September-announced half year results from self-styled “growth and turnaround investment company”, Volvere (VLE) included “net assets per share have reached a new record of £13.56 (30 June 2018: £6.75, 31 December 2018: £12.50)”. Despite this and clear further growth potential though, the shares are still available at a meaningful discount to that NAV and so…
The company's operations currently comprise Shire Foods Limited – an 80%-owned, Leamington Spa-based, frozen pie and pasty manufacturing business, which was acquired in 2011 and employs approximately 150 people. Additionally, just a few weeks ago, the company announced an “approximately £1.25 million” acquisition of certain of the assets of Indulgence Patisserie Limited. This was an in-administration desserts manufacturer with its management accounts for the 8 months ending 31st December 2019 showing a pre-tax loss of £0.23 million on revenue of £3.3 million. Volvere though notes “a number of clients in common with Shire Foods… as well as offering the customers of both Indulgence and Shire Foods a broader product portfolio, the investment strengthens Volvere's manufacturing base”. The position follows sales in 2019 of CCTV-viewing software business Sira Defence & Security Limited for £3 million having been acquired in 2006 for “approximately £0.005 million” and having “repaid all group debt, and paid dividends and management charges totalling £0.38 million to the group” and in 2018 of automotive consultancy, Impetus Automotive Limited, with the company’s share £26.1 million having acquired it in 2015 for “approximately £1.25 million” and having “repaid all group debt and paid interest and dividends totalling £0.52 million to the group”.
The company was founded by CEO Jonathan Lander and Chief Financial & Operating Officer Nick Lander. The former is a Chartered Financial Analyst with approaching 30 years’ experience in the financial services industry and latter a qualified chartered accountant with both financial and operational corporate experience. Following the noted sale of Impetus, in 2018 the total payment to them was £3.03 million. In 2017 it was £0.55 million. They, respectively, have 240,037 (13.09%) and 131,947 (7.19%) shares in the company. Non-Executive Chairman David Buchler is a Chartered Accountant with approaching 40 years of corporate turnaround experience, including as previously Chairman of Kroll for Europe & Africa. His remuneration in 2018 totalled £45k and he has 45,000 shares in the company (2.45%). The results for the company’s half year ended 30th June 2019 showed a continuing operations - Shire Foods+group - loss of £0.62 million on revenue of £10.1 million. However, the revenue was up from a corresponding 2018 period £7.3 million and the company noted “profit before tax and intra-group management and interest charges of £0.24 million, compared to a loss of £0.17 million for the six months to 30 June 2018”. For the 2018 period, the intra-group management and interest charges were £0.47 million, comparing to £0.86 million for the 2019 half-year – with the company noting “one-off incentive costs, relating to the disposal of Sira, amounting to £0.34 million”. Additionally, there’s a weighting of sales – 2018 full-year revenue was £18.3 million, with a profit before tax and intra-group management and interest charges of £0.85 million. The balance sheet showed cash of £19.6 million, total current assets of £26.5 million and a £6.1 million of “property, plant & equipment” against total liabilities of £6.2 million. Net assets attributable to equity holders were £24.9 million.
The results statement noted operating business risks including “the pressure on margins from raw material cost increases and wage inflation remains ever-present” and dependency on a relatively small number of customers. There are also the clearly elevated risks in being a ‘turnaround’ investor and the shares are somewhat illiquid, reflected in the spread. However, the track record here provides confidence for long-term gains and there are also nearer-term growth avenues… As well as the noted potential from the Indulgence Patisserie acquisition, we also particularly note from the prior results statement “we are actively responding to the increased demand for vegan products and have agreed several new products with retail customers. In addition, we have launched our own brand - Naughty Vegan - into the foodservice market”, “we have continued to invest in Shire throughout 2019 and the additional investments have facilitated the revenue growth by increasing capacity. This will enable further opportunities to be sought in 2020” and “we remain positive about the outlook for our business and believe that the current economic and political uncertainty will provide further investment opportunities… the level of deal opportunities has increased since 2018 and we remain optimistic that we will identify new businesses in which to invest”.
The noted growth avenues and track record mean we can see the potential for the shares to be trading above 1500p in relatively short order and for much more longer-term as the current operation is further developed and new moves are made. As such, our current stance is buy.
This 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 later THIS AFTERNOON and a new shorting piece click HERE
Filed under: Volvere, coronavirus, Cineworld, Telit, Open Orphan, Petra Diamonds, N50 website
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