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The recent acquisition of Grupo recently for around 80m Euros and the other smaller acquisition of the transport services provider in Portugal is where I’m beginning to question what is going on behind the scenes! Both sit in ALSA and clearly the Cosmens made a case for these explaining how they are the growth engine so should be allowed to continue. This capital allocation is not what the market wants to see given (similar to the dividend issue) and is jeopardizing the wider business given how paying down debt should be the priority!
I’m in deep here as well and been averaging down but I’m in over a quid, and these drops are just painful. Although less so that a 4% drop today is significantly less at today’s price compared to 2 years ago!
Good luck all - I will be holding and wish I had the conviction not to continually check the share price multiple times a day!!
I wasn’t going to look… but 5% down again today, I couldn’t resist! Ballantye post is spot on and something I cannot get my head around also. Spending £70-£80m on Grupo didn’t make sense unless returning high margins above 10% which from the numbers in the press is nowhere near. We don’t know the price, we don’t know the returns, we don’t know the structure of whether it was a cash deal or not!!! It appears to be a vanity project that Cosmens have been courting for some time. It doesn’t send a good message to investors concerned about debt. the lack of information / communication again is typical of the problem.
We’ve heard about standing tall and not bed wetting etc and that the board are doing their best (which is mostly true and they are dealing with inherited issues and macros out of their direct control) but it’s the lack of care towards the shareholders that concerns me as much as anything. How do you stand tall when we don’t know what’s behind some of these not insignificant decisions. We are all aware that the board isn’t going to communicate day to day operational issues but an £80m spend when cash is so important with no communication at all, other than “by the way we’ve just bought Grupo” is unacceptable.
We need more communication particularly when things are this bad so we can have an informed decision of whether we want to ‘stand tall’ or take a rinsing.
It feels like we are currently cut adrift.
Wealthtrasfer
I can understand your concerns but why we associate groupo buying with cosmen? Nothing changed significantly. Only we don’t believe we will be able to sale NA business. We don’t believe margins will increase and we don’t believe interest rate will come down.
And that’s what shorts know they open lower with margin and keep it lowers while selling to each others and that’s the reason some just go above 0.50% and appear on the screen.
Hybrid is not a big deal and within time frame it will sort out IMO.
This is a big company they former CFO which shows negligence has kicked out. Cosmen and other don’t like loss.
Keep faith.
Lara - we associate with Cosmens by reading the press as it’s the only information we are given. Press reports stated that MCG were the preferred buyer as had close relations with ALSA/Cosmens over many years. No idea if it’s true but all we have to go on.
I don’t really care why to be honest but I do care that we weren’t afforded any respect by outlining the merits of the deal (before or after) and why it was worth doing even at this time of high debt when their ‘focus’ is stated as being on reducing debt as the no.1 priority.
We cannot go along with anything the board want to do without a fair amount of concern if we have to guess what they are doing and why.
This has nothing to do with interest rates, hybrid or whether this will or won’t turn around, it’s about communication and informed decision.
If things are all gong well then less communication maybe acceptable but now it is very important in keeping the owners of the business on side and supporting the companies value. I think this is where the board largely fails.
Dropping the dividend and buying a profitable business with it is what they ought to be doing. The easiest way to deal with debt is to increase one's income. Through that lens there is little wrong with that acquisition.
The furore caused by the recent broker's note seems rather overblown to me. 80% of the debt is fixed till 28/31, a resolution for the 20% will not be overly difficult for a business with growing revenues, recovering margins and healthy underlying profitability and FCF. Exceptional fuel and wage cost inflation is now consigned to last year's books, and things have already begun to normalize this year. Plenty of companies have terrifying debt burdens that they will likely ultimately succumb to, but this isn't one of them. Ocado (with no disrespect to holders of that) has more debt, less revenue, an expanding operating loss at half a billion a year, and is still holding onto a 2.8bn mcap, 10 fold that of Mobico. On paper, Mobico is a far better business. This is one of the market's bargains this week. An exceptional takeover tarket.
" Spending 70-80m Euro on Grupo didn’t make sense unless returning high margins above 10% which from the numbers in the press is nowhere near. "
In the Spanish economy press I read :
" In 2022, Group 1844 recorded a turnover of 29.3 million euros that generated a net profit of 2.4m euros. The gross operating profit was then 5m euros" ...2023 was expected to be higher
so the Op profit margin indicated from that was 17.6%
I read there were a number of interested parties looking to bid for the business including private equity, but because Cosmen family knew the owners well, the owners decided to sell to the Cosmens and Mobico
paying 70-80m euro for a business with an annual revenue of 29.3m euro and an op profit of 17% ...looks...on the basic surface ..to be pretty good business
on that basis..looks like an opportunity came up that they had to jump at....
probably rationalise all the mini companies within 1844 Group.
£6.1m deposit was paid within the 2023 accounts
Kando - if you can explain why there is little wrong with the acquisition and have the. Numbers to back it up I’d love to hear it as there no information available from the company?
