A first look at Entu
An attractive valuation and excellent growth prospects in a sector I like caught my attention here. Entu first floated at the end of October 2014 and has since delivered fantastic returns for those who subscribed. The question now, of course, is whether this strong performance can continue and if the company is likely to deliver meaningful returns to shareholders.
Screen Summary
- With the PE currently sat at 11.2x, PCF at 9.91x and PS at 0.73x, the company appears cheap on an earnings basis. If an investment case is to be made on these grounds, it will be important to address issues around the sustainability and growth of these earnings.
- The unusually high PB of 93.7x and ROE of 131.7% suggest something unusual. A little digging reveals that shortly before being taken public, loans were made to related parties and subsequently written off, effectively reducing equity to £nil.
- Adjusting for this simply by taking the prior year’s equity figure, we get an ROE of 72% and a PB of about 10x.
Company Background
Entu is engaged in the distribution and installation of energy efficient home improvement products. From windows and conservatories to boilers and solar panels, they offer a comprehensive range of affordable solutions across the UK. The company has grown to its current size through a series of acquisitions, with each brand acquired specialising in different areas and geographies. The strategy is to pursue organic growth while making acquisitions when favourable, with production being outsourced in order to provide flexibility and a reduced cost structure.
Financials
The company has performed excellently, with revenue almost doubling since 2011 and operating margins improving over the same period. The business does not earn particularly high operating margins but that is to be expected given the strategy of outsourcing production. In fact, when compared against many similar operations, I think the operating margins are actually quite good and the gross margins in particular are high at around 30% for the year ended October 2014. I like the high gross margins as this means, assuming operating costs are kept under control, that operating margins are likely to improve significantly as the business grows the top line.
The balance sheet appears strong in my view, although there is not much in the form of net book value, there is no debt to speak of and the position is sufficiently liquid. The low net book value was touched on above and this is the result of related party loans being written off shortly before listing. The loans were predominantly to Sale Sharks rugby club which is owned by Brian Kennedy, the entrepreneur who founded the business and who remains a significant stakeholder. As long as nothing like this happens now that the company is public, the transactions were legitimate from my perspective.
A final point worth remembering is the dividend policy disclosed in the prospectus. A dividend yield of 8% on the listing price is promised for the year ended October 2015! This means a dividend of 8p on the 100p listing price, and 8p on the current share price gives a yield of 6.1%. This is absolutely fantastic news although we must wait to see whether the policy is implemented as promised.
The Market
This market is highly fragmented and is renowned for its poor customer service and lack of accountability. Entu feel that through establishing a recognisable brand and a reputation for good customer service, they will be able to achieve significant growth over the coming years.
I am inclined to agree that this represents a viable business opportunity for a couple of reasons. The first is an evident structural need for more housing in the UK, with significant demand from both domestic and overseas buyers. If the number of houses increases, then logically there are more opportunities for Entu to sell their home improvement products. Further, there is a trend of increased environmental awareness in the UK, with improved technology making saving through the use of energy efficient products viable for more Britons than ever before.
Entu's Market Position
Entu appears well positioned to benefit from these combined trends, and if they are successful in establishing the reputation they are committed to, then growth could well be sustained for some time. The fact that reputation and brand awareness are not fully established yet does give me some doubt, however. Entu have shown that with a remarkably small amount of capital, one can go in to the market, acquire a few well established local brands, and in a short period of time go on to a successful (and highly profitable) IPO.
I have no doubt than an observant entrepreneur would be able to replicate this feat with relative ease, especially if it is the case that the market is predominantly made up of a large number of small brands. This threat of new competitors must be monitored closely and will almost certainly lead to a squeezing of Entu's margins over time. Overall, I consider the company to look promising, certainly in the short to medium term, and will be watching the story unfold with interest.
Hope you enjoyed the article, if so then please share it with your network and feel free to leave any comments or questions below!
