Work Service Share Discussion Threads

[smithie6] 05/1/2014 16:43

Tudor Rose
"1.15M PBT

if tax of say 300k tax
then PAT = 850k

If P/E of 10 then cap. value of Tudor Rose is perhaps 8.5M + 2M in P/L account
gives a value of 10.5M....5.25M for Western.

almost 30p per Western share. 18M shares."


worth noting imo that the Hartim investment has in fact turned out to be a good one, despite the large except. loss of Auz. subsidiary.

Western invested 750k for 50% and in 2012 the main operating subsidiary produced 1.15M PBT, ie. around 850k PAT. ie. around 425k PAT as Western part.

425k PAT, in 1 year, wrt to investment cost of 750k to Western.

Thats a very good result. (even in my book !)
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'if' the Auz. adventure had worked out it would perhaps have been very beneficial to us shareholders....
worth noting that they lost 2.5M .....and Hartim is still alive and producing profit.....which is noteworthy I think in comparison to the small investment cost for 50% of 750k....again supports the idea that Hartim value is above 5M and not 180k ! for 50% as per the Western accounts.

180k, I could take it off their hands at that price !

[topvest] 05/1/2014 11:11

Interesting thought on WSE acquiring LFI. Less likely in my view, but an interesting concept. I think it's more likely that LFI acquires WSE and moves to AIM, but as WSE is larger this would be a reverse takeover I suspect. Any deal should be reasonably easy to do through an all share merger, albeit the related party aspects would be costly in advisor fees. Tudor Rose could be separately listed with a new holding company put on top. It would be nice, but I suspect they will want to turn it around first.

[russman] 04/1/2014 21:12

Could WSE take over LFI?

[smithie6] 04/1/2014 20:37

Profit and loss balance at Tudor Rose is +1.2M

hopefully 0.7-1M higher now that 2013 year end has happened
so maybe around 2M
so it could pay a divi !

although I guess it wouldnt help much in current situation since it wouldnt be enough to move hartim profit/loss value into +ve terrority and Hartim to pay a divi....and it is Hartim that Western is directly linked to, not TRI

(if floated TRI then the cash profit would fix the -ve profit/loss numbers at higher levels such as at Hartim)
----

1.15M PBT

if tax of say 300k tax
then PAT = 850k

If P/E of 10 then cap. value of Tudor Rose is perhaps 8.5M + 2M in P/L account
gives a value of 10.5M....5.25M for Western.

almost 30p per Western share. 18M shares....gives Western NAV around
94p +30p
= 124p.

Any thoughts on my scribbles ?

[smithie6] 04/1/2014 20:29

If LFI took over Western....then I assume it would stay listed on the main LSE, as LFI is I think. Could offer cash or shares or a mix.

Problem is, as a Western shareholder, what price would you accept ?
if Hartim is worth 25p then you get 118p NAV I think.

If LFI paid full real NAV then it would be a bad deal for LFI shareholders imo....
since share price would then be 60% of the official NAV.....much lower...

If paid mkt price of 57p then it would be a bad deal for Western holders....I assume they would say no. 70p ?, 80p, 90p ?

There is of course a fairly obvious thing to do with the remaining empty Western Shell ! (Hartim !)

(how to do.
perhaps issue 1:1 shares to Westernholders of new subsidiary Western 2 from listed western.
All assets moved to Western 2. LFI buys Western 2. Listed Western is now an empty shell. Convert the number of share in Western shell to be the same as the number of shares in Hartim.
Move in Hartim by converting Hartim shares to Western shell shares 1:1.
Western shareholders own around 1/2 of it. Perhaps issue 10% of new shares as part of the float if ISDX requires new shares to be issued.

[smithie6] 04/1/2014 20:06

Tudor Rose op. profit % was 4.6% vs 2.6% in 2011 (if excl. the except. in 2012)

ie. excellent growth in profitability

(TR op. profit excl. the except. in Auz, was 1.2M...page 2)

again confirming imho that the 1p value for Hartim in Western accounts is way off reality.
----

ah, there is no auditor comment in the Tudor Rose accounts.....so if wanted to float that, then I assume it could happen (yes, I'd like them to float something !)