It might be the best acquisition in the world but we simply don’t know and in the current circumstances it should be explained. If you don’t want to know and fully believe the board can do no wrong then fine but I’d like to know what I’m investing in.
Poker - let’s hope someone pays 2.5x revenue for MCG then we will all be laughing. £80m spent on £5m adjusted ain’t 17.5%.
You’re missing my point that we should be informed if it’s a good deal. If it’s that good then it should support the SP.
Ocado, glad someone mentioned that one. I was thinking of throwing some cash at that recently as it's dropped so far. I thought better of it for the reasons you mention Kando. It does intrigue me how much furore the debt is causing here. The actual debt is lower than 2019 levels. It's the interest rates which are the concern. They will fall. Am i right in thinking there is no call on any of the debt until at least next year? i believe most of the refinancing is in place till 2028.
" £80m spent on £5m adjusted ain’t 17.5%." " If it’s that good then it should support the SP."
17.5% is the op profit against revenue and net profit stated ...
wealthtrasfer,
it is an acquisition without any expensive tendering or real investment ...just take over a built up business and no doubt use the experience to stream line operations and improve the margin in time
I did buy Ocado Paddyboy. It's stuck in a tight range of late but with 6.2% short and already hammered to the 350's, I see it as an opportunity. Thing is, a significant part of the value is tied in proprietary tech and it simply never gets realised. Big difference to MCG.
I don't think the shorts are attacking/game playing here. You have no communication from management, a debt pile with a USA solution which is not forthcoming and large holder staving off any idea of being acquired. I bought back in thinking 53p was decent, bought again at 51 and now at low 48s. Glutton for punishment.
Paddy - Im not trying to be obtrusive today but am struggling to see it your way. The debt levels are higher than 2019. The covenant net debt may be but with the IFRS rules and importantly the Hybrid (which for all intents and purposes is debt as Im sure you would agree), then the debt is higher.
The hybrid is the first call on repayment in Nov 25. This can be ignored with a premium increase to 8.4% or thereabouts and that interest can also be rolled up at a cost of about £40m p.a. But at a significant cost of reputation and breach of covenant as then the whole £500m Hybrid loses any equity credit and takes us over 3.5x covenant debt to EBITDA. If EBITDA can be increased from £400 to £500m then maybe they would get away with it but still paying 8.4% which wouldn't make sense as pure bond would likely be less even at the high covenant levels (but probably not by much). This adds c. £20m to annual interest payments, so not impossible to fund and wouldn't necessarily cause an immediate crisis particularly if a sale was imminent but it wouldn't look good at all, which is why NASB is up for sale and cash needs to be raised in the bank by next summer/autumn.
I agree with you on the other debts, they are currently manageable.
For the price to drop so fast and so low means no one is buying this share.
The SP suggests this will definitely go bust now with no chance of a recovery.
The organized exit is now a stampede.
Blasted below 50 easily and now 30s in sight for next week.
Flatliner - please enlighten why does the current SP tell you that this will go bust with no chance of recovery?
Facts would be preferable !
Thanks for the unconstructive post. Now read up on what short selling is & how they do it!
The sp may indicate serious issues however the smart money is usually in bonds…and there is no indication of stress in mobicos 2032 bond…zspread currently trading at 284
Wealth, you've kind of addressed the real point i was trying to make. There is no call on debt for at least 18 months. Talk of raises & stuff seems incredibly premature to me! The cost of debt is ATM perfectly manageable. I do feel this is just being played now by the HFs!
Minus 30% in a month.
10% this week. New lows every day now.
Bonds could have it wrong. Not impossible.
Shorts could have had a nod and a wink as to a profit warning, etc ? (not unknown although against the rules.)
Paddyboy
The hybrid first call is next November which needs sorting well in advance.
The rest yeah plenty of time , plod on with recovery etc etc
So how much money do folk suggest this company needs in terms of debt reduction? This is a business which has always had high debt levels. That is the nature of the sector.
Paddy - for me it just needs Hybrid sorting. If NASB is sold to do that then we need more than £500m in order to reinvest for growth or reduce other debt (ie ongoing interest payments) further to take into account the loss of income from NASB (normalised income). We need c. £1b ideally but I assume most would accept £750- £800 (or $1b).
When Wood Group wanted to sell a key asset to reduce debt the share price dropped from 360p to a low of around 110p
110p giving a MCAP of around £715m even though the asset alone was sold with a value of $1.9 billion and x16 EV
...now they are being offered 230p in a takeover offer. The key asset they sold had very good revenue and very good pipeline which of course is now not in the current offer
Different business , but ..shows you how the market really punishes the share price during these periods when companies seek to reduce their debt
Once they do..the SP tends to make a recovery ..
Huge negative announcement must be around the corner, city boys tipped off
This is MCG board not Clontarf or UFO
" I have 1,712 shares in Evraz. Are we allowed to write these off for CGT purposes as a loss?
If not, how do I go about getting a share certificate? Am I too late now. If so, will my broker account be enough ‘proof’? "
Moneymule888
getting your money stuck in Evraz hardly gives you any credibility to pop in and post de-ramps in here
# filtered
goodbye