At the time of writing I hold a long position in Entu - LON:ENTU
It is important to note that all opinions expressed in this piece are the opinion of the author only and do not, in any way, constitute investment advice. Any individual seeking to make investments of any kind should conduct thorough proprietary research so as to fully understand the risks they are taking.
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50 comments
This showed up on one of my screens a while back, lesson learnt, never buy a stock for divs unless you are convinced of the persistence and sustainability of earnings. There just want enough of a track record.
Hi Tom, it's not a stock that I follow, other than seeing Paul's comments about them in his daily report.
All I can comment re: Entu is that the share price behaviour in the run up to the results, results coming out 2 days earlier, and the suspiciously high yield make me extremely wary, and would not encourage me to invest.
These, of course, are all subjective factors and I haven't been through the numbers. I know Paul increased his position, and he has a far better grasp of the financials than me.
However I do like the home improvement sector; personally I shy away from the builders (especially as I'm bearish on property, esp. in London, where prices look way too high), and would rather supply the picks than dig the holes.
To that end, I hold positions in both Travis Perkins (LON:TPK) and Headlam (LON:HEAD) (in the case of Travis, held them for many years). Both are very well managed businesses, with sound finances, reasonable yields (better for Headlam than Travis) and have been quietly expanding during the recession, taking out smaller rivals, investing in infrastructure etc.
They are boring businesses - but that's manna for heaven for me!
Anyway, best of luck if you decide to keep your Entu holding.
Surprised at some comments about housebuilders, yes some companies like TPK and HEAD have done quite well but many housebuilders gone up around 70%, plus special divis in the last year. Yes I agree they look quite expensive now thats why I have sold most.
herbie - I agree - didn't have any housebuilder shares, but to me they look a little toppy and wouldn't want to be buying in at current prices.
I just feel that companies like Headlam or Travis Perkins will continue to reap consumer rewards over a more sustained period.
Obviously IMHO though...
I have been considering Headlam (LON:HEAD) for a while now, just have not pulled the trigger yet.
Is it ever wise to invest in companies who have recently floated on a stockmarket?
Should it have been a red flag that the company proposed an 8% dividend yield in their first year?
In my view, the answer to the former is almost certainly no, and to the latter almost certainly yes.
Buffy
How convinced are we that this was insider trading? What is the evidence ? If we are convinced then what is the best way to do something about it?
Hi Warranstar,
I have strong suspicions - but that's all they are - nothing concrete.
Selling started not long after Entu announced when the mid-year results would be published. (And they appear to have go the date wrong!).
Like many others, I could see no news that would support such a sell off - so I bought more on the initial dip last Wednesday, believing the market had got it wrong. When the selling volume continued I started to suspect a problem and sold out again at a loss later that day. My inference was that someone was acting on information that was not in the public domain - I.e. poor results and possible dividend disappointment.
Now that the results are out the poor results (compared to last year H1) have been confirmed. Dividend has been initiated at a level consistent with the IPO proposal - so not all bad news. (it remains to be seen if they come through at year-end at the promised level).
Certainly trading has been odd over the last week, Entu have acted strangely with their RNSs in my view. I don't trust management to do what they promise anymore, so I'm out of this one.
But this is all just my opinion and interpretation.
I don't suppose anyone will have concrete evidence that cannot be explained away by the uncertainties in the market price movements of shares.
what is the best way to do something about it?
Report it to the FCA. This page explains what constitutes market abuse (including insider trading) and provides contact details for reporting suspicions: http://www.fca.org.uk/firms/markets/market-abuse
Unfortunately, however, you're not likely to get anything other than an acknowledgement of your complaint. In my experience, the FCA won't tell you anything about the status of any cases you ask them to investigate.
