Stephan Bernstein, CEO of GreenRoc, details the PFS results for the new graphite processing plant. Watch the video here.
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That’s true.
There’s a lot of (justified) shareholder anger about the performance of the Board and Management team. I hear you.
But surely those that have sold out huge holdings in disgust will no longer have a say in the future running of the business? And those who have bitten the bullet, and averaged down, or will take up the Open Offer will have every incentive to support whoever is running the company going forward?
The reason SCE is priced for bankruptcy, and the reason that all shareholders from last raise and before have seen their s/holdings pretty much wiped out, is down to Bundred, Johnson & Maddocks.
The Board has a serious problem on its hands. how does it reboot the business with Johson in charge as CEO? The credibility of the Board rests on getting a management team that has wiped out its s/holder base in 6 short months to convince s/holders that they can be trusted.
From the placing RNS:
(Revenue) "Based on the Directors' expectations and their understanding of the relevant OEM's production plan and estimated demand for discs and it takes into account the expected lifetime revenue from the Company's contract with OEM which is anticipated to be entered into following the Company's recent nomination as OEM 10's tier one supplier of a carbon ceramic brake discs."
So hopefully we can expect a huge OEM contract announced fairly soon to bridge the gap between £700 million of non contracted sales, and £390 million contracted sales. That will really make this fly.
The management briefing on Thursday will be key.
We are pretty much priced for bankruptcy and yet have millions in the bank and a strong order book.
If they announce a credible plan to deal with the production issues and a route to profitability this will fly.
I can see this being on the rise for throughout the week.
I noticed Sneller also took a fairly large hit on Deltic so hasnt been a great year for him so far.
Hopefully the block buying continues here with one or multiple parties clearly building positions while the share price is so low, expect to see some more holding RNS in the near future. If Sneller hadn't sold 15% I expect we would be at 2/3p by now.Looking at the chart, if we can break through 1.2p its a clear run back up to 3p. We've got the presentation on Thursday and news regarding the loan, financial reporting and operational progress all to come this month.
The take up of the open offer should be maxed out at the current share price providing plenty of cash working capital headroom until we hit net positive cash flow.
Richard Sneller may have had his position hedged I suppose, but a priori it looks like he didn’t call it right, but make an UTTERLY catastrophic, schoolboy trader, error.
By taking out such a large position in the first place, then selling at the absolute bottom. Even if the company eventually goes bust (a big if) he would have had an opportunity to sell at a higher price than he did, between now and then. He could have sold on Friday for pretty much20% more even, if he had drip fed it. It was an emotional, panicked sale. Perhaps caused by some bust up in the boardroom. A flounce out.
Calling it right? Are you having a laugh?
If you want your investment manager to buy high and sell low, he’s your man!
It's a pity Richard Sneller reduced his holding to zero.
Obviously he sold knowing his investment never be in profit (after dilution).
Sensible move capital gains taxes ect off set profits else where.
Bought a few shares the other day purely as an high risk opportunity only, previously invested, but was frustrated with lack of management skills, maybe a change now is due.
With shares in so many lose hands, any likely takeover will result in a pitiful return.
Hence my view losing a large shareholder.
Maybe only maybe things may turn around.
Time will tell.
Note: horrific situation for LTLs.
Do you average down or sell.
Just maybe Richard Sneller as called it right?.
It’s a good job Sneller bailed. If he wasn’t happy he could have caused real issues with the vote. I assume canaccord is now the new largest shareholder and luckily are fully supportive. There is the chance that sneller did an off market trade and someone else picked up the whole lot but doesn’t look that way. The guy could have waited for the 7th and given himself the option of the open offer. I think he may have sold because he simply didn’t want his huge losses to continue to be so public. He’s an investment manager ( or is he retired?) and anyone looking him up will see largest holding in a company that has gone from 70p to 1p. Does not look good if he still needs to attract investors to funds. Anyway, his loss put gain-gave me the opportunity to get in at under 1p and have been adding ever since. Actually I’m beggining to think I have a little too much in here but it’s just such a no brainier. The £13m loan with the placing/OO proceeds will see this through to profit. Looking forward to the presentation.
1Bn shares at 1p gives the market cap of £10m which it was pre-raise, surely factoring the fundraise in we have to see 1.5p-1.6p purely based on that, let alone increased confidence that we will now see the growth to cash generation? I'm guessing the major issue is that was the view on the last fund raise, only 6 months ago.
There can’t be many companies as undervalued as this one is right now. Once the vote is passed and money in the bank this will be a takeover target, especially if the share price isn’t a lot higher than it is now.
The money has gone, you have to let if go and move onto the next trade.
Use it as a learning point. Most of our losses come from individual, bad investments that we can’t emotionally accept were mistakes. So we hold on as they sink and sink, always hoping for them to turn around. We say to ourselves it isn’t lost until I sell.
It IS lost! The way to stop these killer trades stone dead is to ALWAYS set a stop loss. That will vary depending on factors such as volatility and spread, but 10% is a pretty good rule of thumb for blue chip stocks. For AIM they have to be wider as it is such a volatile market.
