Good morning, it's Paul here with the SCVR for Thursday. In a rare turn of events, I'm up early today & feeling quite perky, so today's report should be earlier than usual & there's stuff left over from yesterday to catch up on too.
Please see the article header for the list of company updates which have caught my eye today.
Estimated timings - most of the article will definitely be up by 1pm today. But I'll probably continue adding sections after that, in order to catch up from yesterday.
Best Of The Best (LON:BOTB)
Share price: 435p (pre-open, likely to go up)
No. shares: 9.38m
Market cap: £40.8m
(I have a long position in this share)
Best of the Best PLC, (LSE: BOTB) the online organiser of weekly competitions to win cars and other lifestyle prizes, is pleased to provide the following trading update for the 12 months ended 30 April 2020 (the "Period").
Once again, BOTB has out-performed against forecast. This is becoming a pleasing habit!
The Company's financial performance throughout the Period, and particularly the second half, continued to be strong.
As a result, the Board now expects to report full year revenue and profit ahead of current market expectations.
Note this comes on top of repeated increases in forecasts previously;
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Another point to consider, is that these big increases in profitability have been achieved despite the headwind of adverse changes in taxation (remote gaming duty, and VAT).
Forecast - house broker FinnCap is excellent in getting its research out to investors, via both Research Tree, and its own research portal. A brief update today shows a big increase in forecast for FY 04/2020 - EPS is up to 33.2p now, up nearly 91% on last year!
Forecast PBT has gone up 27% on the previous forecast, to £3.8m.
My opinion - this share should fly today, it's way too cheap, in my opinion. It's rated at only 13.1 times newly raised FY 04/2020 forecast. The share price should be double the current level, in my view, since a PER of 26 would be perfectly reasonable for a share that's growing earnings so strongly.
I just emailed the CEO to congratulate him with a simple message, "You guys are on fire!"
This company should be benefiting from more people staying at home, and not being able to spend money on socialising, etc. We all know what most men do when stuck at home - watch football, and try to win a supercar online! ;-)
Vertu Motors (LON:VTU)
Share price: 24.9p (up 2% today)
No. shares: 369.2m
Market cap: 91.9m
(I have a long position in this share)
This is a chain of car dealerships.
The quick version is that it has plenty of liquidity, modest gearing, and loads of freehold property.
I'll fill in the detail here later. Today's update overall sounds reassuring.
Superdry (LON:SDRY)
Share price: 125p (up 6% today)
No. shares: 82.0m
Market cap: £102.5m
Branded fashion retailer & wholesaler.
Trading performance impacted in Q4 by Covid-19; focus on cash preservation
I last looked at this share here on 10 Jan 2020 - pre-covid of course. It was a profit warning, indicating that the business was trading around breakeven. I dread to think what the figures are going to look like now, once the impact of store closures is factored in. It has an end April 2020 year end.
Key points;
Ecommerce revenues nearly doubling in the last 4 weeks to approximately £3.7m per week vs the average prior to complete lockdown, offsetting approximately one third of the lost store sales.
Net cash of £39.8m as at 5 May 2020 - not bad. I looked at the last reported balance sheet, and it's fairly strong, so I think SDRY is not at immediate risk of insolvency.
Furloughed 88% of all staff, as you would expect
Board taken 25% temporary pay cut, and bonuses stopped
Suppliers - better terms agreed, and reduced intake quantities by 20%
Landlords - most have agreed to 3 month rent deferral, worth over £20m. Good to see landlords being pragmatic. Many SDRY sites are expensive, flagship-type stores, that would be empty if SDRY goes bust. Rent negotiation programme underway for longer term. £16m benefit from business rates relief
Discretionary spending & capex reduced, as many companies are doing
Tax - deferring VAT, payroll taxes, etc, benefit of £5m to cashflow. Corp Tax recovery of £8.5m - it's really good that SDRY is giving specific figures, to help investors/analysts model the numbers more accurately
Dividends - no final divi for FY 04/2020 - no surprise there. I doubt any divis are likely for several years, if ever
Bank - waived April 2020 covenant test - suggests bank is taking a cautious approach, just loosening the immediate covenant test, but not any future ones presumably, as yet?
Funding - it needs more, and sounds like existing banks might be reluctant to lend more (I don't blame them!);
The Company continues constructive discussions with its existing lenders and with potential new financing providers as it explores the need for the necessary flexibility and additional liquidity going forward. This includes exploring its potential eligibility for government backed borrowing facilities through the recently launched CLBILS programme.
Performance figures - are irrelevant, given lockdown & stores now being closed.
My opinion - I was negative on this share pre-covid, and really cannot see why anyone would want to buy it now either.
On the upside, its current net cash position gives it a few months maybe to put together a refinancing. If that is not achieved, then the autumn is a likely crunch point, when cashflow turns negative to fund the autumn/winter stock build. Plus all the deferred costs will have to be paid at some point.
Stores should re-open soon, but at what level of reduced revenues? They might end up losing more money open, than closed., that's unknown at this stage. The shop leases are the big problem here. The last balance sheet showed £73.8m rents in current liabilities. If my understanding is right, this should be the annual rent cost, which is just way too high for this business to be viable now, in my view. The £265.9m over 12 month lease liability, suggests the pain continuing for another c.4 years. Leases are fine if the sites are trading profitably. They're a millstone when operating at a loss, and often pull down the whole company. That's a big risk here, in my view.
Rising online sales is a positive, but not enough to offset the problem stores.
It seems to me that SDRY is an obvious candidate for a CVA - to ditch all those high rented stores. A slimmed down retail estate, combined with a focus on mainly online sales, looks to be the way forward here. Where that leaves the share price? Who knows. It depends entirely on if & how new funding is secured.