Better regulation & enforcement is something we're pressing for at ShareSoc. To exert more pressure and to succeed, however, we need more people to join us and to help us with our campaigns: http://www.sharesoc.org/membership.html
We have recently succeeded in our campaign to stop Rensburg AIM VCT (LON:RSB) liquidating, which would not have been in the best interests of many shareholders, so it just goes to show what can be done when we work together. See http://www.sharesoc.org/campaigns.html for full details.
Cheers,
Mark
ShareSoc Director
Twitter @marben100
Watchmaker you was correct on the information leak front.
Positives :
Dividend coming through in-line with original target - but heavily weighted to final payment (not unusual).
Order book strength.
Negatives :
PBT down on last year. reported to be 'in-line with management expectations at time of IPO' but not at all in-line the limited forecasts I've seen.
I sold out on the falls last week and see no great reason to buy back in, based on a first quick read through the mid-year results.
huge forecast yield which ever way you look at it,
" Board reconfirms its intention to recommend a final dividend of 5.33 pence per share bringing the total dividend for the year ending 31 October 2015 to 8 pence per share. "
which gives a fcast yield of over 7% @ a share price of 113p, some consolation for the dreary half year results with more promised.
I'm still holding as part of a portfolio, as the order book looked to triple so if they can just let that work through it should bump up the bottom line eps , but were going to have to wait for it.
regards
mrwhits.
results out early....
http://www.investegate.co.uk/entu--uk--plc--entu-/rns/half-yearly-report/201507201511505488T/
regards
Looks like the Govt. are going to announce they will reset green taxes. Solar seems to be a target for cuts.
Maybe this market is near saturation point, with all the deals lately then most houses have had these products fitted and some you will not be replacing? I know Safestyle, I don't like their selling tactics, reviews are vey mixed as well.
Interesting read regarding Safestyle's trading update this morning - multiple ways to look at it
http://www.yorkshirepost.co.uk/business/business-news/safestyle-grows-sales-and-order-intake-in-spite-of-market-decline-1-7361147
Tree shake? Be a big one at that though.
I don't see what out the fundamentals has changed - a large portion of their products are exempt from the Green Deal anyway. British Gas cut prices back in January this year, no hit then.
The MMs aren't stupid, such a lack of information is available on this company on a frequent basis, the ability to throw out a fear factor sale-off and create a run away bear hitting stops all the way down pushing it further is a lot easier to accomplish.
Obviously I could be wrong but I really don't see any event over the last 3 days that has intrinsically affected their business model.
Sebastian
There was quite a bit of selling this morning, 10,000 deals went through. VAT hike to 20%, which has scuppered Flowgroup (LON:FLOW), boiler installations. Think the Green Deal was important for solid wall insulation as its expensive, not sure how much Entu do. VAT will also hit solar panels. So several hits recently. Figures are out next week.
Hi SebjSheffield,
Maybe you're right - however, the sell off isn't small volume - trading volumes are up over the past few days.
In my view, it looks suspiciously like someone has negative information that has not been made public yet - and I fear that bad news may be released in the mid-year figures next week.
My view has been that this company is undervalued based on expected continuation of recent growth AND the promise of a high dividend yield. If either of these are wrong then my valuation will have been too optimistic, if both are wrong then my valuation will prove to be way off the mark.
Regards
Geoff
Absolutely - I will also be looking to the mid-year figures next week to substantiate this move. The sell off on increased volume certainly could be interpreted as you say.
I do think there is already some leeway in the valuation for a deterioration in current growth rates though but I will update my valuation as soon as I see the new results.
Good luck all,
Tom
I have dug around and I think its because the Govt. Green Deal is being cut back and will finish in 2017. Article in FT about it.
What has happened to Entu sp, has fallen over 10% in a day, can't see any news?
Yes I was wondering about this too - any ideas anyone? Does not seem to be spurred on by any kind of public news at least.
Tom and herbie47,
Could be to do with Centrica announcing that it is to cut its gas bills by 5%. Could mean lower demand for double-glazing, insulation etc.
