In a short follow-up to my comments about Avesco's recently announced distribution of the Disney proceeds to shareholders, and in particular the share buyback, I just wanted to add my further thoughts about future shareholder returns.
Firstly, at 217.5p per share (pre-Disney payout) shareholders will receive a 52% dividend within 4 months (114p) which currently implies that post Disney and final dividend pay-outs, the shares are worth 103.5p (217.5p-114p) or a £19m market cap.
As mentioned previously this leaves the shares at a very substantial discount to NTAV. The even year effect in 2014 is more than likely to put the company back on track after a disappointing 2013.
Moreover, the company have increased the dividend by 25% this year (from 4p to 5p), and have stated their intent in pursuing a progressive dividend policy. This is interesting since the reduction in the share capital (assuming the share buy-back goes ahead) from 25.9m to 18.3m implies that a maintained dividend would actually equate to around 7p next year (25.9m*5p=£1.3m, 18.3m*7p=£1.3m). In fact a 7p dividend next year would be marginally less expensive. If Avesco are truly going to implement a progressive dividend policy then is it possible that next year's dividend could be 8p plus? It will be interesting to see.
The way I see it, the company have effectively returned pretty much all of the cash from Disney to their shareholders. The buy-back increases each shareholder's stake by approximately 41%. Despite having being an investor in Avesco for more than four years, and although I have benefitted from substantial share price gains and large pay-outs, I still see the company as well below fair value.
Investor's should also take a peek at their website to view the circular re: return of £1.10 and share buyback:-
http://avesco.com/node/355
and this is also worth a watch:-
http://www.ct-group.com/news/nuformer-and-ct-team-Philips
As ever, no advice intended or given.
Friday, 27 December 2013
Monday, 23 December 2013
Avesco returns cash and buys back 30% of it's shares from Taya
I must admit to feeling just a little bit queasy when I saw that Avesco had released two news statements at just after 5pm this evening. Normally this doesn't signify good news!
However, on this occasion and to my relief, it was quite the opposite.
Firstly, let's deal with the prelims which didn't make very good reading. Avesco had previously indicated that 2013 had been a challenging year for the company and this is apparent from the final results, and of course comparisons with last year are unfair since revenues and earnings had a very substantial boost from the London Olympics.
Nevertheless, they did make a small trading profit of £0.5m, but more significantly the final dividend of 4p is a 33.3% premium to last year's (3p) and a 25% increase on the full dividend (5p compared to 4p in 2012). Moreover, the company are committed to a progressive dividend policy.
I'm not going to spend too much time analysing the 2013 results because there are several figures that could be quoted for EPS, the headline figure of course is 136.2p because of the huge income received from the Disney litigation.
The main drag on underlying earnings this year appears to have been CT Germany and Presteigne Charter. The company had to incur restructuring costs in both of these divisions.
Looking forward however, Richard Murray states:-
"The first quarter of the current financial year has started in line with the Board's expectations. As we look further into 2014, the Group anticipates a return to profitability with the benefits of a reduced cost base and an expected increase in demand over 2013 for its services, with a number of major "even year" sporting events being held, including the Winter Olympics in Russia, the Commonwealth Games in Scotland and the FIFA World Cup in Brazil."
There will still be some costly restructuring at their loss making European operations, but the business should be stronger and more predictable going forward as a result.
Overall, the fact that they have no requirement for the Disney cash going forward, and are intent on a progressive dividend policy, is an excellent and reassuring sign for the future.
The £1.10 return of cash to shareholders will now take place at the end of January and shareholders can opt for the pay-out either as income or capital. With the share price currently standing at £2.26, post Disney pay-out and share buyback (mentioned below), Avesco is valued at just £21.4m.
This brings me on to the unexpected buyback from Taya of nearly 30% of the company's issued share capital. The shares will either be held in Treasury or cancelled. The number of shares in issue will fall from around 26m to around 18.4m and as consequence should enhance earnings significantly.
I must admit this wasn't a move I had anticipated, but it is extremely welcome.
Their reasoning is as follows:-
"The completion of the Share Buy-Back is expected to be earnings-enhancing, post on-going funding costs. After the completion of the Share Buy-Back, the value of the net assets per Ordinary Share will increase proportionately."
"The total voting rights of Independent Shareholders (excluding the interests of the Directors) will increase to 66 per cent. from 47 per cent. and, in this context, the Independent Directors believe that the removal of a significant shareholder will remove a possible disincentive to other institutional investors considering an investment in the Company."