Therefore, at the moment, this is high risk & uninvestable, in my view.
Filta Group (LON:FLTA)
Share price: 112.5p (up 57% today)
No. shares: 29.1m
Market cap: 32.7m
Launch of specialist COVID-19 sanitising service
Filta Group Holdings PLC (AIM: FLTA), a provider of fryer management and other services to commercial kitchens...
This franchise company issued an update on 23 March 2020, saying that it has been impacted by covid, as you would expect, given its activities cleaning commercial kitchens, most of which must be shut down since late March.
Management has obviously been thinking of ways to drum up more business, and they've come up with this;
... pleased to announce the UK launch of FiltaShield, a new sanitising service to help businesses combat and prevent the spread of Coronavirus (COVID-19).
Working closely with industry experts and specialist chemical suppliers, Filta is extending its range of environmental services and deploying an approved, laboratory-tested Coronavirus sanitising solution, which is effective against all enveloped viruses, killing them within minutes. The anti-viral solution, which has been developed for use in restaurants, bars, shops, offices as well as healthcare facilities, is applied to a surface by spraying or fogging, leaving behind a mono-molecular layer that bonds to the surface and protects surfaces for up to 30 days.
It's also offering temperature screening equipment, to check if customers have a high temperature & hence may be ill with covid.
My opinion - these look sensible new services to offer its existing customer base.
Neither service appears to offer anything proprietary, or unique. Therefore, whilst it might generate some extra revenues, I wonder how many restaurants could afford to get someone in to do this? Surely better to just buy the fluids & spray them on yourself?
"Up to 30 days" is a nice catch-all claim. After all, 5 minutes is less than 30 days, so would fit that definition!
My opinion - business is likely to be dire for FLTA and its franchisees. We already know that restaurants are likely to be one of the later stage sectors to see lockdown eased.As a longer term proposition, FLTA looks OK, and the US growth could be interesting. Hygiene in kitchens is likely to be more important going forwards, due to ongoing virus threats. I think that shops are likely to be allowed to open imminently. After that, the stock market is likely to start anticipating the subsequent re-opening of bars & restaurants. Therefore, bombed out stocks in this area could have decent recovery potential, providing there is no setback with a large increase in covid cases from the early stage easing of lockdown.
Today's 57% jump in share price looks barmy to me, so provides an excellent selling opportunity, for anyone who was not sure whether to continue holding or not.
Hyve (LON:HYVE)
Share price: 19.9p (down 7% today)
No. shares: 815.8m
Market cap: 162.3m
There are 2 announcements today - interim results & a rights issue.
Hyve Group plc is a next generation global events business whose purpose is to create unmissable events, where customers from all corners of the globe share extraordinary moments and shape industry innovation. Hyve Group plc was announced as the new brand name of ITE Group plc in September 2019...
Interim results - to 31 Mar 2020 are now largely irrelevant. The only thing that interests me is the balance sheet, which is very weak, something I warned readers about here on 5 Mar 2020.
Net debt is £157.2m - up 44% on prior year due to unluckily timed acquisitions.
Balance sheet -a train wreck, laden with intangibles & debt.
NAV: £198.6m, but take off £147.6m intangibles, and £280.9m other intangibles, and NTAV is negative, at £(230m). Even the proposed rights issue still won't put this right, in my view. Post-covid, I don't think any company should be operating with negative NTAV, as we now know that doing so is a lot more risky than previously thought.
We might well ask, how come shareholders, management, and the bank thought it was sensible to agree to such a weak balance sheet? I think the answer must be that they thought the shows/exhibitions were valuable assets, which up until covid, they were. The trouble is now, everything has changed. We don't know what resale value, if any, the rights to these exhibitions might be in future.
Going concern statement - worth reading for anyone considering buying or holding this share, as it reminds us of the risks. Concludes that the rights issue, combined with relaxing of bank covenants & loan repayments, leaves the business "well placed" & gives it adequate resources for the foreseeable future.
Rights Issue & Agreement with Lenders - key points of this fundraising;
Underwritten, hence it's definitely happening (at a cost, underwriting fees will be substantial)
Raising £127m
Linked to bank waiving covenants & deferring £35m term loan repayments - perfectly reasonable for bank to require shareholders stump up fresh equity, in return for lenience from the bank (who are horribly exposed to this)
Share consolidation of 10:1, so share count drops by 90%, and share price simultaneously goes up 900%, thus market cap remains the same
Huge price discount of 67.8% for Rights shares, at 6.9p in old money, 69p in new money (post consolidation). This is reduced to a 39% discount on the theoretical ex-rights share price. I haven't got time to work through all the maths on this. The upshot is that existing holders are heavily diluted if they don't take up or sell their rights.
Big dilution - it's 9 new shares for every 4 existing (on a like-for-like basis)
My opinion - this is a great example of an overly-indebted group, which has run into something unforeseen, and being too weak financially to weather the storm. Hence the share price has collapsed, and new equity has to be issued at a deep discount.
If things were to return to normal quickly, then I could see the logic in buying into this. The trouble is, we don't know if, or how soon, exhibitions are likely to resume, nor how successful they will be. Do people really want to congregate at events like this? Maybe some will, with social distancing and masks, but I wonder if these events would be as profitable as before? That's impossible to know at this stage.
Plus there's all the disruption of re-scheduling events, etc, which is bound to lead to some exceptional costs.
It looks far too messy to me at this stage, but could become more attractive if covid subsides & does not return.
This is really a geared play on covid. Even after the fundraising, the balance sheet would still be weak, and I imagine divis are probably a thing of the past.
Overall then I see this as unattractive for now.
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Lunch time now, I'll be back later.
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