Why is there no auditor comment about Auz in the accounts ??!
..was the Auz. venture not owned by TR. Internat ? perhaps not...
TR Inter. accounts say that goodwill was written down....which infers imo that TR. Inter. "did" own the Auz venture.
..there is also a TR Holding co....perhaps it was that that owned the Auz venture and perhaps TRI as well....Ill keep digging..

[russman] 04/1/2014 19:59

Any views on LFI taking over WSE as opposed to WSE taking over LFI. If the combine LFIWSE was listed on AIM with a divi it could create value & more liquidity.

[smithie6] 04/1/2014 19:56

Re-posting Topvests numbers for Hartim

2009 471K
2010 766K
2011 -119K after exceptionals
2012 873k before exceptionals

(2008 was around 370k I think)
2007 was around 50k I think
(gross profit in 2007 and 2008 were similar)

SUMMARY

that Hartim profitability has roughly doubled since bt. in 2007/8
and 100% cost around 3.5M incl bank debt.
so, one could argue that the value is closer to 7M now, with its cost price as a way underpriced minimum, 3.5M (around 10p for Western stake, as it was in Western 2012 accounts)


The gross profit has increased from around 2.6M in 2007/8 to just under 4M now. Not quite double. (And turnover is up) But profitability has increases in relative terms since costs has been reduced, such as lower lease costs.

so, again I think around 15p is perhaps a fair value for the Western stake in Hartim, and easily move up if the results for 2013 turn out to be good. The Hartim year end has already happened.

15p is 14p higher than current valuation used in Western accounts.
so, recent NAV calc. value of 94p (see post of 1-2 days ago)
= 94+ 14
= 108p

and imo you could cough and easily add another 10p to make 118p

[smithie6] 04/1/2014 19:46

Valuing Hartim

....bad news that it cant pay any divi, due to the rules, as Topvest pointed out

but the value of it is imo still in the region of 20p...even though only 1p in Western accounts
Hartim cost around 3.5M-4M to buy including bank debt...and that bank debt was paid off over the last few years

around 1.3M -ve in the company level profit/loss account (due to except. 2.5M loss from Auz in 2012 accounts)
but around 500k -ve a group level
and made 1.25M op. profit in 2012 excl. the Auz. exceptional.
so at group level when you add in the profit from 2013
---

If there was a corporate consolidation then the group profit/loss number would/could become the 'company' profit/loss number...even if doesnt happen.
...in that case, imo, the profit/loss number is "now" +ve at group level (adding annual PAT of around 500-600k to 2012 value of around 500k -ve at group level)
...so ...who knows we might be closer to a divi than we think

---
Hartim cost around 3.5M -4M in 2007/8
and since then the profit number is well up, perhaps 70-100% up
and the co. does not hold the bank debt that it had when it was bought, (bank debt was taken on by Hartim to help pay the cost for Tudor Rose, was it 1.4 or 1.8M). ....and some of the debt held now by Hartim or Tudor Rose is to provide working capital, which is now higher I assume since turnover is higher

so...perhaps a valuation of 5.4M would be fair for Hartim, Western has half, 2.7M or 15p per share (18M shares)

(noting that if reports growth (it has since 2007)....and then listed, its value listed (if only sell 10% of new shares) would perhaps be double its value for a private sale)

Hartim should be in theory adding around 280-360k /year to Western assets, even if hidden within Hartim...which is approx. 2p per Western share....the same as the divi...around 4%...even though Hartim is officially only valued at 1p/share in Western accounts.

----
I note that the co. works for Unilever (eg. PG Tips) and Tesco.....so it has access to a lot of brands imo to try to sell

BTW Hartim accounts give 25M as the turnover for 2012

[smithie6] 04/1/2014 19:16

"I do think the ISDX closure, if it happens, may force the issue though. Of course, they may just decide to re-list on AIM or stay as a private company."

