Dewhurst - reluctantly sold

I’ve sold my “A” non-voting Dewhurst (DWHA) shares for £7.22, not because I judged it to be over-valued but because I wanted to rebalance my portfolio so as to have more cash available for post-Covid purchases.

Dewhurst A’s were selected to be turned into cash because they were trading close to intrinsic value, not because Mr Market had pushed them up beyond a reasonable level.

Ordinarily I would have held on to this Buffett-style investment when it traded near – or even slightly above - intrinsic value.  But we do not live in ordinary times.

I judge the supply and demand shock of Covid to the world macroeconomy to be so great that I feel much more comfortable with a large buffer of cash (as well as my put options on the Dow).
I bought Dewhurst shares at various prices over the last 6 years:  April/June 2014 at £3.11, December 2014 at £3.75, November 2017 at £5.46, February 2019 at £5.54 and April 2019 at £5.64. You can read Newsletters setting out rationales.

I still regard Dewhurst as an excellent company, and I will be looking to buy back in later in the year or next year if I can achieve a value price.

Summary of previous analysis
A different share structure
There are 3.3m Ordinary shares carrying voting rights and 5.1m Non-voting ‘A’ shares. Thus, any overall earnings or valuation figure should be divided by 8.4m shares to derive per-share numbers.

The Ordinary shares and the ‘A’ non-voting ordinary shares rank equally in all respects pari passu except that the ‘A’ non-voting ordinary shares do not carry the right to receive notices, attend or vote at meetings of the company.

Market capitalisation:
3.3m Ordinary shares             x      £10  = £33m
5.1m Non-voting ‘A’ shares   x      £7.22 =  £37m
Total market capitalisation      =            £67m

Brief description of the firm
A manufacturing and electrical component distribution company that designs and manufactures components for lifts, ATM and other keypads, and for trains.  It also supplies handrails for escalators and various traffic products such as large road bollards.
In June 2018 it greatly expanded the distribution, wholesaling and retail selling of lift components and other electrical items, through the purchase of A&A Electrical Distributors for £12.25m, offering a range much wider than what it manufactures itself.

Revenue, Earnings and Dividends 
The various businesses making and selling components for lifts has grown to about 80% of turnover. In rough terms: one-third of sales are in UK, one-eighth in Europe, with one-quarter in North America and one-third in Australasia and Asia.

Sales, earnings and dividends (including TVC business which was sold 30th Sept 2019 (yearend) -  both operating profits and capital gain made on TVC’s sale are included)
               Sales, £m    Earnings per share (p)     Dividend per share (p)
2010          37                 40.97                               6.36
2011          42                 34.35                               6.69
2012          52                 44.48                               7.02 + 5 special
2013          44                 15.7                                  8.0
2014          47                 43.87                               9.0
2015          46                 50.21                               10 + 3 special
2016          47                 40.75                               11.0
2017           53                 52.65                               12.0
2018           55                47.93                              12.50
2019         66                  116.23p                          13.0

​In the table above the 2019 earnings number is raised due to the inclusion of a capital gain on selling the TVC subsidiary – we can now remove that element as well remove the profit contribution made by operating the TVC business in the financial year.

Underlying earnings of continuing businesses only (in 2019 that means excluding capital gain on sale of TVC and the £1.1m profit after tax TVC made):...
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