"In recent years the Company has been reporting its financial results on a quarterly basis to enable Taya to comply with Taya's own reporting obligations on the Tel Aviv Stock Exchange. After completion of the Share Buy-Back, the Company will be able to revert to producing its financial results on a biannual basis which will remove a management and administrative burden."
"It is estimated that the Company will save approximately GBP0.2 million per year in quarterly audit review fees, director's fees and related expenses."
"The reduction in the issued share capital will result in a 29.2 per cent. reduction in the amount of cash being paid out in dividends by the Company and will, therefore, provide further support to the Company's intention to maintain its progressive dividend policy."
If my calculations are correct then post Disney pay-out and share buyback the shares stand at a 40% discount to Avesco's net asset value (and they are quality assets). In my view this still means the company is significantly undervalued.
Avesco has been a stellar performer for me, and I am extremely grateful for all the efforts of those involved with the company.
Merry Christmas to all readers of my blog, and congratulations to all shareholders in Avesco.
As ever no advice intended or given.
However, on this occasion and to my relief, it was quite the opposite.
Firstly, let's deal with the prelims which didn't make very good reading. Avesco had previously indicated that 2013 had been a challenging year for the company and this is apparent from the final results, and of course comparisons with last year are unfair since revenues and earnings had a very substantial boost from the London Olympics.
Nevertheless, they did make a small trading profit of £0.5m, but more significantly the final dividend of 4p is a 33.3% premium to last year's (3p) and a 25% increase on the full dividend (5p compared to 4p in 2012). Moreover, the company are committed to a progressive dividend policy.
I'm not going to spend too much time analysing the 2013 results because there are several figures that could be quoted for EPS, the headline figure of course is 136.2p because of the huge income received from the Disney litigation.
The main drag on underlying earnings this year appears to have been CT Germany and Presteigne Charter. The company had to incur restructuring costs in both of these divisions.
Looking forward however, Richard Murray states:-
"The first quarter of the current financial year has started in line with the Board's expectations. As we look further into 2014, the Group anticipates a return to profitability with the benefits of a reduced cost base and an expected increase in demand over 2013 for its services, with a number of major "even year" sporting events being held, including the Winter Olympics in Russia, the Commonwealth Games in Scotland and the FIFA World Cup in Brazil."
There will still be some costly restructuring at their loss making European operations, but the business should be stronger and more predictable going forward as a result.
Overall, the fact that they have no requirement for the Disney cash going forward, and are intent on a progressive dividend policy, is an excellent and reassuring sign for the future.
The £1.10 return of cash to shareholders will now take place at the end of January and shareholders can opt for the pay-out either as income or capital. With the share price currently standing at £2.26, post Disney pay-out and share buyback (mentioned below), Avesco is valued at just £21.4m.
This brings me on to the unexpected buyback from Taya of nearly 30% of the company's issued share capital. The shares will either be held in Treasury or cancelled. The number of shares in issue will fall from around 26m to around 18.4m and as consequence should enhance earnings significantly.
I must admit this wasn't a move I had anticipated, but it is extremely welcome.
Their reasoning is as follows:-
"The completion of the Share Buy-Back is expected to be earnings-enhancing, post on-going funding costs. After the completion of the Share Buy-Back, the value of the net assets per Ordinary Share will increase proportionately."
"The total voting rights of Independent Shareholders (excluding the interests of the Directors) will increase to 66 per cent. from 47 per cent. and, in this context, the Independent Directors believe that the removal of a significant shareholder will remove a possible disincentive to other institutional investors considering an investment in the Company."
"In recent years the Company has been reporting its financial results on a quarterly basis to enable Taya to comply with Taya's own reporting obligations on the Tel Aviv Stock Exchange. After completion of the Share Buy-Back, the Company will be able to revert to producing its financial results on a biannual basis which will remove a management and administrative burden."
"It is estimated that the Company will save approximately GBP0.2 million per year in quarterly audit review fees, director's fees and related expenses."
"The reduction in the issued share capital will result in a 29.2 per cent. reduction in the amount of cash being paid out in dividends by the Company and will, therefore, provide further support to the Company's intention to maintain its progressive dividend policy."
If my calculations are correct then post Disney pay-out and share buyback the shares stand at a 40% discount to Avesco's net asset value (and they are quality assets). In my view this still means the company is significantly undervalued.
Avesco has been a stellar performer for me, and I am extremely grateful for all the efforts of those involved with the company.
Merry Christmas to all readers of my blog, and congratulations to all shareholders in Avesco.
As ever no advice intended or given.
Saturday, 21 December 2013
Trakm8 interims, and brief updates
As anticipated in last week's blog, Trakm8 released their interim results this week.
