10:25

:o))

Fine.

[eezymunny] 20/5/2019 10:15

You can't PRESUME stuff like that, only guess. And that's just rampy amateur nonsense IMO.

[rivaldo] 20/5/2019 10:11

Because presumably the £34.1m will have been invested and received some form of return, maybe 2% or more.

Unless VLE's management have hidden the cash under the bed or run off with it!

The £2m Shire investment may have already been invested or may be spread through the year, nobody knows yet.

[eezymunny] 20/5/2019 09:40

Why are you presuming cash is higher now? H1 is the weaker one for Shire and they may well have invested the £2m in new equipment by now. We possibly/probably won't find out til interims are released in a few months anyway.

[rivaldo] 20/5/2019 08:49

Thanks for the reminder jotters3. This Friday then.

Current m/cap - £35.1m.

Cash pile at 31/12/18 - £34.1m (presumably more now). Plus £2.9m retention on the Impetus disposal to be received March'20. Plus Shire Foods. Plus Sira Defence.