It’s been an interesting week.
I sold out of GAH (Gable Holdings) on Thu 20 June because it reached its sell target on my momo strategy, being overbought, and “subject to pullbacks”. More on that later! Results seemed suspiciously on the late’ish side, and I began to have a sense of foreboding. Insurance is also complicated and iffy area, and I had some worries about potential underprovisioning. More on that later!
The price of GAH had declined somewhat by Mon 24 June, and I said that put it in the “hold” zone. I also said that I thought my comments on underprovisioning were too paranoid. “Everything now depends on the finals”.
It was also Mon 24 June when the market tanked, and DXNS (Dixons) dropped by about 12.5%. This put DXNS in my “buy” zone, and after much humming-and-harring, I decided to top up. So far, this has proved a profitable move, as the shares rapidly advanced, and now stand at about 9% higher.
As an aside, it’s interesting to note that momentum strategies /can/ be good in volatile markets like we have experienced recently, as it signalled a sell at prices which were over-extended, and signalled buys when prices were near support levels. This might be a counter-intuitive conclusion to those that expect momentum strategies to basically “do the wrong thing” in volatile markets.
On Tue 25 June, GAH announced that it would announce its final results on Friday. The whiff of rat went up a notch, as GAH seemed to be waiting until the very last minute – and on a Friday – to present its results.
Come Fri 28 Jun, the company had still not released its results at 7 am. That whiffy smell went up even more. Companies usually give their results at 7 am; although in the past GAH had given them at 7.30 am, and in the afternoon. Still, 7.30 am rolled around, and still no results. At the start of trading, the shares seemed to trade up initially, but at around 9 am the shares traded down 5%. The market was clearly getting cold feet.
At 9.32am, John Roiser noted in his blog that he sold half his holdings. At 1.36 pm he noted (http://is.gd/NOdLNe) that he sold the remainder of his holdings. Great instincts! People were increasingly expecting that GAH would publish near the market close – at 4 or 4.30.
As it happened, the results were released at 3.44pm. This was a sure sign, or almost a sure sign as could be, that the results would contain a sting in them.
GAH missed analysts revenues, profit before tax, and EPS projections. It also restated its prior years downwards. For a period of about 10 minutes, the share price ticked up on solid buying. Possible investors had only skimmed the headlines “announces excellent consolidated final results”.
This was quickly reversed, as the share price fell off a cliff on heavy selling, despite the bullish outlook by the board: “Since the start of 2013 Gable has seen the strongest pattern of new business and organic growth in its history, notably as our partnerships with Towergate Underwriting in the UK has come on stream in its first full year of the five year agreement and internationally with Arthur J. Gallagher International and Willis International, which are substantial brokers and their support is testament to Gable’s growing status in the insurance market. I am delighted with the level and quality of business now coming through our UK business and we look forward to developing further bespoke products for our UK and European broking clients.”
The share price closed down 20% to 54.00p. As one poster put it, it feels like we’ve been “Quindelled”.
I think I just have to put it this way … when management pulls a stunt like they did today where targets were missed, results were restated, and they left it to the last minute to publish them … then as far as I’m concerned, their credibility goes out the window.
One BB poster picked up on this rather cryptic statement in the RNS: “The Group has experienced strong growth in 2013 from initiatives announced in 2012 and early 2013 and is actively investigating significant additional opportunities in new business classes. As a result of this strong start and the expectation that this will continue throughout the year and beyond, it is anticipated that the Group will explore commercially attractive options to increase available solvency capital.” This sounds suspiciously like the words “fund raising”. Also, if they’ve restated prior year results downwards, then we must presume that their solvency has worsened.
There are a lot of question-marks.
It will be interesting to see how things develop from here. I think it will be one for short-term traders to play with for awhile. It doesn’t interest me just now, though, as the director’s integrity are under suspicion, as far as I’m concerned. The mauling that the shares have received from the release of the statement means that it is removed from my momo radar irrespective of how it sits against the trendline.
In other news …
CPP: Mr Ogston announces he has abandoned a possible offer for CPP. He also announces his resignation with immediate effect. “The Group remains engaged in constructive discussions with its existing lenders and certain Business Partners with a view to putting in place a long-term funding plan for CPP. The Group has in place existing banking facilities which expire on 30(th) September 2013 and the Board will make further announcements when appropriate.” The shares closed up 18.8% to 3.00p. I’m pleased that my suspicion that Mr Ogston would abandon the bid proved correct. As I had stated previously, if it took him so long to work out if 1pps was a good price to pay for the company, then I couldn’t see him making a bid.
It’s difficult to know for sure, but it seems that Mr Ogston’s resignation implies that the company is a lost cause. It’s an odd situation, because Mr Ogston owns over half the shares. Why would he abandon any interest he had in having a say in salvaging as much from the situation as possible.
Another one to keep an eye on to see how things progress.