The headline figures show that revenues increased by 10% to £2.564m, combined UK and International orders received increased by 28%, and underlying annualised recurring revenues increased by 15% to GBP2.3m. The company continues to maintain profitable growth with an operating profit before exceptional costs of £87,000, gross margins increasing slightly to 75% whilst they retained strong cash balances.
The figures are very healthy and encouraging, but it is the forward looking statements that have greater significance following the "transformational acquisition of BOX Telematics Ltd completed in October 2013". In the year ended 31 December 2012, BOX recorded revenues of GBP8.4 million and profit before tax of GBP850,000.
In the forward looking statement John Watkins, Executive Chairman of Trakm8 said:
"We expect to deliver on the investments in resources over the next year and to deliver strong growth in profitability on the back of the much larger Group revenues, in line with our expectations."
Broker forecasts are for revenues of £10.9m in 2014 with EPS of 2.3p and £16.9m in 2015 with EPS of 4p. This gives forward P/E figures of 15 and 8.5 respectively. The figures don't look unreasonable , but I don't tend to pay too much attention to broker forecasts on smaller companies in the early stage of their development. Revenues and profits at this stage are very difficult to predict. With this company there are a number of other key indicators that are far more important to me in holding shares in the company for the long term.
Highlighting the significant detail from the interims:-
"Trakm8 has continued to consolidate its trading position and profitability, in addition to enhancing its robust financial position. We were very pleased to have completed the transformational acquisition of BOX Telematics just after the half year end, significantly improving our market leading position. "
"The rate at which new orders have been received during the period indicates that the expansion of our engineering and sales teams is starting to positively impact the results."
"There has been a continuing increase of 15% in the annualised recurring revenues, which are based on increased numbers of units reporting to Trakm8 servers. These revenues are the bedrock of the Group's financial future."
"Gross profit margins have continued to improve, which we anticipate to increase further once BOX Telematics is fully integrated into the Group."
It should be noted that the increase in revenues and profitability were achieved without a large order from one single customer which they had achieved in previous years. This is down to the fact that they have managed to broaden their customer base both in the UK and internationally. It's always important to me that a company does not have too heavy a reliance on one single customer. I watched a company called UBC Media (mentioned in previous blogs) for many years before buying shares in the company. Amongst the early reasons for holding off any purchase was their reliance on the BBC for the vast majority of their revenues.
"Our customer facing web based solutions are market leading........ The order pipeline has been building strongly following the appointment of a Corporate Sales Director early in 2013."
"Trakm8 has been building from the strategy announced last year to invest in more engineering and sales resources. Although, as expected, operating costs have increased at the expense of short term profitability, the new product introductions and the order pipeline is giving confidence that this investment will pay off."
Despite this investment Trakm8 continues to trade profitably.
The report regarding the early integration of BOX Telematics into the group reads very positively indeed and will be transformational for the group if they achieve the financial and strategic benefits they have outlined.
Finally,
"The Group has a much stronger pipeline of new sales opportunities than at any time in its history and has the recently enhanced engineering resource to capitalise on them."
and
"The Board believes that the investment in resources and the acquisition was timely both in terms of the improving general economic climate and the tipping point in mass market adoption of telematics that appears to have been reached. "
In conclusion, Trakm8 is a small company valued at less than £10m that could have a very big future.
I am excited about the prospects for the enlarged group which can grow significantly from a sound financial footing with high gross margins, strong cash flow and double digit growth in recurring revenues.
In other news, Angle continues to show considerable promise and is presently delivering on the timeline set out for the marketing and sales of it's Parsortix system in the diagnosis and treatment of cancer patients. This week they announced the CE Mark authorisation of its Parsortix cell separation system for use as an in vitro diagnostic device in the European Union. FDA approval should follow in due course which opens up a potential £8 billion plus market for sales of the device.
Some time ago there were rumours in the Times newspaper that Angle was a bid target. I expected that there was some substance to these rumours, and that a bid would duly follow. I still believe that because (as mentioned last week) the company is now a one product outfit with some not inconsiderable challenges to be overcome in getting the product into mass market use, a bid for the company is very much a real possibility. Of course other options are open to them, as outlined in their RNS. Overall, I am very happy to hold on tightly and see what happens in the ensuing months.
No further details from Avesco or UBC Media yet. In the meantime, I have noted that Creative Technology continue to ramp up their visibility on the website. The latest news item details their involvement in Jessie J's concerts. Certainly worth a read for shareholders:-
http://www.ct-group.com/news/ct-alive-jessie-j
As ever, no advice is intended or given.
