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Thankfully, ITX have been stockpiling raw materials and keeping required levels of raw materials. Not overly worried as the market squeeze isn't he only reason they are seeing sales fall. People are moving towards greener products.
Thankfully ITX ticks the box.
Small consolation but today saw over 17 million ITX shares trade hands which I believe is a new record for ITX and a sign of how far this company has come. There are multiple buys of over £10,000 showing today so clearly a lot of confidence out there that is an amazing buy opportunity. I’m confident the price will rise over the coming months but wouldn’t mind this starting on Friday after I’ve topped up on Thursday lol
@1N: I bought a large number of shares between May and August last year when I felt the lowly market cap of the company didn't reflect its potential. I was also encouraged by John Shaw's ability to slash costs and keep the company running when there were only fumes remaining in the tank before the fundraise in late June 2020.
I've since sold the majority of my holding into the rise, but only because I thought the share price had got ahead of itself and would be susceptible to a retrace if this year's revenues roughly matched the company's projection that I had calculated from the Annual Report.
I'm still holding well over a million shares and at today's price I'll just let these run, with future transactions based on news flow and any insights that are uncovered by the product sleuths on this board (for which I'm very grateful I should add).
Reckitt-Benckiser update talks of somewhat similar problems ..obviously they are a bigger company selling more differential products..but worth reading across.....issues being faced by many such companies....
The overall picture looks like there is a lot of uncertainty regarding H2 and as such a somewhat cautious and undefined forward guidance......many companies saying the same .... cautious uncertainty but looking to 2022 when the issues improve
....so sellers have sold and don't see much of a near term change in things
https://www.theguardian.com/business/2021/jul/27/dettol-maker-reckitt-benckisers-sales-slow-as-it-warns-over-prices
Luthrin,
- you explained that very well, thank you.
With posts like that, you are going to be very welcome here. . . I presume you are invested to some degree?
1N
Thanks Luthrin. Yes there is the potential to time and word his updates to his advantage.
@pedrolancaster: I think of the bonus scheme as purely deferred consideration rather than as a cost against revenues, and as far as I'm concerned the higher the bonus achieved the better. It's not a cash cost for the company and instead results in some dilution for shareholders, who should be amply rewarded if revenue growth is strong. It also grants more shares to Dr Durant, and I'd like to see him with a greater holding in the company.
What I'm not so happy with is the potential (and I must stress potential) incentive it gives for John Shaw to keep the share price subdued and for him to time the release of ITX's final results to his advantage (the share price for the bonus award is based on the volume-weighted average closing mid-market share price over the 30 trading days immediately preceding the first day on which the financial results are publicly released).
Insightful Luthrin, thank you and that $9.9M fits well with my 20p target for the end of next year.
Good work Luthrin and an excellent first post.
That Incentive scheme seems very generous and would suggest the margin on Sales is over 50% or it is not paying for itself.
uallmakeitup wrote: "Why would he play it down.? Does he want the share price to drop as the last two updates have been very lacklustre."
John Shaw would arguably play it down because he is entitled to a performance bonus based on revenue growth, and this performance bonus is settled by awarding him newly issued shares in the company. The lower the share price, the more shares he receives. As a consequence, he is incentivised to grow the company's revenues as much as possible while keeping a lid on the share price until the bonus scheme ends at the end of 2022.
The deferred consideration bonus scheme was put in place when Itaconix merged with Revolymer. The scheme was originally due to expire in 2020, but it was extended to the end of 2022 as part of the 2018 fund raise.
Note 17 in the Annual Report (page 62) explains how the scheme works. In 2020, scheme members were entitled to a bonus of 50% of incremental sales above $3m. Sales for the year were $3.292m, so the bonus was (3,292m – 3m) * 0.5 = $146,000. The bonus was paid through the issuance of 1,923,389 new shares in the company as per the RNS of 9 April. John Shaw received 884,953 of the shares (46.0%) and Dr Yvon Durant received 205,802 (10.7%).
2020's sales of $3.292m now becomes the base figure for the 2021 bonus.
What's interesting about this deferred consideration is that it's a contingent liability for the company and it must therefore be reserved for in the accounts under fair value accounting. This in turn leads to the company having to project what its sales will be in 2021 and 2022 to compute the liability. Note 17 in the AR gives a gross value of $2.853m for this liability at 31 Dec 2020, of which $146,000 has now been settled. There is no breakdown of liability by year, so in theory we can only make guesses as to what is expected for revenue this year and next.
