Volvere Share Discussion Threads

[rivaldo] 03/6/2020 08:34

Hi jg. I agree in that obviously Shire's tangible assets and liabilities are already included in VLE's NAV, i.e the net of the freehold property, the borrowings against it, the stock, debtors/creditors, leasing liabilities etc etc.

An acquiror will pay an amount for the business as a whole, which would comprise its valuation of the ongoing core profitable business plus an amount covering the surplus property, debtors etc which it will take over.

It's impossible to separate the two as beauty is in the eye of the beholder! My thinking is that a buyer must pay up a multiple for the future/ongoing profitability of the business, as well as something realistic for the excess tangible assets.

Another thought - there may be hidden upside in the freehold property, which hasn't been revalued since December 2017.

[jg88721] 02/6/2020 23:44

hi Rivaldo,
Isn't there quite a bit of Shire already in the reported NAV??
Ie, all the investment in recent years would be added to the acquisition price of shire, less depreciation etc. In particular, see note 5 in the recent final results "operating segments". Food manufacturing made up 7.6m of VLA's total net assets of 27m in net assets. So your valuation of Shire, post the Landers' profit share and minorities, is around net book value (rather than additional to it).

[rivaldo] 02/6/2020 22:48

I thought it was worth rechecking the current NAV after the latest results, so here's my attempt.....

The NAV is 1385p per share, incorporating almost nothing for the value of Shire's business (and Indulgence) other than the tangible assets.

Shire made £1.4m pre-tax profit last year. I'd hope for say £1.7m this year given the good start, or say £1.4m PAT.

Shire could imo now achieve an improved exit multiple of say 8 given (1) the vegan growth/desirability (2) the heavy investment into the business and (3) immediate access into all the fastest growing supermarket chains for the acquiror.

So that would make Shire worth £11.2m. Times that by 80% equals £9m, less Lander bonus is say £8.1m.

On the current shares in issue that's around 450p per share - plus any further value re Indulgence - which gives us a total NAV of say 1850p per share.

NAV of 1850p per share still gives quite some upside from here.

Happy to be corrected on any errors/misapprehensions!

[jg88721] 02/6/2020 22:00

hi yamaha, I tend to agree re: valuation. Note that shire has invested heavily in recent years (1.9m last year on top of 1.2m the year before) ... so you'd expect higher profits and value.
I'm not selling ... I expect there is more value growth to come and I'm backing mgmt to find another good acquisition or two as well
GLTAH

[yamaha865] 02/6/2020 14:48

Don't disagree with those comments...just that the implied value of Shire has gone from almost nothing to around £13m in a couple of months...which would seem around fair value to me. So the level of upside which was almost a one way bet is no longer so compelling.

It's still my largest holding and definitely not overvalued IMO.

[rivaldo] 02/6/2020 10:54

I've held all mine yamaha865. Good luck to you, but long experience here - and complete confidence in the management - has taught me the value of holding on for more.

Shire looks in fine fettle and seems primed to have a rather good year.

And Indulgence was a bolt-on which won't imo prevent another acquisition this year with VLE taking advantage of the number of distressed companies around. When that happens we should see another share price jump.

[yamaha865] 02/6/2020 10:26

You selling any Rivaldo? I've got rid of about half mine over the last few weeks including this morning. Looking much more fairly valued now

[rivaldo] 02/6/2020 09:45

Nice rise to new highs on almost no trades - I assume there's a delayed Buy trade which we'll see later.

Great to see the bid price up to 1500p, and the spread down nicely too.

[westcountryboy] 02/6/2020 09:16

Ah thanks. Since Shire and Indulgence cost less than £2m between them, I guess they could easily carry on pursuing the food strategy and also have cash over for unmissable opportunities elsewhere. But they won't want to buy too many businesses at once given the demands on management time.

[cockerhoop] 02/6/2020 08:17

WCB,

This is from the May 19 Finals - I think it was the 1st mention.

