Tue 27 Nov - INL, PLA, AGA

A fairly brief report this morning, as I have to catch a train to Amersham, for the Inland Homes (INL)  AGM. There is expected to be a high turnout, as many private shareholders are, like me, unhappy with the excessive Director remuneration, which does not correlate with the very poor performance of the company both in terms of share price (down over 60% from the 2007 IPO price of 50p), and the poor performance in terms of NAV.

Inland have put out an AGM update statement this morning, which doesn't look particularly exciting, although I am intrigued by the last few sentences;

The Group is exploring a number of longer term funding possibilities to finance some exciting new land opportunities which it is currently evaluating.

 

Stephen Wicks, Chief Executive commented:

"Inland is now making significant progress in its key operating areas with an increasing number of transactions concluding or close to doing so.  I am particularly pleased that the Ashford Development Agreement has been signed after many months of negotiations. We believe that agreements such as this can enhance the returns from our land bank and we are looking at how we might develop this concept further.

The funding secured from Barclays is a significant step forward and represents a welcome return to mainstream funding for the Group".

My view is that, at present the Directors remuneration is far too high, and needs re-basing at a lower level, and their interests to be more aligned with shareholders - so bonuses only linked to meeting target increases in NAV, etc. I shall be putting that view to the Directors today & will report back with their response.

However, if they were to considerably increase the size of the company (as hinted at from their comments above), then the existing salaries would be diluted enough to possibly make more sense. (Paul holds shares in Inland Homes)

Another company I follow, although don't have a holding in currently, is Plastics Capital (PLA). Dave Stredder & myself interviewed the Executive Chairman, Faisal Rahmatallah in our first ever "Mellocast" video (more to follow, but we're being highly selective about who we want to interview! It's by invitation only basically).

Interim results this morning from PLA today look a tad soft on the top line & EBITDA, down 3% and 16% respectively. Although profit before tax is down less, at 7%, and due to R&D tax credits (which are expected to recur), EPS is actually up 4% to 5.5p. These figures are stated after adding back goodwill amortisation by the way, which I always do, as it's a pretty meaningless non-cash book entry to account for acquisitions, and has no bearing on the performance of the business.

So annualising that to 11p, means the shares look good value at 70p, a PER of just over 6. However, there was also quite a bit of debt here, although it is good to see that reducing nicely to more acceptable levels - down to £8.6m. As they point out, net debt has been reduced by £10m in the last 3 years, so if you're prepared to take a long term view, then in another 3 years' time you'll probably own a company with no debt, and hence able to pay out much more in dividends. The interim dividend has been doubled to 0.66p.

I'll speak to Faisal, and see if he wants to do an update video for the interims, which would be good.

Posh cooker company, AGA Rangemaster (AGA) has announced a deal on its yawning pension deficit, and has managed to keep the banks on-side too. Good to see, although the pension deficit will essentially suck up all profits from the business for quite a few years, so the equity has very little value in my opinion. At some point however, it would be a great turnaround stock. I've researched it in quite a lot of depth, and came to the conclusion that the extent of the pension problems is far too great to present attractive risk/reward at the current share price of 64p (£43m mkt cap). But I'll keep it on the watch list.

Right, I have to dash now - have the joys of the Victoria & Bakerloo lines to face, in order to get to Marylebone station from my pied a terre in Islington, then heading up to Amersham for this AGM. So a miserable & fairly stressful day in prospect, ah well!

Regards, Paul.