Derek Pain: All change at RSH as it prepares for the switch to AIM
No Pain No Gain
Saturday 07 January 2012
Dramatic changes could be afoot at Rivington Street Holdings (RSH) the financial and software conglomerate which is arranging to switch its shares from the fringe Plus trading facility to AIM, the Stock Exchange junior market.
The group, recruited to the no pain, no gain portfolio 15 months ago, is undergoing a strategic review that, I understand, could influence its direction and shape. Indeed, when RSH arrives on AIM later this year – the transition appears to be taking much longer than originally anticipated – there is a possibility it will bear little resemblance to the present Plus-traded vehicle.
It would seem that the move towards AIM and the intended sale of the corporate finance side have prompted the group to embark on a far-reaching reassessment. The AIM adventures has forced RSH to adopt the International Financial Reporting Standard (IFRS) of accounting, underlining, in the company's view, that its shares are substantially under valued by investors. When the portfolio descended on the shares they stood at 27.5p. Subsequently, much to my joy, the price topped 50p. Now it is 28.5p, capitalising the company at £11m as opposed to approaching £20m in the more halcyon days.
RSH recently produced its yearly figures. Thanks to IFRS they were not quite the Christmas present I expected. Although revenue was up 169 per cent at £16.7m with gross profits 147 per cent higher at £10.7m, the bottom line figures were devastated by a £2.7m goodwill impairment that helped to produce a pre-tax loss of £260,000 against a £352,000 profit.
Tom Winnifrith, RSH's director-founder, complains: "IFRS is cruel in that you must write down the carrying value of any assets where you think a write down may be prudent but cannot write up any values."
Therefore the loss stems largely from non-cash adjustments that would not have materialised under the accounting procedure the group previously adopted.
Mr Winnifrith believes the expected sale of RSH's corporate finance side demonstrates the "absurdity" of IFRS accounting. Agreed price for the disposal is £3m. Yet the book value is only £681,000. And, of course, it is the much smaller valuation that features in the accounts.
Hence the operations review. Are there other businesses within RSH that could be sold well above book value? Mr Winnifrith stresses that no sell decisions have been made, although he adds: "What is the point of a share quote if the stock market is not valuing the shares properly. You've got to do something about it."
The group's spread of interests embrace such diverse activities as internet media, including the widely followed t1ps.com share tipping website, online stockbroking – claimed to be the cheapest in the land – and fund management. It also runs the JP Jenkins trading platform for shares of unquoted companies and a variety of software operations and has public relations and conference interests.
In 2010 the group, which dates back to around the turn of the century, expanded quite rapidly. The past year has been more of a consolidation exercise.
RSH has just completed a private placing at 25p a share which pulled in £1m. The corporate deal, when completed, should add to its cash pile, although it is mostly in 8 per cent loan notes and the cash inflow could be a rather long-winded affair. Still, RSH should be in a position to take advantage of any buying opportunities that this year – expected to be so fraught with difficulties for many companies – throws up. However, I expect it will avoid companies on the AIM market. Because of the fees involved, quote-to-quote takeovers are regarded as prohibitory expensive.
Although RSH shares had failed to deliver when I produced my December quarterly portfolio performance, I still have faith in the group. The more heady 50p-plus valuation should return.
My simple view is that the move to AIM – apparently demanded by some shareholders – is a mistake, although it is now probably too late to attempt a U-turn.
The Plus market leaves a lot to be desired, particularly when considering share dealing volumes. But for many companies AIM has turned out to be an unsatisfactory platform, with share trading weak and prices not reflecting a businesses' true worth. In addition AIM is much more expensive than Plus. Still, I expect RSH to be one that thrives in the AIM environment.
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
Mark Dampier: Don't panic. Canny investors sit tight when the stock market falls
Shareholders can hold a company to account
Derek Pain: Dividends ease the suffering in a moribund stock market
Questions of Cash: Payment woes with Barclays overshadow Cornish holiday
Bank-beating exchange rates on your international payments
- 1 Russell Brand says he will 'probably' give up acting to focus on his revolution
- 2 Watch what happened when food critics were unknowingly served McDonald's
- 3 David Beckham's Haig Club whisky is exactly what’s wrong with the Highlands
- 4 Queen's first tweet: Reply telling Her Majesty to 'f*** off' broadcast on BBC News
- 5 #AskNigelFarage: Twitter starts hilarious Q&A for Ukip leader
Of course, teenage girls need role models – but not like beauty vlogger Zoella
Support for EU membership 'at highest level since 1991' with most Brits wanting to stay 'in'
Tony Blair 'says Ed Miliband will lose 2015 general election'
Thousands with degenerative conditions classified as 'fit to work in future' – despite no possibility of improvement
Putin: The US is to blame for almost all the world's major conflicts
Poppy Appeal 2014: This is why I won't be wearing a red poppy this year
iJobs Money & Business
£60000 per annum: Ashdown Group: Compensation and Benefits Manager - Compensat...
£30000 - £35000 Per Annum plus excellent benefits: Clearwater People Solutions...
£24000 - £28000 per annum + bonus & benefits: Ashdown Group: IT Business Syste...
£50000 - £90000 per annum + benefits: Ampersand Consulting LLP: Markit EDM (CA...
Day In a Page
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village