Future Strategy

The disposal of Impetus has once again validated our strategy of acquiring underperforming businesses and investing our resources in effecting a turnaround and an ultimate exit. 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.

[scorpio51] 01/6/2020 22:44

Still looking at all sectors and geographies,but it makes sense to draw on their competencies,being invested in 2 food businesses already.

[scorpio51] 01/6/2020 22:40

In the final results last Friday. Read post 3364.

[westcountryboy] 01/6/2020 21:52

I'm sure I haven't been paying enough attention, despite my decent sized holding, but when did VLE first state they were planning to develop 'a larger group of food businesses'? I'd always previously assumed they were trawling a wider range of opportunities...

[rivaldo] 01/6/2020 11:15

Cheers glawsiain. Not much added insight then, but good to see he remains very positive.

[glawsiain] 01/6/2020 10:11

Here you go:



Volvere (LON:VLE)
Share price: £14.50 (+5.5%)
No. of shares: 1.8 million
Market cap: £25 million
Final Results

Please note that I have a long position in VLE.

As you may already know, I have an overly large position in this - 25% of my portfolio. Not exactly in tune with standard portfolio construction practices.

When I originally bought in, it was for less than 10%. But the price has nearly trebled, so here was are.

It's a turnaround investment vehicle, typically buying businesses out of administration. It then reinvigorates them, gives management a decent stake, and helps them to grow, before selling them on.

Results - for those who closely follow the company, I don't think these results contain much that is new.

The main points are:

NAV per share now £13.85
Net assets £25.4 million (excluding non-controlling interests), of which £19 million is cash.
The only operating subsidiary which was left at the end of year, Shire Foods, grew revenue by 25% and PBT (before Volvere's charges) almost doubles to £1.4 million.
Volvere owns 80% of Shire (the rest of it was awarded to management), so its adjusted pre-tax profit that is attributable to Volvere is £1.1 million.

One of the key features of the Volvere strategy is incentivising management at subsidiaries, and I note that Shire paid a £500k dividend. Shire management will have received £100k of this.

Success in 2019 is explained as follows:

I am pleased with the growth achieved in 2019, which came principally from a deepening of relationships with existing customers, resulting in wider distribution and broader product ranges. Particularly encouraging was the growth in vegan product lines, where we believe we have developed flavours and textures that appeal to a wide consumer audience
Covid-19 impact - "too early to say" whether the sales uplift to supermarkets will be sustained and result in full-year growth.

Foodservice customers have been hammered, and they represented 12.5% of Shire's 2019 sales. Volvere expects them to return to normal when trading restrictions are ended.

Production and costs are affected by social distancing measures - "we are still achieving an encouraging level of output and, for the most part, meeting customer demand".

Indulgence Patisserie - a small acquisition made earlier this year. It is making progress, with more to do:

"...we have been working to improve customer and supplier relationships, increasing teamwork and investing in new systems - and whilst we have been encouraged on a number of fronts, there is still work to be done in making the business more efficient and reducing costs."
Strategy - this bit is interesting. Jonathan Lander said on April 21st that markets were experiencing "peak gloom". But it looks like Volvere is waiting for more fallout from this crisis, before it does another deal. It's not in a rush:

We are already seeing increased levels of distressed deal flow due to the COVID-19 pandemic. The length of the economic effects is uncertain, but I fear it is likely to extend well into 2021 and possibly beyond. The anticipated reductions in financial support from state schemes will probably trigger more hardship for individuals and companies.
We will do what we can to rescue those businesses which we believe viable, in all sectors and geographies, in accordance with our investment mandate, but with added focus on building a larger group of food businesses, leveraging our competencies in this area.
I think this is fairly clear, and sounds sensible.

Remember that Volvere's strategy typically involves buying out a bank loan for a company in administration.

But with the government support schemes currently in place, such as furlough and loans, many companies have avoided going into administration.

It makes sense to wait until some of these schemes are over, and only then to make a move.

My view

No change to my view here (what did you expect?!)