...'if' moved back to AIM, 'if' ISDX were to close....then be two advantages imo

- could then put into an ISA.....which would benefit some people wrt tax on divi perhaps
- some investors might be willing to buy, who would not be willing to buy ISDX stocks
----

the spread
officially 5p not 10p !.....worth noting imo that a lot of trades go thru well inside the spread.....the MM just marks a large spread 'cause it is so illiquid, he doesnt want to get stuck with a lot of stock himself, MMs normally dont want to hold stocks if not making trades with it and hence a weekly profit

over last 2 months most trades went thru at 55-58p....3p spread....not so bad
need to use a limit order.....even with 3p spread the MM makes a nice quick profit, 10k traded on 1 day, so the MM only had to hold for maybe 1/2 hour to make 5%.....same at many company shares, but I guess that someone has to pay the MM wages etc.

[topvest] 04/1/2014 09:05

Yes, it's never been a trading stock and always a terrible spread of nearly 10p. Liquidity will get worse when ISDX closes! Personally, I think a 60p share price is about right. There is always going to be a big discount on this with the current arrangements in place, and no obvious trigger to unlock value. A merger with LFI would improve liquidity, but that's not really the Marshall's style unless they are forced into it. They like collecting companies! I do think the ISDX closure, if it happens, may force the issue though. Of course, they may just decide to re-list on AIM or stay as a private company.

[russman] 03/1/2014 22:55

Judging by todays trades, share liquidity is also an issue.

[topvest] 03/1/2014 18:30

I haven't got time to endlessly research this as it doesn't make any difference anyway, BUT looking at the WSE accounts; I think you will find that they are incorrect on page 20 and inconsistent with other parts of the accounts.

At 30 June 2013 Hartim is held at £185k which means it must have had net assets of approx twice that or £370k. It had net assets of £557k at 31 December 2012 and so it made a small loss all other things being equal. The share of net assets number of £1,506k looks complete nonsense to me!

It's impossible to try and quote an underlying profitability of Hartim with the information available, but £0.5m per annum looks about right to me.

2009 471K 2010 766K 2011 -119K after exceptionals 2012 873k before exceptionals

[smithie6] 03/1/2014 13:45

although the writing off of loans and debts to Auz. subsidiary (50% owned) was 2.5M...and a big hit in 1 year

I think it is worth noting that

the op. profit was
1.25M !!

before charging for deprectn. impairment and loss on disposal of fixed assets

ref. note 18 on page 20 of Hartim annual report for 2012 (to Dec 2012, issued Sept 2013, slow))
( 2.5M - 1.25M)

Western paid 750k for 1/2 of Hartim .....
so it it is producing 1.25M op. profit..(that's around 600k as the Western part !) ...then it is surely shelling out a lot of cash relative to the investment cost even though all stays within Hartim, ...although 2.5M written off due to Auz. mess up.

Western's part of op. profit is almost as big as its investment cost !

and the book value for Western of its investment is only 185k !
-----

From Western annual accounts to end June 2013.
"Western holds 49.5% of Hartim, which has a 31st December year end, and which generated trading profits before exceptional items in the year to 30th June 2013 of £915,000."

.....I can not understand how official Western accounts can say that Hartim has a Dec 31st year end for audited accounts....and then give data to 30th June 2013 !!
...surely the audited annual accounts of Western can only make use of the numbers from Hartim from its audited annual report, ie. to Dec 31st ?!!

in any case, the numbers to 30th June 2013 say that trading profit was 915k
(I assume this is probably before deprecn. etc)....almost double Topvests number of 500k.
(915k is lower than the value to Dec 2013 of 1.25M but still a good number, numbers might go up and down depending on specific dates for contracts or deliveries)

[smithie6] 03/1/2014 13:38

2.5M was written of due to Auz write off....completely written off according to Hartim accounts

.....all debts etc...even though the administrator wasnt called in till 3 months later.....(I assume that Western wanted it like that....a kitchen sink job I assume...and to get it booked ASAP....and out of the way.....so as not to hang over the accounts and perhaps affect business


"they made a loss in H1 "
the Hartim accounts actually said that trading well in H1...and that expected trade to be better since new customers and new routes to market...

