I remain convinced that the worst is behind this company and that the future is pretty bright for it. I have been constantly wrong on this one though and a smarter man would have cut his losses years ago.
More buying last Friday to take the shares to 12p ahead of the AGM in Leeds on Wednesday. This has performed well since the refinancing but remains the purest play on Hinkley Point and the resurgence of the UK nuclear industry.
As rather feared, Redhall have lost their lucrative contract painting the Astute subs in Barrow. I wonder if James Fisher have won it? My guess is the Astute contract was worth several hundred thousand pounds a year in profit but fortunately its loss will be made up by the rest of the group performing better. I don't know what Redhall Marine have in the way of assets but quite often in these situations the assets and workforce are sold to the winner of the tender which reduces any closure costs. It's disappointing news but it was probably inevitable that Redhall Marine's profitability would fall on the re-tender.
It looks as if the large turnover in the shares was due to City Financial selling and Ruffer increasing their stake with further announcements to come. The top 3 institutions must together hold over 50% of the company. Let's hope for some good news to lift the share price.
Almost 10% of the company changed hands today. Totally unrelated but Carr's Group in their disposal announcement commented on a resurgence in nuclear decommissioning. Maybe Redhall is about to have its day in the sun.
A board meeting of the French energy group on Thursday 28 July is expected to give a final investment decision in favour of building new reactors in Somerset despite internal divisions over the £18bn scheme.
I expect a further 5% today as it is usually so far off the radar that it needs a writeup in the press to stimulate any interest. That being said, looking at my history of posting on this share, it equally could be announced that they are diversifying into peach farming.
Just my own way of things, I prefer to venture in as soon as there are what appears to me fairly positive signs for the future and at a time when the sp is low.....all particularly after there has been a considerable re-organisation, with new faces in place.
It's not a strategy to suit all and it demands a long term view on the wait for sp multiples on the ones which come properly good.
Overall I'd say the results were as expected. The worrying aspect is that specialist services did particularly well probably due to the Astute contract within Marine and the broadband rollout helping Networks however the Astute contract is now up for re-tender. They say it will be several months before they know the outcome of the Astute contract re-tendering. Either they win it on lower margins or they lose it so to me it suggests a hit to profits of several hundred thousand pounds a year. R Blackett Charlton has been badly hit by the oil and gas downturn as expected. Most of the improved order book seems to be in Booth Industries which has gained Crossrail contracts for blast-proof doors. The Yate manufacturing facility is probably short of work and really needs the go-ahead for Hinkley Point C.
I'll forecast breakeven for the second half - the lucrative Marine and Networks businesses offsetting the shortage of work in the rest of the business (Booth excluded). The shares are probably a hold as a low risk punt on Hinkley getting the go-ahead later this year. Of course Brexit may throw a spanner in the works in the meantime.
I think in this case there are genuine reasons for the second half to be better than the first. The financing was only completed half-way through the first half and this will have been time-consuming to deal with. My only concern is the 'D' word. The medium term outlook is very bright but in the short term if there are any delays in the nuclear work coming through (apart from Hinkley) then the shares could be marked down. If we can have an interim statement without any mention of delays then the shares will go up almost irrespective of the actual numbers.
Longer term great news as debt disappears and the company is on a more secure basis - With Henderson converting £3M of debt to equity, any suggestion that they might have put the company into liquidation or some other insolvency route is hugely remote. And Henderson, if I'm not mistaken, are the largest debtor, having bought out the banks.
I think you've got just as much chance of losing your shirt on this one than making a home run. The EV of the business at c.£21m still sounds expensive to me for a business with negative EBITDA. It's all very well have a large contractual order book but if you're unable to take out cost to improve your margins, the business will continue losing money. Only option value left here and even then, the bank / henderson will take the upside first ! There must be better turnaround plays than this one out there.
You both make valid points/arguments, recent broker coverage are valuing it at 26p (given current situation) but what do they know?, the new guy they hired could well be able to help with restructuring or it's liquidation!, I'm actually glad that the communications are direct and honest in there RNS's, makes me more inclined to believe that when they say "they hope to deliver there recovery plan albeit over an extended period of time" (from recent trading update) that they mean to do just that.
