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Accountant’s rock bottom share price sends main trio on buying spree

by Simon Keane

Paul Jackson, Paul Ashton and Trevor Applin – the three main players at accountants Vantis – have put their brokers on notice to pick up stock. Chief executive Jackson, finance director Applin, and the company’s deal maker Ashton picked up a modest 13,334 shares a piece last week as the stock hit six-year lows.

But Ashton says the trio will keep on buying so long as prices remain at rock-bottom: ‘The last note from Landsbanki [Vantis’ house broker] had us on April 2008 earnings of 16.5p, with a share price of 90p and PE of 5.5 which, as far as we are concerned is too low. It is an opportunity.’

This is the first time the three directors have purchased shares in at least a year and comes after the company’s shares collapsed from their high of 291.6p in December 2006. The directors picked up their stock at 87.8p, which is lower than the float price of 90p in May 2002.

Ashton, 58 and Jackson, 59, go back 30 years. The two met at City accountants Morgan, Brown and Spofforth (MBS). MBS was later to take the lead in a merger with three other accountants, which happened consecutively with the flotation, creating Vantis. Jackson joined MBS in 1970 from school and qualified as an accountant in 1974.

Ashton joined MBS in 1977, already qualified, and the following year he joined Jackson as a partner. Applin came on board following the pair’s first acquisition, of R D Neville & Co, in 1985. In charge of mergers and acquisitions, Ashton has been the driving force behind Vantis’ buy-and-build strategy taken since the float. A string of smaller deals culminated in the purchase of insolvency specialist Numerica in 2005 which was a reverse acquisition.

‘We have adopted a growth strategy over the years and we think over the six years we have done that very well,’ says Ashton. ‘We have paid a dividend every six months for the last six years. There was a block of shares there on the market, three of us took them up, we would probably do so again.’

Strength in weakness

By themselves, the deals are small beer for the men who collectively own about 20% of Vantis’ 51 million shares. Ben Archer, from independent broker Charles Stanley, says: ‘The shares are pretty weak and I think this signifies that management is happy with where things are.’ Archer says the market is looking for evidence of improved cash flow.

The shares have de-rated on concerns about cash flow, which has taken a hit as the company rapidly expanded its insolvency business. Insolvency work has long lead times as the administrator only gets paid at the end of the job, so debtor levels have accelerated as insolvency revenues became a larger part of the pie.

Sitting on a net debt of £37.9 million (excluding finance leases and loan stock) the market is looking for improved cash flows to allow these borrowings to be paid down – especially so given the current credit environment.

The other side of the coin is that Vantis’ acquisitions leave it well positioned for an expected upturn in corporate insolvencies as credit conditions remain challenging.

Investors are due a year-end trading update in May for the financial year just ended on 30 April 2008. Will this update signal an improvement in cash flow? The market will have to wait and see.