I also recall ENTU has a contract with Centrica (owner of British Gas). From the admission document:
British Gas contract
The Group entered into an agreement with British Gas on 6 February 2014, with effect from 1 October 2013 to perform energy saving cavity wall installations. This agreement was varied pursuant to an agreement dated 25 March 2014. If the obligations under the ECO Order change in the future or if completed installations cease to count towards the targets imposed by British Gas, then British Gas would be entitled to cease funding further installations and would be entitled to claw back funding for any installations completed since the date of the effective change of the ECO Order. In any event, British Gas is entitled to terminate the agreement on 45 days’ written notice at any time. This could lead to a reduction in forecast revenue and/or profit should the contract be terminated or should British Gas claw back funding for any installations completed.
I am speculating lower gas prices may mean lower profits at BG, which may mean less cash for paying third-parties to perform cavity wall installations etc. But I am not sure.
Mayn
I looked at ENTU when it floated and didn't like what I saw in the admission document (AD).
Tom writes:
"Entu have shown that with a remarkably small amount of capital, one can go in to the market, acquire a few well established local brands, and in a short period of time go on to a successful (and highly profitable) IPO."
I couldn't find the details to calculate the 'remarkably small amount of capital', but goodwill of less than £2m does suggest the capital was indeed remarkably small. Reading the AD, there did seem to be a distinct whiff of financial engineering involved here, with all sorts of home-improvement businesses cobbled together since 2008 for small sums and then floated off for £65m during 2014.
From what I recall, the group is a pure marketing business. The doors and windows are all sourced from third parties, which suggested to me there is no proprietary product that can separate the firm from the crowd. Furthermore, I did wonder if ENTU was too dependent on its main supply agreement with Epwin, in which major ENTU shareholder Brian Kennedy also has a substantial share holding.
I also noted the group depended heavily on cold calling -- doorstep canvassing and telemarketing. The sector is notorious for aggressive selling (as referred to briefly in the Risk Section of the AD) and all of ENTU's canvassers, sales agents and installers are self employed, and who perhaps may serve other firms as well.
I just worry that the practices of self-employed agents may not be as commendable as those of a full-time employee, and which may be to the detriment of the longer-term prospects of ENTU. The small print in the AD does reveal one subsidiary being 'consulted' by the OFT about sales practices, although not further action was taken.
I should add that the 8p dividend on a 100p float price did look attractive -- but may also have been a sign of the sellers being very keen to sell.
Finally I should add that my experience of the home-improvement sector has been scarred somewhat by a share called Ultraframe. Those with long memories may remember the specialist conservatory roofing business from the late 90s/early 00s -- here is an article I wrote back in 2001 giving some details:
http://news.fool.co.uk//qualiport/2001/qualiport01...
It was heralded by many as a quality company, with high ROE, top management etc, but it still became a disaster. The share price in that article was 351p and I see from investegate the firm ended up being acquired for 30p in 2006:
http://www.investegate.co.uk/Index.aspx?searchtype...
I can't recall exactly why UTF hit problems, a large US acquisition was involved, but the last full-year results RNS revealed sales dropping c20% -- which I guess is what can happen if you sell big-ticket items in a 'challenging marketplace'.
Incidentally, the chap that bought UTF was one Brian Kennedy -- who now owns big slices of ENTU and Epwin.
Maynard
Hi TMFMayn,
Apologies for a slow response - things have been busy! I've not much to add to what you've said as I think that you make excellent points and your experience with Ultrafame is very interesting indeed.
In particular, I like your thinking on the incentives in place for a self employed work force and how this may impact Entu's reputation going forwards. Charlie Munger famously says that he thinks he takes incentives into account far more than the average investor - and that he still thinks he underestimates their impact!
Anyway, many thanks for the balance and I will bear these additional points in mind as when I continue my work on the company.
Have a good afternoon,
Tom.
