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Alina Holdings PLC: 2024 Interim Results
Alina Holdings PLC (ALNA) Alina Holdings PLC
Alina Holdings PLC (Reuters: ALNA.L, Bloomberg: ALNA:LN) ("Alina" or the "Company")
Interim Results for the period ended 30 June 2024
The Company is pleased to announce its results for the six months ended 30 June 2024. The unaudited interim results have been submitted to the FCA and will shortly be available on the Company’s website: www.alina-holdings.com
Highlights for the 6 months ended 30 June 2024 GROUP RESULTS 1H 2024 versus 1H 2023
Macro Background/Outlook
After a first half correction, the US market markets (in particular the Tech led Nasdaq) have continued to reach for Infinity and Beyond, although it is the DJII and S7P 500 that have reached new all time highs as investors rotate out of Tech. Whilst interest rates are finally on the decline as the Fed lowers rates, it is too early to assess how much damage may have been done to economic components such as Real Estate where, both in the USA and Europe, commercial real estate prices are in full retreat.
As pointed out in last year’s Interims, Niall Fergusson, Bloomberg columnist and the Milbank Family Senior Fellow at the Hoover Institution at Stanford University wrote…As Humpty Dumpty says to Alice: “When I use a word, it means just what I choose it to mean — neither more nor less.” Inflation has been above target for nearly two and a half years. Whenever it returns to 2%, we’ll be told: “That’s what we meant by transitory!”
The Company’s Board is still in the “Markets are overvalued camp”, and believe that Central Bank fiddling and tinkering will eventually result in the likelihood of stagflation in the UK and Europe and, if they get lucky, only recession in US, but possibly worse in Europe.
Recessions have a habit of creeping up on one and then falling off a cliff. Past downturns have taken longer than expected to manifest themselves but when they arrive they invariable bring pain and a dose of sanity back to markets as they adjust to the new “normal”.
I stand by my earlier statement that that the Fed and ECB are still behind the curve. Their efforts to curb inflation have, in my opinion, ironically caused rates to stay higher for longer. We are, therefore, sceptical that the Fed can engineer a Soft landing. In our opinion, the prolonged increase in interest rates has severely damaged commercial and personal property prices in the US, UK and Europe (the greatest store of personal value for most families), which is likely to result in a substantial stock market correction … that I and other (older!) participants have alluded to for some time.
As at the time of writing, the Buffet Indicator, which compares total market capitalisation to GDP stands at 200%, indicating that the Stock Market is Significantly Overvalued and that a reversion to the mean (barring any overshoot!) would indicate a potential 30% to 50% decline in US markets from current levels. I do not believe that this is a question of “if” the markets will correct, but “when” will they correct.
Add to the above scenario the European issues of “Corporate Obsolescence”, specifically the Auto industry, and we have the makings of potential mass unemployment in Germany, offset by increased Government spending, which reminds me very much of the Weimar Republic (1918 – 1933). I realise that this is an unpopular position to take but a closer look at the growing problems in Western Society should really temper political and economic complacency. Both the US and Europe have major migration problems, which the US Democrats have generally ignored and the Republicans wish to deal with using force. Whilst in Europe, “Angela Merkel (aka “Mutti”) used her dominant position in the EU to ‘persuade’ member States to open their borders to the influx of migrants…until now that is when Chancellor Olaf Scholz’s Government having lost two regional elections in Eastern Germany has closed German Boarders to ‘illegal’ migrants, and in France, in an effort to repel the Far Right, the new Barnier Government have also announced that migration is at the top of their Task List.
And whilst the migrant problem becomes increasingly complex, Germany’s massive exposure to ICE powered cars (internal combustion engine) and uncompetitive EV cars is estimated to result in a possible 50% decline in auto related jobs from 830,000 (which does not include a further 300,000+ people employed in support industries) to 400,000 by 2030.
Warren Buffett is well known for saying that ‘one should be fearful when others are greedy, and greedy when others are fearful’.
Conclusion… In our opinion, now is not the time to be greedy…peak earnings and peak stock prices do not make for a good entry point when buying stocks.
Operations
Real Estate Hastings
Works to remove asbestos have now been completed and the tenant that had moved into the former Restaurant has been evicted for taking possession without a contract and in breach of the Head Lease covenants. Removal of the illegal occupants required legal action and took over a year. Unfortunately the tenant only conceded the week Court proceedings were due to commence. Whilst Hastings is now structurally ready for occupancy, substantial electrical wiring is now required to ensure that the building is compliant with today’s regulatory requirements. On a positive note, the departure of a number of smaller tenants now gives us the opportunity to attract a larger tenant at current market rates rather than the historical discounted rates. Securing a Nationally recognised tenant would also have a significant, positive impact on the Book Value of the Property.
Bristol
We are in the process of retaining an agent to sell the Brislington Property. The agent has indicated a sales price in excess of our Book Value, which has resulted in an upward revaluation in these accounts to reflect some, but not all of the increased potential sales value.
