Week No 6 of The Voyager RNS Log: Week commencing 13/08/2017
Monday 14th August 2017: Firstly one in which I don't hold a position at all; neither long or short. RNS from Telit: TCM: Mkt Cap: £168m but sadly for holders subject to violent gravitational pull. The RNS informs the market that the crook of a CEO has departed the company and that allegations made about the company's accounts are incorrect and that all is well. Well, that’s ok then but hang on, how come that in just 48 hours since the market closed Telit suddenly find out that their CEO is a fraudster? Also, the interim CEO is the CFO i.e. the chap who was responsible for signing off the accounts so he is hardly likely to say that he produced a set of smoke and mirror accounts to fool the market, is he? Now somewhat surprisingly the share price did not tank in fact, it went up a few points by the end of the day and thereby offering investors rather than gamblers the chance to jump ship.
My View: When I have the slightest suspicion that I doubt the trustworthiness of management or something is potentially wrong with the management of a company, I honestly don’t waste time in heading for the exit. That’s what I did back in June 2016 when I stumbled on the likelihood that TCM had been creating alleged profits by diverting essentially opex costs to capex. Just turning back to last weeks profits warning, those who acted fast on the day of the profits warning would have been able to exit at around 190p-200p rather than the close price of 150p: a strategy I employ is to sell on a profits warning as early as I can and I usually have business done by about 08:10 unless I am swanning around somewhere far-away enjoying myself. As soon as there is any doubt in my belief in the management or a PW, then I sell immediately: I just can’t see the sense in not preserving one's capital. I feel it always pays to remember that bad directors don’t readily become good directors and poor company culture is so difficult and slow to change. In the case of TCM with the various announcements from the company and investigative work from a couple of highly respected researchers, I take the view that to hold the shares is really simply a gamble something akin to running through a gunpowder factory in the dark carrying a candle: you may reach the other side and be declared as brave yet other outcomes are certainly less favourable. I honestly don’t mean to offend investors who decide to remain faithful to TCM; simply a case of me writing about my approach to such situations. Incidentally, I do not hold either a long or short position in TCM: shorting seems a touch alien to my mindset.
Tuesday 15/08/2017: Revolution Bars Group: RBG: two RNSs today involving RBF. Firstly at 07:00 one from Deltec Group informing the market that they had approached RBG about a possible takeover of RBG but the RBG board did not wish to pursue further. Secondly, one from RBG giving their view on the Deltec approach and their reasoning for not feeling the approach would be in the best interest of shareholders. Also at the same time, RBG confirmed that they are still working with Stonegate as they discuss a possible bid at 200p.
My View: It seems to me that RBG is now firmly in play and will either be taken out by Stonegate or another predator and I would not be at all surprised if it were to be at a higher price than 200p. I will sit tight on my fortuitous purchase of RBG and await developments.
Wednesday 16/08/2017: No RNS of interest to the portfolio or Whittler universe.
Thursday 17/08/2017: No RNS of interest to the portfolio or Whittler universe.
Friday: No RNS of interest to the portfolio or Whittler universe.
Third Week of New section: Glad I’m Not There (a sort of reverse take on the old Judith Chalmers holiday programme briefly mentioning a dog of the week that thankfully I don’t own). This week’s major Glad I’m Not Here award goes for the second consecutive week to Telit Communications: TCM if only for the comment about the shamed CEO that they published on Monday: “It is a source of considerable anger to the Board that the historical indictment against Oozi Cats was never disclosed to them or previous members of the Board and that they have only been made aware of its existence through third parties”. I have to say that statement did amuse me a touch, just what did they expect a fraudster to do?
Another worthy contender for the award is Ashley (Laura): ALY: a serial disappointer and another profits warning this week. The generous looking “unreal” dividend that has not been covered by FCF for years and in recent months there have been boardroom changes plus senior management resignations. This weeks RNS contains the award winning paragraph “The results will show an exceptional GBP2.8m impairment charge due to the revaluation of a freehold property owned by the Group. In addition, and as previously disclosed, trading conditions have continued to be demanding. The Board of the Company therefore expect net pre-tax profits for the year ended 30 June 2017 will now be materially below market expectations”. Just what are demanding trading conditions? Does it mean difficult, overpriced or simply customers not living in a time warp?
Next week: The only scheduled RNS I have in the diary is for one of those beautiful Brexit bargains Persimmon: PSN with full year results on 22/08/2017 although I suspect we will get a trading update from the superb Bioventix in the next few days. Fingers crossed for nothing nasty from elsewhere but if it happens, it happens! As I always say part of the deal we sign up to as investors is that even with best due diligence sobriety reminds us that the next profits warning is probably just around the corner.
Have a good weekend; catch you next week.