It's worth noting that while the ECJ ruling of the VAT illegality is yet to be responded to by the UK government. With the UK down on EU green targets and the increased irritation vented towards the EU at overriding of laws I wouldn't be surprised to see the UK want to hold ground on this.
There is a lack of information on forecasts for Entu (or I'm not looking in the right places?).
Stockopedia has no forecast information, Morningstar likewise.
I can find a limited amount of forecast information via VoxMarkets :
Simon Thompson (Investors Chronicle 16/04/15) : Analysts forecasts pre-tax profits £11.1M, EPS 13.3, Revenue £127M. This looks to have come from Edison Investment Research analysis.
Not clear if Flowgroup agreement and Astley Facades acquisition are factored into this but can assume they are as this article post-dates both RNSs.
Also, Hybridan (07/04/15) state in their comments that they expect Astley Facades acquisition to make a positive contibution in year to 31-Oct-2015. Turnover for previous year was £12.2M for Astley Facades.
The interims results should give an indication of growth which will exclude any contribution from Flowgroup and from Astley Facades. From that we should get an idea of the full year potential. I'd not factor any growth in from Flowgroup - if sales kick in then that's a bonus.
Has anybody got any more forecast figures?
HI
The only forecast that I can find is from Edison. It's free, you don't have to register. Whether it's any good or not is another question!
Yes FLOW has not got off the ground yet. FLOW figures have dropped from 200,000 to 15,000 boilers this year I believe, so that could affect ENTU revenue forecasts.
If you look at ENTU's revenue figures in their last statement the big increase was from insulation now the question is how much will VAT increase effect sales. I would have thought probably not that much.
Interesting, I've had a quick look online and the energy saving trust have posted some average figures on the cost of insulation installation:
http://www.energysavingtrust.org.uk/domestic/roof-and-loft
Most installations seem to cost about £300 on average (assuming their data is reliable). Divide by 1.05 to take out the 5% VAT and multiply by 1.2 to get £343. While a significant % increase, an extra £40 is probably not going to stop individuals opting to install insulation, especially given the long term energy bill savings it can deliver.
It's probably the higher value items, like, as you said before, solar panels, where people are more likely to be put off by the price hike.
Tom
Yes I think you are right. Solar panels are around £6,000 for 16, now add 15% on it not so attractive.
I don't hold Entu (UK) (LON:ENTU) or Epwin (LON:EPWN) but both are on my watchlist and I'm tempted to buy some. Another company that is similar is Ensor Holdings (LON:ESR), why do all these companies begin with E? Its interesting doing the Stockopedia comparision on those 3 companies. You may want to read Pauls reviews on ENTU and EPWN, I think he holds both long.
I have read Paul's write ups of both ENTU and EPWN, I think he is holding them long too if memory serves me well. Cheers for your earlier comment about Flowgroup too, I didn't know that Entu had an agreement with them and they do seem to have been hit by the ruling quite hard. I will try to find out a little bit more about that. Do you know whether the deal was significant?
I did actually send an email off to Entu when the VAT decision was first made but have not had a response from them, maybe I'll try again.
Thanks,
Tom
Hi Tom,
I don't think any significant sales had happened for Flowgroup products - was more about potential for future sales and an additional income stream for Entu. Flowgroup sales forecasts have taken a big step backwards in the short-term following the ECJ ruling.
Therefore, limited impact to on-going business for Entu but a setback on the possible additional growth related to Flowgroup.
RNS from 10-Feb-2015
http://www.londonstockexchange.com/exchange/news/m...
Regards
Geoff
Thanks very much for that link, very informative.
I think we're on the right side of that deal, there is some potential should the product succeed but if they don't all we miss out on, as you say, is the additional growth.
This is a good illustration of why I quite like capital light business models and the outsourcing of production. Generally, I'm very happy to leave the innovation to someone else - call me boring but I can't resist the added certainty it brings.
Thanks,
Tom
Hi Tom
Interesting article, and I also hold a long position in LON:ENTU.