The share price is now at a small (5%) premium to NAV, but I don't think that's unfair. Remember that this vehicle has compounded wealth at an extraordinary rate for nearly 20 years now. A small premium for this sparkling track record hardly seems unreasonable.

If we deduct year-end cash from Volvere's market cap, we are left with an enterprise value of just £6.4 million.

With Shire earning (pre-tax) £1.1 million for Shire in 2019, the implied pre-tax earnings multiple is a mere 6x.

Some cash has been used to buy Indulgence, but I note that Volvere did not even pay a premium over book value in that deal. And there is clearly some potential for it to benefit from the association with Shire, as they are both in the business of manufacturing frozen food.

Happy to continue holding, then.

[rivaldo] 01/6/2020 08:31

I see Graham Neary covered VLE in his Friday update after the results. VLE are of course the largest holding in his portfolio - anyone got access to his comments?

[rivaldo] 29/5/2020 15:36

Good to see the full 1500p offer price now being paid.

[hesperis] 29/5/2020 12:06

I don't often comment here as I find ADVFN's layout of BBs brings on a migraine!
VLE has been a safe haven recently due to its cash pile.
Once we get news of another deal (or two) and if ST of IC mentions the co again (he has held in the past) then the share price should rerate.

[jaf111] 29/5/2020 07:53

Happy with numbers etc, but most interested in future deals......so "the increased levels of distresse deal flow" is very positive imo....

[rivaldo] 29/5/2020 07:37

The 2019 results are out. 1385p of NAV, including £19.3m cash - plus of course the hidden value of Shire Foods, which made £1.38m PBT, and Indulgence Patisserie.

As regards current trading there's the usual downplaying and caution against hype from the Landers.

Q1 has seen "an uplift in sales", but (1) the Landers would never give more detail or extrapolate further as it's "too early", and (2) the COVID-affected foodservice operations, which represent only 12.5% of Shire's sales and more re Indulgence, gets far more detailed coverage than the 87.5% of non foodservice sales which are thriving and get just a line or two :o))

The "increased levels of distressed deal flow" bode well for a company like VLE with such financial strength - and it does seem that food sector consolidation is now a definite aim, which makes sense.

A couple of interesting points hidden away...

- per Note 24, Indulgence Patisserie's assets cost £1.25m - but against this VLE received £1m of property (one leasehold and three freehold) and £0.34m of plant and equipment. Not bad value at all!

- per Note 15, included within the cash pile is £2.63m held in escrow against warranties/claims from the Impetus and Sira disposals. But since the year end £2.39m of this relating to Impetus has been released from escrow - perhaps another validation of how well the Landers run their companies.

[zangdook] 21/5/2020 08:36

"A big rise in stocks since 21 April, but I think some sector valuations are now too optimistic. We are seeing a rise in investment proposals but the problem is knowing when demand will return. Do you fancy a beer wearing a mask, 2m apart? No vaccine, no good outcome."

[rivaldo] 11/5/2020 13:52

Around £30,000 of net buying so far today.

Results are not long now - around the 29th May, so just over two weeks away.

[zoolook] 04/5/2020 11:15

To the tune of ‘Clair’ with apologies to Gilbert O Sullivan

Volvere.
The moment I met you, I swear.
I felt as if something, somewhere,
Had happened to the NAV, which I couldn't see.
And then, the moment I started making a gain.
I knew in my heart that we were friends.
But with the tender it couldn't be no.
But try as hard as I might, I don't know why.
I kept having to re-buy.
Again and again and we are forever friends
Oh Volvere..

[piedro] 28/4/2020 22:10

JAF111, have you ever watched a caterpillar?

The 'asking' price moves up widening the spread {to 50p}
Then the 'bid' moves up bit by bit lessening the spread {to 10p}
and once again its the turn of the 'ask' {oops, 50p again}

... the mid price is only an allusion of that movement - AIMHO

[jaf111] 28/4/2020 16:44

Indeed.....even if it has resulted in a wider spread (50p)!!!