@andy777with the intention of keeping the dialogue to one thread...

@andy777

with the intention of keeping the dialogue to one thread I’ve copied this post from the other thread.

not an altogether unexpected reaction from the investment community but as a somewhere who sees this company as a very long term investment opportunity, I was happy, and was again impressed by the new MD.

I think the market didn’t like the customer power at play.

- Rebates up from 8 to 10%.
- Terms for customers being extended
- home branding impacting some lines (4mil impact)
- customers de-stocking (5mil impact apparently)
- the new deals sound like they are beneficial to customers in the short term (at the expense of GUD) with benefit to gud in the medium to longer term.
- new filter competition (bmc?), preventing price rises for RYco.
- gross margin pressure due to fx
- lower cash conversion due to investments in nwc

but having said all that there were certainly some positives:
- i think clearly their financing terms will be unibail-esque as I’m sure banks will be throwing money at them with rates where they are.
- They feel that home branding has reached a floor
- cash conversion guidance sounds very conservative
- Davey growing with volume, and price increases to come. High demand for some products.
- plenty of acquisition opportunities. There was a question about the changing criteria. I took that as more a refinement to keep them focused when choosing further acquisitions rather than reflection on any really bad ones. Having said that the im group acquisition doesn’t seem to be doing too well.
- tailwinds from an extra 5 months of AAG this year.

And then the all important valuation...

With ebit growth forecast, the company has a prospective ev/ebit of about 11 which seems excellent for a cash generative company that when all manner is going against them they still manage to report earnings growth. Net debt:ebitda is low and we can obviously expect bolt-ons in the near term.

To me the result seemed resilient and I’m a happy shareholder. If the market wants to have a short term hissy fit, then I’ll be waiting.