I think the recent slump in SP was as Herbie47 said down to the ECJ ruling, which I think should be limited on Entu (UK) (LON:ENTU), although we won't have long to find out as interims are due to be published on the 22nd July. In many ways the share price of Entu (UK) (LON:ENTU) is mirrored with other similar companies such as Safestyle UK (LON:SFE) and Epwin (LON:EPWN). Both have fallen slightly in recent weeks, but are fundamentally good businesses which are in a sweet spot at the current point in the cycle. I see good upside for Entu (UK) (LON:ENTU) if it can deliver. I also note that they recently appointed a new CFO with a strong background in Private Equity and they reference that the Corporate Development Director is looking at the acquisition strategy.
Best wishes,
Imran.
Hi Imranawan,
I think the ECJ ruling is too recent to have any real impact on the figures due to be reported in the interims. We should, however, get a statement on the outlook for ENTU which will hopefully address the expected impact of this issue going forward.
Also, please advise where you found 'interims due to be published 22 July' - have I overlooked this in an RNS or do you have another source?
Thanks
Geoff
Hi Geoff
They issued an RNS this morning re: the publication of interim results: http://www.investegate.co.uk/entu--uk--plc--entu-/rns/notice-of-results/201507091150146250S/
Best wishes,
Imran.
Thanks - hadn't seen that one. I check RNSs every morning before leaving for work and they sneak one out around midday when I'm not looking :)
Hi Imran,
Thanks for your feedback, I think we're pretty much on the same page on this one - good point about the new CFO and what this may mean for the business's acquisition strategy. The company has largely grown through acquisition so far and as they are acquiring relatively mature, local brands, I think further growth is more likely to come in that form.
So far the acquisitions have been successful but I think we should keep an eye on any new one's - a few poor decisions could easily see profits evaporate I think.
I am inclined to agree with TheWatchmaker about the ECJ ruling however. I don't think this will be reflected in the figures at all yet - if anything, theoretically, it may provide a short term boost to sales as some people might bring forward purchases to avoid the VAT rate increases.
Have a good day for now,
Tom
One thing to mention is VAT on Solar panels and other energy efficient products will be charged at 20% soon not 5%, thats why the shares went down a few weeks ago.
Yes, absolutely, the ECJ just couldn't keep their noses out of that one! Excellent point though and I should have mentioned it.
https://www.gov.uk/tax-on-shopping/energy-saving-products
That is the relevant page on the current VAT rules for energy efficient products (kindly sourced by Paul Scott in one of his previous articles), which conveniently lists what does and what does not qualify for the discount. Certainly some of ENTU's products are affected but not all. In particular, energy efficient boilers and secondary/double glazing were already charged at the full rate.
I am inclined to think that the real impact will not be too severe although, as you say, the market's reaction indicates that I might be wrong. I also feel that as this legislation will affect everybody in the industry, on a relative basis Entu should not be negatively impacted.
What are your thoughts on that? Do you feel that this ruling will have a significant negative impact on the energy efficient home improvements market as a whole? Or do you think the damage is likely to be worse for a few players?
Thanks,
Tom
Well the sp did not fall that much so it seems the impact will not be that great and some of these products are paid for by grants. But it has put me off fitting solar panels, if I have to pay another £1,000 it does not seem so attractive. Some boilers have been affected, for instance Flowgroup (LON:FLOW).
It was thought that in the budget this would have been adjusted somehow but if anything George seems to be hitting a lot of green producers, see £DRAX and new car road tax bands.
Just remembered ENTU has a agreement with FLOW so that is relevant, FLOW has announced they are delaying launch of the boilers until costs can be reduced due to this VAT hike, many believe that is just an excuse.
Hi Tom,
"That is the relevant page on the current VAT rules for energy efficient products (kindly sourced by Paul Scott in one of his previous articles), which conveniently lists what does and what does not qualify for the discount. Certainly some of ENTU's products are affected but not all. In particular, energy efficient boilers and secondary/double glazing were already charged at the full rate."
