There are not a lot of funnies and uses of non-GAAP metrics.
The only really complicated factor is their valuation of their holdings. However whilst I see this as possibly being an area that could be manipulated I have never detected this happening at BPM in the years I have held the shares. In particular they have realised often considerably higher valuations on sales and of the 17 individually listed investments in the accounts 3 are at £0. But ongoing proof of the pudding will be in achieving realisations at, or above, the value they have in the accounts.
What makes the situation a little harder to read this time is that during the period there was a significant and well oversubscribed share placing. What this did was;
- Bring in a new significant shareholder, PSC Insurance Group,
- Allow Mr Marsh to reduce his % shareholding and allow him greater flexibility to sell down going forward. He has been a gentle seller over time but as he nears retirement presumably wants to sell more. (Readers of some of my earlier articles probably realise that I believe BPM has developed to the point that where Mr Marsh is important to the business he is no longer one of the really key Directors).
- Add a significant level of new cash that BPM can now invest into new business. BPM had largely spent existing balances and either needed new funds or would have had to slow down investments until a realisation occurred.
- Increase the share count to allow share awards to be made to those staff they have identified as being able to take on the responsibilities of the key Directors. Again readers may be aware that I believe BPM has been quite proactive and clear in bringing staff through to take on responsibility.
Given all of the above I see the key information as being;
-NAV/NAV per share – Is it increasing over time.
-Cash – Is it sufficient to let the company continue to invest and meet its operational needs.
-Management – Are the key staff still in place and working and are they bringing new colleagues through.
NAV per share in January 2018 was 339p. In July it was 333p. Clearly this was not an improvement. However there had been a placing and rights issue in the period, which per management would have reduced the NAV to 321p if applied to the January numbers.
Management claim a 6.7% increase in the portfolio valuation in the period and the cash was needed to continue to further invest.
As such I see it as a result where some pain was borne (NAV 339p – 333p) in order for the Company to go forward at a faster pace.
Bearing that pain has enabled the Company to put a decent amount of cash on its balance sheet for future investments. £15.4m - £15.1 uncommitted. Whilst cash available is very important it does of course detract from the 11.9% average compound growth rate that the company has obtained as cash makes nothing like this return. Though it is to be recognised that Market Cap is only circa £100m so cash is currently a fair % of value.
None of the key staff have left.
As of the time of writing the current Share price is 271p against a NAV of 333p. Which is 22% below. I think the company has and continues to be good value for money.
it is also worth noting that having had a share buy back policy set at under 20% NAV, which was never utilised BPM recently introduced a 15% policy which is now in effect and being used given the share price falls this month. Clearly if they reduce the share count at well below NAV the remaining shares will improve their NAV. Though of course buy backs will reduce the cash for investments.