Physical stops can’t get blown out by huge gaps down, of course, so then you use a mental stop.
Let your winners run. Strangle your losers at birth. Don’t get caught holding the bag hoping for a turnaround. Take you loss and invest somewhere else. Have the discipline to use stop losses.
You've got average down son. sooner the better
The numbers will be interesting. Most of our cash has gone on the expansion. Now we have the loan ringfenced for capx the proceeds of the fund raise should last until cash flow positive. Sounds like the operational efficiencies are improving so maybe there’s a nice surprise and that comes earlier than expected.
IMO you’ve got to see it as a new investment, forget what you put in before. If you’d rather invest elsewhere do that.
I keep reading comments from SCE and brokers along the lines of Zeus' note; "The production team has now removed almost all the single points of failure and scrapping rates have reduced significantly in the past two months."
But how do we know? How can we have any faith that the manufacturing process has been/ is being fully resolved when we have been fed a whole bunch of bulls**t since last September (and possibly longer)? Unless manufacturing is sorted they will just burn through this cash as well. It's a pure leap of faith.
I'd appreciate other's views here because as a long term holder I've been wiped out. I either do nothing and need a 40-bagger to break even, or average down and "only" need a 10 or 20-bagger! It's an appalling Hobson's Choice.
Thanks for the post, the debt covenants issue will likely be that there are potential debt serviceability covenants that ST was in risk of breaching due to the delays, and those needed to be renegotiated to avoid triggering a default. Remember that these furnaces are apparently unique to ST and their process, therefore from a lender's perspective they've very little value as collateral, if these were HGV's or other ubiquitous assets with readily ascertainable market value, a simple Asset Based Lending facility could probably be achieved on a light to no covenant basis.
Thanks Dogg.
I had already assumed from the RNS that they hadn’t drawn down on the loan yet. It certainly reads like that.
This seems to confirm it.
Below is from Zeus. Note the part about the development loan - debt covenants being renegotiated - does this mean we havent drawn down on the loan yet? Will have plenty of cash headroom.
Surface continues to target increasing factory capacity to £75m of annualised sales over the next few years, with a medium-term target of £150m. As recent trading statements have shown, improving manufacturing resilience is at least as important as the capacity build out, and this is being addressed diligently by management. The production team has now removed almost all the single points of failure and scrapping rates have reduced significantly in the past two months.
Surface has a secured and prospective risk weighted customer pipeline for c. £700m of sales; it can sell as many discs as it can manufacture. Over £390m of the c. £700m is expected orders, with an average revenue of c. £79m each year. Customers, who are global and significant OEMs, remain supportive.
We assume base case 2024e revenue of £17.5m, against £8.3m of sales in 2023a, and recent guidance from Surface for a range of sales of £17.5m to £22m. We assume a gross profit margin of c. 55% for 2024e, rising to 57% in 2025e helped by planned unit cost reductions. This remains conservative against our expectation of a normalised run-rate of c. 60% over the medium term. The gross margin will vary with revenue levels and mix, particularly relating to the volumes of sales made to global OEMs versus other customers. In this note we provide quarterly estimates for 2024e to show the movements in capacity, revenue, and cash for the near term.
We expect operating cash generation to turn positive later in 2024e. Working capital intensity should start to reduce as volume production normalises. With a successful fundraising, cash balances will start to look much stronger, and improve rapidly with further positive cash generation in 2025e.
Debt financing is in place for capex funding with the Liverpool City Region’s Urban Development Fund (which is part funded by the ERDF). In this way, equity investors are somewhat shielded from the significant cash outflows associated with further large equipment purchases. Surface Transforms and Liverpool City Region’s Urban Development Fund have agreed revised financial covenants for the loan facility, with banking documentation currently being prepared.
The market opportunity remains significant, measured in the billions of dollars over the medium term. We believe the adoption of this durable and light weight technology will expand significantly as the unit price falls for the end-customer.
The supplier market structure is attractive with an effective global duopoly comprising one major competitor. Barriers to entry, particularly driven by the complexities of volume production, are high.
With the proceeds from this fundraising combined with the capex loan, Surface Transforms should now be funded through to the next phase of g
e****eker, your lack of understanding of this business and the sector it operates within is astonishing. suggest you go and do some homework.
Manufacturing wasn't scaled up until the orders were received. Doesn't make sense to do it the other way around. Now targeting £75m+ annual revenue and we know we can sell anything we can produce.
Why does it take 30+ years for a company like surface transforms to start scaling up manufacturing. Look at Brembo - a world leader but growth has been stagnant.
What Surface Transforms can do Brembo can do, so why waste money on ST? What's so special about ST, I can't understand. Investors keep pouring money into a black hole, yet management fail to deliver.
Well, he bought high and sold (very) low.
Those of us who took his shares off his hands are aiming to buy low and sell high.
(Of course he might have hedged his position with a countervailing short as someone else said).
Thanks
@Goldwater - the 15% holding was before the trade, it went to Zero afterwards.