Its a risk for sure until contracts are won etc but they have a skilled workforce in the nuclear sector and it's a lot less riskier buy at this current price, only got a small holding here though, wouldn't bet the house on it until things develop a bit more but could easily correct substantially from here with an order book the size of there compared to the current market cap and enterprise value (in case someone was to buy them)...
"Surely a man who specialises in the death of companies may be best to advise how to avoid the common pitfalls? "
Let's hope so Huckleberry.
Only the last company that I was invested in, that hired a "turnaround and restructuring" specialist, was Mouchel. Within a year they went into administration, and shareholders got sweet FA.
Dwiggy, I noted the quote from the Interims RNS that you posted, below.
"The new management team will concentrate on profitable execution and increasing margins rather than top line growth in the short term. Once we have achieved this we can again look to grow. The Board remain convinced that the Group's future prospects are strong"
As you say the Hinkley approval should be good for RHL.
However, the latest Director Change RNS troubles me.
"Redhall Group plc (AIM: RHL), the specialist engineering support services group, announces that Martyn Everett has been appointed as a Non-Executive Director of the Company with effect from 24 September 2014.
Martyn is a Fellow of the Institute of Chartered Accountants and has experience both as an executive and non-executive director across a number of sectors including engineering, retail and media. He has particularly strong expertise in the turnaround and restructuring of both public and private businesses."
The term "particularly strong expertise in the turnaround and restructuring" causes me concern. Reading further down the RNS which lists his achievments we find:-
"Martyn was a director of Snap Equity Limited and JGLCC Camera Company Limited (trading as Jessops, the specialist photographic retailer) which went into administration on 9 January 2013 and underwent a creditor's voluntary liquidation ("CVL") on 11 December 2013."
"He was a director of the companies of global media group Chorion which underwent a CVL on 31 July 2013 following an orderly disposal and wind down programme."
"Martyn was a director of international commercial property company Kenmore Property Group Limited and its subsidiary Ashchurch Corston Limited which were dissolved following an administration to aid in its asset disposal programme on 12 November 2009."
"Martyn was formerly also a director of international engineering company B Elliott Group and certain subsidiaries which following a number of successful divestments were restructured using CVA and LVL's between Sept 2005 and Jan 2007."
These slightly abridged quotes above make it clear that we have hired a man who has extensive experience of liquidations, disposals, and wind downs.
So if "the Board remain convinced that the Group's future prospects are strong", then why have they hired an expert in administrations?
Hi guys, These have been on my watchlist for a while, I added these to the portfolio today, think this SP drop has been far over done on all accounts and the Hinkley news is great for RHL prospects (see quoted info below from last interims RNS):
"The order book fluctuates with the incidence of, and activity level of our framework contracts. This is particularly true of our current order book which stands at £85 million compared with a year-end position of £111 million. We have re-assessed our framework contracts based on current activity levels which has resulted in a reduction of approximately £30 million in the order value. The balance of the order book compares favourably to the year-end comparative and is adequate for current management expectations.
Our high level prospects remain good and we are close to realising work in several areas of the business, but particularly so in Manufacturing and in the food segment of our Engineering division. In the longer-term, we remain convinced that the proposed new nuclear reactors at Hinkley for EDF will go ahead, but we cannot give any guidance on a start date and have therefore excluded this potential work from our forecasts.
The new management team will concentrate on profitable execution and increasing margins rather than top line growth in the short term. Once we have achieved this we can again look to grow. The Board remain convinced that the Group's future prospects are strong"
The new management team will concentrate on profitable execution and increasing margins rather than top line growth in the short term. Once we have achieved this we can again look to grow. The Board remain convinced that the Group's future prospects are strong.
MKCAP at this level only about £5.5m!, well undervalued, reckon only a matter of time before it corrects to around 30-40p then onwards and upwards as there strategy is implemented and contracts awarded.
Some other interesting reading flying about on the net also below:
"Given our position in key nuclear markets, we remain well placed to secure orders in the UK's nuclear new build programme through our joint venture arrangements with ACPP and Baumert but do not expect any work to commence until 2015."
From memory, I believe the infrastructure has been underway for some time now at Hinkley e.g. road building etc. I do not know if Redhall have secured any contracts relating to this site.
Redhall is back to the price where I sold it when it was called Booth Industries. Maybe I should buy it back now. Some shares can be held for the long-term like Carr's Milling and Goodwin. Other shares are for trading. All we have to do is pick the right ones.
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