----
op. profit was
1.25M !!

before charging for deprecatn. impairment and loss on disposal of fixed assets

ref. note 18 on page 20.
( 2.5M - 1.25M)
----
...so ...I think the accounts differ a lot from what Topvest/you posted
" I would guess underlying profitability is only £500k maximum."

[topvest] 03/1/2014 13:03

They won't make much, if any, profit in 2013 as they made a loss in H1 I believe as all the Australian costs were not taken in the 2012 accounts if I remember correctly. I would guess underlying profitability is only £500k maximum. They could do a capital reduction. No chance of a dividend or float for a couple of years in my humble opinion.

[smithie6] 03/1/2014 12:49

Discussion of Hartim Distributable reserves

"When can a company make a distribution?
A company must have profits available to make a distribution (section 830(1), CA 2006). These are often referred to as distributable profits or distributable reserves.
A public company can only make a distribution:
If the amount of its net assets (that is, the total excess of assets over liabilities) is not less than the total of its called up share capital and undistributable reserves.
If, and to the extent that, the distribution itself does not reduce the amount of the net assets to less than the total of its called up share capital and undistributable reserves.
(Section 831(1), CA 2006.)
Additional requirements apply to investment companies (see section 832, CA 2006)."

looks like your 1.3M number comes from the company accounts, not group accounts....looks like any divi must come from company accounts....I hadnt realised...(I am normally interested in consolidated accounts, ie. group accounts)

[smithie6] 03/1/2014 12:17

distributables and divis and distributable reserves, wrt comp. accounts and group accounts

I need to learn up more about the details....and try and see if Hartim could do any corp. action to allow a divi to be paid earlier..such as moving money between company level and subsidiaries, to improve the number at company level.

----
Ah, -ve distributables, good point....I hadnt looked at that.

but !

if they have made the same profit as last year ....then the accounts are now different, the year end has just happened I think, end Dec.
so that 1.3M -ve could now be very close to 0.....and if got some of the loan or goods money back from Auz then the distrib. reserves would move +ve...and allow a divi

or some corp. action or something to bump up the dist. reserves a little to allow a divi to be paid in coming months.....although they might be quite wary of any corp. actions after their Aussie 'mis-adverture' !!
---

but looks like you are right that no divi till bump up the distributable reserves numbers (profit/loss number)

---

cut

[topvest] 02/1/2014 20:15

Hartim can't pay a dividend unless it restructures it's balance sheet - it has negative distributable reserves of £1.3m. Again this points to 2/3 years of clearing the deficit, which is also linked with the medium term funding put in place.

Yes, I do hold some shares in the demerged Creston land company and even subscribed to their rights issue about a decade ago. Achieved nothing since unfortunately.

[smithie6] 02/1/2014 17:08

ah, on the divi front, NBI is also expected to increase its divi...

so Western income should well increase this year
and with NBI price up a lot and looking solid...and CRE has perhaps found support around 90p..and SWL looking likely to rise...

and Western income exceeds its operating costs and op. costs have been stable for last few years

Western could well afford to increase its divi....

(personally I'd prefer they handed out all the assets 94p/share + %Hartim + %Ind. Commer. Hold. and we could each then make our own investment decisions on NBI, CRE and SWL..and we'd avoid 300k running costs..but that looks unlikely to happen)

[smithie6] 02/1/2014 17:03

Hartim
float or pay divi ?

Well, if it makes around 1M PBT/year , then approx. = 750K PAT.
Western owns half, around 380k, or 2p per Western share. (18M shares)

If pay out 1/4qtr of this PAT as a divi...then its 1/2p per Western share.
And 1.5p per share to go to solidify the Hartim accounts and help fund stocks and working capital.

