Industrial group’s assets well ahead of share price
Volvere plc is an AIMquoted investment firm. The company specialises in the type of activity that is frequently described as ‘turnaround’. Volvere generally acquires distressed, loss-making companies. Volvere will then apply restructuring techniques in the hope that value will be created. Volvere is an industrial holding company. The company has a solid record of selling acquired companies after a turnaround has been secured.
activities make it a rare thing The Volvere portfolio typically comprises between three and five companies. It is not an investment trust. Volvere does not value their companies upward but there is an impairment test on the assets. This can result in the market value of Volvere’s assets being greater than the published asset value. Investment trusts and some other investing companies will typically reappraise their portfolio each time an asset value is published. 10
a 40% annual IRR when sold Volvere’s activities make it a rare thing among AIM companies. The shares are essentially a play on the capability of its management. The growth in the company in the last ten years demonstrates how well Volvere’s shareholders have done out of the efforts of its director brothers Jonathan and Nick Lander. Volvere’s first acquisition, made in 2003, yielded a 40% annual IRR when sold just three years after its purchase. In March 2006, Volvere acquired Sira Test and Certification, and Sira Defence and Security (SDS). Sira Test and Certification was sold to Canada’s CSA Group for a total of £8.3m in July 2009. This price equated to an IRR of 80% per annum. Volvere acquired JMP Consultants for £0.4m in May 2013. At the time JMP had approximately 150 staff. Volvere also loaned JMP just under £1m. Remarkably, JMP made an underlying profit of £0.5m for the full year 2013, paying its owners a dividend of £0.45m for the year. By the end of 2013, JMP had also returned £0.4m of its loan from Volvere. However, not all of JMP still belongs to Volvere today. 25% of the equity was
Volvere does not revalue its investments upwards subsequently taken by management as part of an incentive scheme. The two other companies in the portfolio are an 80% stake in foods manufacturer Shire Foods (a supplier of own-brand products to the supermarkets) and the company’s remaining investment in SDS, a provider of video software to the police. When last reported, SDS was trading at around breakeven. The most recent numbers from Shire showed a £0.2m loss on £4.1m of sales in the six months to June 2014. New business wins at Shire are expected to deliver stronger profits going forward. Volvere’s last balance sheet showed cash and marketable securities of £12.2m. Current assets and current liabilities were approximately matching. There is £5m of property, plant and equipment on the balance sheet, the lion’s share of which is accounted for by a factory. Given that Volvere does not revalue its investments upwards, it is left to the reader to decide the real value in the company. Volvere (LON:VLE) FOR Winning management team Valuation well backed by assets AGAINST Key person management risk No dividends Market cap Bid:offer NAVps Yield (forecast) 52week low:high
£12m 300p:310p 393p 0 250p:335p
Published on Mar 3, 2015