This article is about entu (UK) PLC (ENTU) and my experience of purchasing a share without a proven market track record that had only recently come to market through an IPO.
entu (UK) PLC is a company that markets 'energy efficiency' products. It sells heating boilers, double glazing and solar products. It was floated on AIM in October 2014 with a market cap of £65.6m with shares valued at £1.00 each. The company had produced accounts for the previous years prior to floatation showing increasing turnover and increasing profits and made claims that it was going to pay a future dividend of 8%.
Simon Thompson in the Investors Chronicle wrote an article about the company published on 10 November 2014 analysing the figures and suggesting that the share would make a decent income buy. One of the strengths highlighted by Simon Thompson was that the company merely sold the products and did not manufacture any of them and therefore did not require much capital expenditure.
In February 2015 entu (UK) PLC published their Final Results. Revenue had increased by 24.6% and profits had increased 69.5%. An initial dividend was announced and things appeared to be on track. The share price had risen to £1.24.
I researched the stock, believed the published figures, and I purchased shares on 7 April 2015 at £1.365. At the end of May the company announced the appointment of a new CFO. The half year results were due to be released on 22 July 2015.
Here is the movement of the share price during July 2015:
Following the fall of the share price I sold my full shareholding on 15 July at 1.158 for about a 15% loss as it had hit my stop loss.
The half year results were published two days earlier than previously advised on 20 July due to the market volatility of the shares. These results showed a 31% drop in profit and an interim dividend of 2.7p per share. The loss was blamed on a change in VAT rulings by the EU and seasonality (I would have expected more boilers to have been sold in the winter months than the summer months). In addition to these disappointing results the management failed to attend a scheduled shareholders / analysts meeting. The IC maintained their BUY rating.
A profit warning was issued six weeks later on 1 September 2015 advising that things had not been going well for the previous six months and the company was going to reduce the previously highlighted 8% dividend. This caused the share price to drop by about 40% to 62p. Following the announcement the IC advised that now was not the time to crystallise the loss and amended their previous rating to HOLD.
The total dividend paid for the year was 5.3p. The shares continue to trade and on 29th June 2017 they are priced at around 16.75p each.
Many thanks for taking the time to read this.
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