If so, a 25% increase in divi. around 2p to 2.5p

Be good news if it were to happy. Western shareholders have been very patient imo....invested in Hartim a few years ago now....and its never paid anything back for that investment.....and recent deal with the co. applies some pressure on them to pay a divi.....so clearly Western wants/expects it to happen.
If it happens in forthcoming accounts will depend I guess on how solid the accounts are. Putting in 1/2M hopefully makes the accounts solid enough to support paying out around 95k-180k to Western to then use to increase the Western divi

waiting is a bit like watching paint dry !!.....but the share price rose 40% last year....so that was beneficial waiting...the share price could easily move up from where it is now imo

[smithie6] 02/1/2014 16:54

Topvest
personally I dont think investors would take any notice at all of an auditor comment that Auz subsidiary went bust and accounts not seen.....

the dirs. would include notes that all possible losses from that Auz. subsidiary had been written off in full and that no further liabilities from it to Hartim existed.....and imo investors would then take no interest in the subject.....

investors would look to see
- how much profit is being made
- profit falling or rising
- debt level ref. profit. (negligible I think imo once include profit from 2013)

Western have never mentioned floating it....always mentioned it providing income to Western...but a chunk of Marshall family trust assets are in LFI and get much higher value and directors fees !...if subsidaries are listed rather than private (part of the reason I think why they have not de-listed Western imo)

(and if Western ever wanted to do any corporate actions or raise money for Hartim or whatever they it is much easier I think if it is listed.....shareholders in private companies need more persuading before they subscribe to an unlisted company imo....especially if the chairman and controlling shareholder is resident in South Africa !)

but DCM has been involved in floats all the time he has been at Western and LFI
...been numerous.....with Western or LFI investing...and DCM getting a seat on the board as a result and City Group getting the work/income for doing the accounts and secretary function for most of those companies...

DCM director income often paid to 'overseas company'...I assume to Marshall family trusts domiciled in Virgin Islands (mentioned in the papers somewhere)


Western also of course has 30% of the land held in another associate company ..Western controls the board...which would need funding if ever gets building permission....so floating is also an option there perhaps....2 Marshalls on the board there....I assume they would be quite happy to turn it into a real company and get real directors fees....just get around 1k at the moment, but perhaps just for a 1 hour meeting one time per year...before other bod meetings....while a property company does the lobbying to get permission

it was separated from Creston back in 2000...as a free bonus share...1:1.

[smithie6] 02/1/2014 16:38

NAV update

to buy NAV 94.4p per share

using NBI 468p
CRE 95p
SWL 90p

Hartim and Gen. Portf. as per the accounts. (which we all agree is no where near the true value for Hartim)

If value Hartim 10p higher then NAV = 104.4p
If value Hartim 20p higher then NAV = 114.4p
If value Hartim 30p higher then NAV = 124.4p

(so, money moved from Gen. Portf. to Hartim , assuming that rather than taking on new debt.....is considered as having unchanged value...but in reality in Hartim it will produce a higher % return)

NAG. DYOR

[russman] 01/1/2014 12:17

I do not recollect Hartim's flotation being a stated goal. It is a useful value benchmark as time passes. It is not the only option but could allow the DCM gravy train to keep rolling.

[topvest] 31/12/2013 16:28

Smithie6 - No, the Hartim accounts will be qualified in my opinion. I've mentioned this a few times already, but when you have a limitation of scope because you don't have the records then it stays with you for at least a couple of years. The Australian entity is presumably in liquidation and so Hartim do not and will not have access to all the records. I'd love to see a float, but I really can't see this happening for 2/3 years as floating something with qualified accounts is very difficult and you would no doubt pay the price with investors offering a lower price. They would need to have a short form and that would be complicated by the Australian issue. Also, why would they want to dilute their holding at a rubbish price, whereas they could presumably now build up a nice three year record ahead of any listing. Has anyone at WSE ever mentioned a listing or is this just your wishful thinking?