However, there's a crucial bit of extra info in note 17: we're told that a 1% increase in the discount rate reduces the fair value liability by $46K. If you play around in a spreadsheet with different sales combinations and the cited discount rates for 2021 and 2022, you'll quickly see that high revenue growth for this year was never on the cards, but that management is forecasting revenues to surge in 2022. I make the numbers $3.9m for 2021 revenues and $9.9m for 2022, so revenue growth for next year is projected to be over 150%.
Yes looks a bit heavy & manna from heaven for the MMs. That being said the drop is a reflection of the (short term) view that the revenue growth curve and therefore breakeven & profitability is pushed out to the right, and John Shaw’s (as usual) cautious statement is par for the course. It’s a bit like a 5 set tennis match: if you can win a point, you can win a game, if you can win a game, you can win a set, if you can win a set, you can win the match. With our IP, products, environmental credentials, and sales so far, we have won the first set. Mona Manning the new VP Sales needs to crack on with sales of existing and new products coming down the line, and help us win that match.
Hi DD77
It looks like they have used quite a bit of cash to secure raw materials, to build a stockpile to be able to furnish demand for the second half of the year.
Good too that they are actively involves in increasing the visibility of the company " increase marketing efforts with broader promotional activities in the second half of 2021"
Just a case of sitting tight on what we have and take advantage to the drop to add more, which will make the share even more tightly held by sticky handed PI's
ATB
AJP
Typical overreaction today.
As DD77 says a few issues have been illuminated but nothing has fundamentally changed and progress continues towards profitability with an ever-growing customer base.
A good time to top up or buy in.
I think the trading statement has opened up a couple of challenges the company faces -
1. Ongoing cost increases, which are being seen in other sectors too. Also, delays in shipping are similarly too
2. The lack of visibility of future order patterns. It appears there's huge fluctuation which makes it difficult for the company to predict - very much driven by their clients, who they don't appear to get much heads up on. This makes forecasting for the company difficult
Completely agree AJP and DD77.
@Chanatron - really? So I suppose the company must be using magic beans to pay for the following:
“The Company plans to add a new odour control product, expand into at least one new application, and increase marketing efforts with broader promotional activities in the second half of 2021.”
“Interest in new detergent products based on Itaconix® TSI™ continues, with new detergent brands and new formulation projects starting by the end of 2021.”
Morning all
surprise, surprise, guess we have a few paid derampers joining us for a few days, just filter as they bring nothing to the table as usual.
Bit disappointed in the manner in which the trading update was presented, almost as if they wanted to cause a short term drop in the SP.
Cannot understand why you would not compare eggs with eggs, why compare first half numbers with second half numbers, of course they will be lower, we know historically that the second half generates at least twice the revenue.
There is so much to look forward to, but none of this was really pushed to the fore.
I for one will be adding when the dust settles, as it would be extremely rude not to at these prices, this is still a fantastic company with ingredients that are sought after by all the majors in the industry, we will maybe just have to play the long game.
ATB
AJP
That wasn't a good update, I know some of it was expected but I didn't expect it to be as bad as that, and clearly nor did the market. M6 must have been poor. That said, I would have expected a 10% drop today, not 30% which is well overdone. Great opportunity to top up for those who have spare cash
Smart,
The fundraise is for working capital and does not allude to product development at all. Cash burn and nosedive.
Pedrolancaster, nothing to justify the fall?? They have run out of money!!!! It's dead in the water.
I’ve sold some other shares to buy ITX this morning at 8p and will add more on Thursday. Trading is not flat, you have to look at the year on year data to take into account the cyclical nature of its business. The recent fund raise at 12.1p now looks a very shrewd deal by the company and no doubt that money will be used to invest in driving product development over the coming months as the RNS alludes to. I am confident that in 6 months time when we have the H2 results I will be very pleased that I added shares at 8p!
The update may not read as all positive, but it is entirely as expected, and as presented by them just a few weeks ago.
Buying opportunity!
Just had a little nibble
There is nothing in there to justify an over 20% fall. Markets are very volatile.
Typical, thought I'd have a nice top up yesterday....should of waited until today!
Still LTH here and like most say the second half of the year is where the action will be at.
GLA
I’m guessing most of us will be a little disappointed with the RNS but then did we realistically think things would have changed much in a month since the previous update. I was hoping M6 would be an improvement on M1-M5 but it looks like M6 wasn’t a particularly good month due to order cycles etc. No doubt share price will take a hammering today which will hurt but I think it’s also an opportunity to make money during the second half of the year which as we all know is when Itaconix shines. As mentioned before I’ve got funds coming in on Thursday and will be adding to average down.