Stafford
We recently withdrew from the sale of our Stafford property due to the buyers constant excuses for delayed completion. In the meantime, the rental market has firmed and recent rent increases give us reason to believe that we can achieve an improved sales price.
Holdings
https://www.dciadvisorsltd.com/index.html
As at June 30 2024, ALNA owned 2.99% of DCI Advisors Ltd., which is focused on the development of luxury leisure properties in the Eastern Mediterranean, Greece, Cyprus and Croatia).
The Company’s trophy asset is a Golf and Leisure development on the outskirts of Porto Cheli in the Peloponnese. Porto Cheli is currently going through a development boom, including 3 major projects - a new Four Seasons Hotel and Private villa, Beach resort in Hinitsa Bay, adjacent to Porto Cheli fronted by Irish Billionaire Paul Coulson; a Six Senses Hotel Resort and a Waldorf Astoria Hotel.
In the past few days, DCI also announced that the sale of the Livka Bay property should complete in the coming weeks.
On a less positive note, the company is up to its neck in litigation with the founder and former manager of the Group. Further, the Company’s shares are suspended as accounts have not been filed.
https://www.heiq.com/investors/
HEIQ continues to drag and has now fallen from a 2021 high of ~244p to a current level of 5.5p, a decline of 97.5%, and a decline of 89% from the Company’s Main Market listing price of 50p/share.
2020 and 2021 accounts have been restated and instead of the profits that the Company had previously announced, which drove the share price up, restated 2021 results showed a loss versus a previously announced profit whilst losses in 2022 ballooned as the Company took a $13m impairment charge and had to reverse $4m of revenues.
The fact that the Company’s Directors thought it conservative or prudent to use stage of completion accounting rather than cash accounting where revenues are only booked when invoiced, beggars belief.
Quote from the Executive Director, “Previously, we had recognized revenue from these contracts at the point in time of achieving certain technical development milestones. However, upon further review, we concluded that it is appropriate to recognize such revenues over time to coincide with specific exclusivity rights being granted by HeiQ to the partners. Consequently, total revenue of US$4.0 million has been deferred over a period of four years with initial revenues being recognized in H2 2022.”
Sadly this statement indicates that the Company is still using stage of completion accounting rather than the more conservative and, given the appalling results, prudent cash accounting convention.
Conclusion
As I write the Fed has cut its benchmark rate by half a point, which would indicate that they are concerned about the weakness of the US economy, and most importantly about flagging employment numbers. A half point cut is also significant as it indicates that the Fed may, as we have previously suggested, be behind the curve. The coming months, culminating in the US Presidential election will probably be volatile as was the Market’s 1% positive knee-jerk reaction to the 0.5% rate cut before it fizzled and turned into losses for all 3 major US Indices.
We are concerned by, in our opinion, the extreme over-valuation of the US Stock, and RealEstate Markets and the enormous over-hang of US consumer credit, which gets far too little mention these days.
Whilst we are pleased to report improved results for the period under review, we believe that the second half of the year will pose multiple headwinds and will focus our efforts on raising cash from property sales and by monitoring and managing our other assets as best we can.
Duncan Soukup Chairman Alina Holdings plc 26 September 2024
Financial Review Total income for the 1H 2024 period was £503k (1H 2023: £(286)k). This was supported by the strong performance of financial holdings, particularly the largest short position in Tesla (TSLA). Gross Rental Income declined by 27% due to increased vacancy rates at Hastings, the sale of Shaw in April 2023 during the comparative period and tenant issues at a Brislington property partially caused by scaffolding erected for work on the Landlord’s adjacent building. Cost of sales reduced from £148k to £21k, driven by a service charge credit of £132k at Hastings within Property operating expenses. The credit related to service charges at vacant units for required work which had been invoiced in 2022 and 2023. As the work has not yet been done, the property management company had to refund this to units that had paid, including Nos 4 Limited’s vacant units. The Board has reassessed the carrying value of Brislington and revalued this property up +£200,000 to £1,362,500. The revaluation reflects the selling agent’s estimated sale value, less fees and contingencies. At Hastings, following the refurbishment and removal of asbestos, a claim for expenditure plus costs has now been submitted to Sainsbury’s, the owner of Argos, per the ‘full repairing lease’. During the period under review Book Value increased 7.0% to 23.4p/shr from 21.9p/shr as at 31 December 2023.
We confirm that to the best of our knowledge:
Cautionary statement This Interim Management Report (IMR) has been prepared solely to provide additional information to shareholders to assess the Company’s strategies and the potential for those strategies to succeed. The IMR should not be relied on by any other party or for any other purpose.
Duncan Soukup Chairman Alina Holdings plc 26 September 2024
Interim Condensed Consolidated Statement of Income For the six months ended 30 June 2024
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