frusset
11 Mar 2018
Re: Shambles An author on Motley Fool says "12% yielder Conviviality plc isn’t the only turnaround stock I wouldn't touch with a bargepole" [link] Magazine has "Conviviality shares plunge further despite executive share buy-up"[link] . Shore Capital's drinks analyst has downgraded from Buy to Hold, but isn't as negative as the Fool author, saying the problem is "fixable", though restoring investor confidence will take time. Forecast dividends have been reduced by more than half.
Bill1703
10 Mar 2018
Re: Shambles -what actually IS CVR? "Any idea what "market" expected for EBITDA before the warning, they say now 20% less? Am trying to get a handle on p/e and wondering if any risk to debt covenant of 2.5 times with debt of £150m."OP et al - as far as I could see, previous "consensus" was for around £70m EBITDA FY, so they seem to be saying c.£56m now, against c.£61m for previous FY.I get the impression forecasts for underlying EPS will be coming in around 18p (vs. 21p prev FY), so a 6x P/E on this basis (and consistent with the previously quoted broker views). If so, then a held divi of 12.6p looks well enough covered, and thus a yield approaching 12% - also backed by an (historic) FCF yield well over 20%.All well and good, and if there are no more nasties to emerge, then you'd probably conclude CVR is worth quite a bit more than £1 and change. But it is, of course, a massive "if"... problem is, this is a business that has spent some £315m in cash on acquisitions and related costs (eg. integration) since the start of FY 15/16 - and more than that, when you throw in an element of equity finance. For a stock that is now valued at ~£200m market cap (or a total EV of some £350m).So what actually IS "Conviviality"? Whatever it was a couple of years ago is irrelevant - it's gone, consigned to an historical detail, etc. It has shown it can be an acquisition and integration vehicle, combining various extablished and (hopefully) related operations, some fairly big, others smaller - but is it anything more? Can it actually deliver a sustainable and "valuable" whole, going forward? We simply don't know.This wouldn't be the first management to have lost control of their organisational structure while building their empire at full steam... if that is indeed what has happened? Maybe, maybe not, but for now the charge stands - we need to hear much more about it, and sooner rather than later. Meanwhile, I would suggest the board needs to put a block on future M&A, for the foreseeable future, while they focus on assimilating and bedding down what they have assembled in relative haste.And as for the directors... I agree with previous, the new CFO is probably absolved, and likely has a key role to play now in steadying the ship - but I think the CEO needs to go. Anyone can spend money and buy scale - you pay a proper CEO to deliver "value", and self-evidently there is scant evidence of that, from where we sit today.
TX2
10 Mar 2018
Re: director share purchases The directors must only have become aware of the material change in the companys financial position between 8 AM & 3 PM on 8th March which is why they took the rare step of publishing a trading update during that day.They were obliged to notify the market under listing rules immediately they were aware of this material change.This was not a normal trading update.
frusset
09 Mar 2018
Re: director share purchases I bought some, but I think of it as a gamble rather than an investment. I'm guessing a newish CFO wouldn't splash out £131K just for PR, and he'll know better than I do what the financial risk is for the business. Still, I didn't buy much. It wasn't me who bought 14 worth a total of £15.15 though .
rikid
09 Mar 2018
Re: director share purchases Diana also purchased 50000 at £3-05 just four weeks ago!
old_punter
09 Mar 2018
director share purchases In addition to the CEO purchase of 44,000 at 114p as already reported on this board, the CFO has bought 120,000 shares at 109p. These should help a bit but not much impact on the share price at the moment 107p.
old_punter
09 Mar 2018
Re: Shambles TX2,Good points you make, I would not invest in such a biz but am looking at it as a trade after such a steep fall, over 60% there is often a decent bounce.Those following this might like to look at the broker comments this morning on FT Alphaville's Markets Live blog. Shore says its on a p/e of 7 for the year about to end which if correct seems to me low enough. However, they move it from buy to hold. Investec say they are reviewing their previous buy recommendation. Investec estimate the cover for the debt covenant now at 1.8 so inside the 2.5 limit. Both seem very shocked unsurprisingly, but unless there is worse to emerge, agreed possible and another update 27th March, then I think the shares may bounce some more from the low of c100p.But WDIK.
frusset
09 Mar 2018
Re: Shambles About the CEO's stock purchase today, of 44,176 shares at 114p. She might think £50k-ish is worth it for the PR, rather than for the investment merits. Any thoughts?
TX2
09 Mar 2018
Re: Shambles Whilst this is a fairly asset light business in the sense that they hope to sell & get paid for goods sold more or less by the time they have to pay for their supplies and in the main they operate from rented premises;however even taking this into account CVR has a very weak balance sheet with negative net tangible assets.All other capital not provided by supplier credit being supplied by bank borrowings.There is substantial risk of failure to meet bank covenents & some suppliers may worry about giving such generous credit.Even if the companys position is no worse than indicated I suspect it may need to raise around £100m new equity capital.Even with this taken into account it could be risky value at the present price but it is possible,probable even that management do not have control of the running of this business which has been lashed together from a number of acquired businesses and operating from many hundreds of locations so "things" could be worse than suspected at present.
frusset
09 Mar 2018
Re: Shambles Does Conviviality have any competitive advantage?Right now I don't know much about the company beyond the news, the director buying, and the tip in Investors Chronicle.
megaloss
09 Mar 2018
Re: Oops Thanks for pointing out the IC article which I have now read.There has been consistent selling of this stock over the past month or so in spite of very bullish broker sentiment - this is deeply suspicious to me, just reinforces my view that a lot of the AIM market is rotten to the core, if not worse....
penhome
09 Mar 2018
Re: Shambles Numberbiter - it is impossible to tell; it could go either way. I agree. With the margin issues and material error in forecasting, people are going to need a lot of convincing that there aren't more mistakes and control issues currently undiscovered.I imagine that this will be a hot topic of discussions with some of the funds holding this who will be trying to work out what to do next with their holdings.They're producing an update on 27th March. I think the best we can hope for is that any other issues are aired by then and that they can then go on the offensive in briefing analysts/funds.Pen
numberbiter
09 Mar 2018
Re: Shambles There is little doubt that these shares were over-valued, but, on the face of it, the fall in price does not seem to be justified. I think the massive fall is due to the old investors problem of 'uncertainty' in that we cannot be sure exactly what the profit warning means. If profits are going to be 20% below market expectations, what were 'market expectations' exactly? Ckearly, the 'softening' margins need explaining amongst other things. Often after a profits warning it seems obvious the stock should be a 'strong sell'. In this case, it is impossible to tell; it could go either way.
nev1jol
09 Mar 2018
Re: Oops on the IC website they say they got caught out just like everyone else, they also have it as a sell at 103.
chortler
09 Mar 2018
Oops Today's Investors Chronicle - Tips of the Week: Buy Conviviality at 305p.I just averaged down at 98.09p
