Victoria - update on bond fiasco, remains a sell says Lucian Miers

'I agree with everyone on one matter & with in house Bulletin Board loon Wildes on another' - listen to Tom Winnifrith Bearcast HERE

It will be interesting to see how Geoff Wilding, Executive Chairman at Victoria plc (VCP), responds to what is his first real hiccup since he took the helm five years ago, growing the company exponentially with a string of acquisitions that have been welcomed by the market and seen himself and his shareholders richly rewarded. August must seem like a long time ago when he effortlessly raised £60 million of equity at 827p to fund the latest acquisition, a Spanish ceramic tile maker called Saloni. The shares have fallen sharply since then, most of the decline coming late last month after Victoria announced that it was seeking to raise €420 million in the bond market to pay off its bank debt and warned on margins (profits to you and me) - quaintly describing this as “margin investment”...

A Formal Request to the Financial Reporting Council to investigate First Derivatives. Read HERE

As part of this process various pro forma financial statements were produced and credit ratings from agencies Fitch and S&P released (Non-investment grade Speculative). The bond issue plan was then shelved, and Victoria announced that it would stick with its existing banking facilities. At least Wilding has adopted a contrite tone saying that this “was not the board’s finest hour in terms of the clarity of our communications” and that he had left an open goal for those “with less than pure motives to spread outrageous untruths”.

Interserve: you haven’t answered the question – statement a screaming sell signal says Nigel Somerville HERE

Blaming poor communications and short sellers is pretty standard stuff when a company runs into trouble but, as is often the case, there is more to it than that and I can understand why investors have taken fright. The pro forma balance sheet for June showing the effect of the later Spanish acquisition shows the group to have negative tangible assets of £263 million, double that in the year to March (£133 million). Net debt is in excess of March's £258 million. The fact that Wilding claims that his bankers are fully supportive may well be true but it doesn’t look good that they were “acting as global coordinators and bookrunners on the potential bond issue”. Call me old fashioned but it suggests a bit of a conflict for banks to be enthusiastically offering bonds to investors, with the proceeds going to repay their own debt.

Maistro – fundraising at a massive discount, despite in September arguing “significant progress” & “looking forward with confidence”. Reviewed HERE

In any event investors can be forgiven for questioning whether Victoria’s acquisition days might be behind it and for noting the fate that often befalls roll ups when they stop rolling up. Having made a right hash of shorting Victoria a few years ago, I suggested selling at 680p in September. The shares had fallen below 400p and have since rallied to 500p. I think they will revert to sub 400p before long - and then some, and so I am staying short.

This article first appeared on the N50 website which Tom Winnifrith runs with Steve Moore & Lucian Miers. To access the website ahead of the next share tip from Tom & Steve and a new shorting piece from Lucian shortly click HERE

Filed under: Victoria plc, Bearcast, First Derivatives, FRC, Interserve, Maistro, N50 website

2018-11-14 12:00:05

Latest Tips