Absolutely.. Have just been catching up on this story and see form their recent results that:
"The Group already applies a full 20% rate of VAT to the large majority of its home improvement products and the impact of a rate change is not expected to be material to the Group. "
http://www.investegate.co.uk/entu--uk--plc/entu/half-yearly-report/201507201511505488T/?fe=1&utm_source=FE%20Investegate%20Alerts&utm_medium=Email&utm_content=Announcement%20Alert%20Mail&utm_campaign=entu%20%28UK%29%20plc%20Alert
If this is the case then the impact of the ECJ announcement shouldn't be too harsh - the big question therefore is what was influencing the large pre results sell off therefore other than the usual "someone in the know selling"
Interesting company, despite trading being weighted to second half I'm a tad concerned at how poor these first half ones were. More to the point though I'm inclined to lean towards TMFMayn's assessment - if they're merely a marketing organisation for third party contractors there's minimal barriers to entry and the home improvements side of the housing market surely must've have reached its peak
Despite the chunky yield think I'll give it a miss. On the watch list however.
Great article though - thanks for sharing.
Hi Fangorn,
Thanks for your feedback - I agree (as do management) that the VAT ruling shouldn't have too much of an impact.
That is not really my concern here now though. I was not particularly impressed by H1 results either, and given that at least a modest growth rate was required for the valuation at my purchase price to make sense, I am now unsure whether I was sufficiently prudent in my assumptions.
Further, if the pre-results sell off was indeed the result of insider dealing (although I suspect we will never receive proof of that), that is a big red flag to me and not something I want to be involved with.
That said, I'm all too aware that my thinking will be affected by the fact I'm now sitting on a little loss and I am just trying to take everyone's views on board here before deciding if I should sell up. I note that most people have a negative view (although again this is likely skewed by recent price movements), but there are definitely some optimists out there!
Perhaps I've made a mistake on this one, oh well!
Tom
Hi Tom
I'd be interested to get your thoughts about Entu (UK) (LON:ENTU) given their profit warning this morning. I sold out this morning for a largeish loss.
Best wishes,
Imran.
Hi Imran,
I'm so sorry to have taken this long to respond - I was away on holiday for a few weeks and hadn't seen the new comment on here.
I must admit, the results were worse than I expected and the shutting down of the solar panel division was a bit of a surprise too!
That said, I actually sold out well before them, on the 23rd of July I believe, a day or two after my last post on here. I wasn't expecting the bad news to flow as badly as it did, but my motivations for the sale were as follows:
1 - The suspicion of insider trading around that date, while never confirmed, really put me off and were not something I wanted to be taking a chance with.
2 - The discussion on here combined with managements announcements led me to reconsider the scenarios I had modeled previously, and I realised that I had not been prudent enough with growth assumptions.
3 - Difficulties relating to upcoming changes in government policy led me to reconsider my thinking on the viability of the business model.
So while I did sell out at a loss, I ended up about 18% down and avoided the worst of it, thankfully. I'm sorry to hear that you haven't fared so well - personally, I feel you probably made the right decision but it's never easy and Paul Scott disagrees with me from his SCVR on the date of the release.
Tom
My stop-loss - set after the profits warning! - triggered today at 59.1. Just 6 weeks after buying at 114.6 :-(( Perhaps they are now a bargain, but capital protection has now become the priority. If and when management do demonstrate that they are in control and can be trusted, that will be the time to look at the investment case again.
Stop-losses are a controversial measure and there is a danger of being shaken out by price volatility rather than by changes in fundamentals. OTOH, it helps take emotion out of the selling decision - once the level is set at whatever one chooses, the broker takes execution of the sale out of ones hands. Triggering a stop-loss is, by definition, a disappointing event but, I hope, better than hanging on in forlorn hope. Been there, done that, lost loads.
Colin