J Smart – shareholder returns

PUBLISHED: Mar 31 2021 @ 06:40 | Comments (0) |

Clearly J Smart (LSE:SMJ) has more money than it knows what to do with – see yesterday’s newsletter. The money in bank accounts, shares and other liquid assets is generally not needed for operations.

Indeed, the investment property holding division could easily take on some borrowing to finance itself and/or add to the cash pile in what I call the “Cash-Land-Shares Division” – after all, investment property produces £4.8m rent annually so could support a fairly high level of bank debt.

The capital held in liquid form produces very poor returns – less than 1% on the cash. We can conclude that the directors run a very inefficient balance sheet. We can also conclude that one day that money might be handed to shareholders.

The directors have been on the path of distribution for some time, but they have room to accelerate this – see table. If the directors continue to produce earnings north of £3.6m but distribute £1.6m to shareholders then they will accumulate an ever larger cash pile or warehouses. A special dividend anyone? Or a large rise in annual share buy backs?

Market capitalisation is 42.4m shares x £1.253 = £53.1m

£m	Profit after tax	Dividends paid	Spent on share buy backs	Total flowing to shareholders
2020	3.63	0.80 (after waivers of final dividend by almost 60% of the shareholders)	0.793	1.59
2019	6.24	0.81 (after waivers of final dividend by over 50% of shareholders)	0.806	1.62
2018	4.85	1.39 (after waivers of final dividend by over 50% of shareholders)	0.908	2.30
2017	3.73	0.84	0.55	1.40
2016	3.49	0.84 (after waivers of final dividend by over 50% of shareholders)	0.70	1.55
2015	3.00	0.85 (after waivers of final dividend by over 50% of shareholders)	0.83	1.68
2014	1.03	0.86 (after waivers of final dividend by over 50% of shareholders)	0.29	1.15
2013	0.38	0.87 (after waivers of final dividend by over 50% of shareholders)	1.85	2.72
2012	-0.53	1.44	0.75	2.19
2011	1.01	1.43	0	1.43
2010	3.73	1.40	0	1.40
2009	-1.16	1.39 (after waivers of interim dividend by over 50% of shareholders)	0	1.39
2008	5.33	0.65 (after waivers of interim and final dividend by 51% of shareholders)	0	0.65

Musing on the future of that cash

NCAV is £96m and the number of shares is 42.4m therefore NCAV per share is £2.26.

By buying-in 1.5% of its shares each year at a price below NCAV per share the controlling family and the other remaining shareholders gain an increase in net current asset value per share.

Average profit after tax over the last five years is £3.7m – see bottom of the table (the other numbers are before deduction of tax).

£000s	2020	2019	2018	2017	2016	2015	2014
Net rental income	4,815	5,198	3,728	3,437	3,356	3,171	3,485
Profit on sale of investment property	0	0	0	613	186	60	0
Net surplus (deficit) on valuation of investment property	3,179	4,05

………………To read more subscribe to my premium newsletter Deep Value Shares – click here http://newsletters.advfn.com/deepvalueshares/subscribe-1

CLICK HERE TO REGISTER FOR FREE ON ADVFN, the world's leading stocks and shares information website, provides the private investor with all the latest high-tech trading tools and includes live price data streaming, stock quotes and the option to access 'Level 2' data on all of the world's key exchanges (LSE, NYSE, NASDAQ, Euronext etc).

This area of the ADVFN.com site is for independent financial commentary. These blogs are provided by independent authors via a common carrier platform and do not represent the opinions of ADVFN Plc. ADVFN Plc does not monitor, approve, endorse or exert editorial control over these articles and does not therefore accept responsibility for or make any warranties in connection with or recommend that you or any third party rely on such information. The information available at ADVFN.com is for your general information and use and is not intended to address your particular requirements. In particular, the information does not constitute any form of advice or recommendation by ADVFN.COM and is not intended to be relied upon by users in making (or refraining from making) any investment decisions. Authors may or may not have positions in stocks that they are discussing but it should be considered very likely that their opinions are aligned with their trading and that they hold positions in companies, forex, commodities and other instruments they discuss.