Tuesday, January 31 2023

There was a lot of logic behind chemical group Johnson Matthey’s decision in November to abandon investment in its battery materials business.

Although the company had pumped millions into the business – it had net assets of £340m and employed 430 people at the end of October – it felt competition in the industry was growing at such a pace that ‘She wouldn’t have done a decent job. return to the business.

Investors were clearly disappointed, however – the company’s share price fell 19% that day and hasn’t recovered since. Most (£314m) of the division’s assets were written off, leading the company to report a loss of £9m before tax for the six months to September 30, despite an increase in sales up 23% to £8.59 billion.

It agreed to the sale of its Advanced Glass Technologies business for £178m in November and said the proceeds would be used to fund a £200m share buyback programme. That, and the divestiture of its healthcare business for £325million – or 9.8 times underlying cash profit – last month failed to dispel the gloom.

The main problem for Johnson Matthey is that it makes most of its money from its catalytic converter technology, and with the ban on vehicles powered by combustion engines looming in the UK, it’s a business on the way. of disappearance.

Attempts to create other sources of income are not yet bearing fruit.

Shares of the company now trade at just over nine times expected earnings, below peers and its own five-year average of 13 times earnings. With the buyout program underway, executives felt confident enough to bounce back to increase their stakes. Chairman Patrick Thomas bought more than £100,000 of shares on January 6, two days after non-executive Doug Webb bought for more than £50,000. At least one institution is betting that the fall will continue, however – BlackRock Investment Management currently has a discloseable net short position equivalent to 1.27% of the company’s shares.

Has book publisher Quarto turned over a new leaf?

Shares in book publisher Quarto Group have more than doubled in price in the past 12 months, to 130p per share.

It’s good news for all of the company’s long-term shareholders, although the share price remains well below the highs of £3 hit in early 2017, before it announced the first of three losses accompanied by a decline in sales as it sought to reduce debt.

Chuk Kin Lau, owner of Hong Kong-based book printer Lion Rock Group, took control of the company alongside one of its co-founders, Laurence Orbach, and others at its annual meeting in 2018.

Lau became a managing director and his companies provided loans that provided working capital while debts were restructured. He returned as the group’s interim chief executive last July after Polly Powell stepped down less than a year into her role to focus on running her own publishing house, but made way to a new boss, Alison Goff, this month.

He obviously retains faith in the publisher’s outlook. On January 6, Lau spent almost £1.25 million to buy 1 million shares of Quarto through his company, 1010 Printing.

A day later, he added another 343,000 shares, taking his stake above 44%.

Quarto’s fortunes appear to be improving – in the six months to June 30, 2021, he posted a profit of $3m (£2.2m), compared to a loss of $4m a year earlier, with revenue up more than a fifth to $56.9 million. Net debt was also reduced by $21 million to $16.4 million, although Lau warned his second half would likely be tougher due to rising freight costs and shipping capacity issues. .

Lau’s recent purchases, however, mean a greater concentration of stock is being held by company insiders. According to FactSet, the combined stake of four shareholders related to the company is now over 71%.

Another consideration is that the company is incorporated in Delaware, which has tax implications in terms of dividend payments for certain shareholders.


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