The headline figures show that revenues increased by 10% to £2.564m, combined UK and International orders received increased by 28%, and underlying annualised recurring revenues increased by 15% to GBP2.3m. The company continues to maintain profitable growth with an operating profit before exceptional costs of £87,000, gross margins increasing slightly to 75% whilst they retained strong cash balances.
The figures are very healthy and encouraging, but it is the forward looking statements that have greater significance following the "transformational acquisition of BOX Telematics Ltd completed in October 2013". In the year ended 31 December 2012, BOX recorded revenues of GBP8.4 million and profit before tax of GBP850,000.
In the forward looking statement John Watkins, Executive Chairman of Trakm8 said:
"We expect to deliver on the investments in resources over the next year and to deliver strong growth in profitability on the back of the much larger Group revenues, in line with our expectations."
Broker forecasts are for revenues of £10.9m in 2014 with EPS of 2.3p and £16.9m in 2015 with EPS of 4p. This gives forward P/E figures of 15 and 8.5 respectively. The figures don't look unreasonable , but I don't tend to pay too much attention to broker forecasts on smaller companies in the early stage of their development. Revenues and profits at this stage are very difficult to predict. With this company there are a number of other key indicators that are far more important to me in holding shares in the company for the long term.
Highlighting the significant detail from the interims:-
"Trakm8 has continued to consolidate its trading position and profitability, in addition to enhancing its robust financial position. We were very pleased to have completed the transformational acquisition of BOX Telematics just after the half year end, significantly improving our market leading position. "
"The rate at which new orders have been received during the period indicates that the expansion of our engineering and sales teams is starting to positively impact the results."
"There has been a continuing increase of 15% in the annualised recurring revenues, which are based on increased numbers of units reporting to Trakm8 servers. These revenues are the bedrock of the Group's financial future."
"Gross profit margins have continued to improve, which we anticipate to increase further once BOX Telematics is fully integrated into the Group."
It should be noted that the increase in revenues and profitability were achieved without a large order from one single customer which they had achieved in previous years. This is down to the fact that they have managed to broaden their customer base both in the UK and internationally. It's always important to me that a company does not have too heavy a reliance on one single customer. I watched a company called UBC Media (mentioned in previous blogs) for many years before buying shares in the company. Amongst the early reasons for holding off any purchase was their reliance on the BBC for the vast majority of their revenues.
"Our customer facing web based solutions are market leading........ The order pipeline has been building strongly following the appointment of a Corporate Sales Director early in 2013."
"Trakm8 has been building from the strategy announced last year to invest in more engineering and sales resources. Although, as expected, operating costs have increased at the expense of short term profitability, the new product introductions and the order pipeline is giving confidence that this investment will pay off."
Despite this investment Trakm8 continues to trade profitably.
The report regarding the early integration of BOX Telematics into the group reads very positively indeed and will be transformational for the group if they achieve the financial and strategic benefits they have outlined.
Finally,
"The Group has a much stronger pipeline of new sales opportunities than at any time in its history and has the recently enhanced engineering resource to capitalise on them."
and
"The Board believes that the investment in resources and the acquisition was timely both in terms of the improving general economic climate and the tipping point in mass market adoption of telematics that appears to have been reached. "
In conclusion, Trakm8 is a small company valued at less than £10m that could have a very big future.
I am excited about the prospects for the enlarged group which can grow significantly from a sound financial footing with high gross margins, strong cash flow and double digit growth in recurring revenues.
In other news, Angle continues to show considerable promise and is presently delivering on the timeline set out for the marketing and sales of it's Parsortix system in the diagnosis and treatment of cancer patients. This week they announced the CE Mark authorisation of its Parsortix cell separation system for use as an in vitro diagnostic device in the European Union. FDA approval should follow in due course which opens up a potential £8 billion plus market for sales of the device.
Some time ago there were rumours in the Times newspaper that Angle was a bid target. I expected that there was some substance to these rumours, and that a bid would duly follow. I still believe that because (as mentioned last week) the company is now a one product outfit with some not inconsiderable challenges to be overcome in getting the product into mass market use, a bid for the company is very much a real possibility. Of course other options are open to them, as outlined in their RNS. Overall, I am very happy to hold on tightly and see what happens in the ensuing months.
No further details from Avesco or UBC Media yet. In the meantime, I have noted that Creative Technology continue to ramp up their visibility on the website. The latest news item details their involvement in Jessie J's concerts. Certainly worth a read for shareholders:-
http://www.ct-group.com/news/ct-alive-jessie-j
As ever, no advice is intended or given.
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