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From today's AGM agenda.
Resolution 13. That the Directors be and are hereby generally and unconditionally authorised to exercise all powers of the Company, pursuant to Section 551 of the Act, to allot equity securities (within the meaning of Section 560 of the Act) up to an aggregate nominal amount of £65,797.56, which represents one-third of the nominal value of the Company’s issued share capital at the date of this notice
Seems quite prudent to me.
Or a nice way to deflate the share price further and take private.
If Braben and his team are being replaced, yes this cash rescue is prudent and could save the company.
If Braben and team are staying, well who in their right mind will give that bunch more money to p*ss away making garbage games. So yes this share issue will simply accelerate the SP drop.
Pretty sure they have the wording about the ability to allot shares at every AGM so i don't read too much into it. DB would be reluctant to be diluted and would he really want to put more money in to maintain his percentage holding?
I do think the reducing cash balance will concentrate minds and hopefully spark some change here. It is needed for the long term health of the company. Hard to detect any urgency though.
If they used some new money to relaunch a fixed Elite on all devices it could be interesting. I’m not sure they have the leadership and vision to pull it off though.
Otherwise, I would be incredibly worried that they work with a mindset that tells them they can keep making HUGE mistakes because all they gotta do is print more money by issuing new shares.
Issuing new shares and buying more studios, won’t help, if you’ve still got the same people that messed up over and over again in place.
Their mindset is even worse than that. They cannot even accept they are making mistakes. Years back on the Elite Dangerous Odyssey shambles Braben publicly apologised but F1M has been far bigger a disaster and Braben is completely silent. The company is blaming everyone else from the customers to Max Verstappen. No kidding.
"Issuing new shares and buying more studios, won’t help, if you’ve still got the same people that messed up over and over again in place."
Yes yes yes.
There needs to be a motion of no confidence at the AGM
Cash flow benefited from an £8m working capital inflow which likely won't be repeated so i do think they are cash flow negative. The adjusted EBITDA figure is the one that they look at, and that was negative to the tune of around £5m.
So likely no immediate concerns on cash, but there are 900 people to pay so those costs are cash costs whether they go into capitalised development on new games or straight to P&L.
AAAA's issue with FDEV is an historic one and well documented on this BB and the other one. I tend to agree with him that mangement are complacent about poor products, but i still see value here albeit it doesn't feel like there is any urgency to buy in.
ATB
Teddy yes I saw the investor webcast and heard the CFO say he's confortable wth the cash. Huge red flag. Because his figures show he should not be comfortable at all. If you think he won't go for a cash raising issue, then let us hear your theory on how the company will meet the cost of making the next game.
"agree much was spent on R&D for last 2 years but that's expected with 2 completely new games and genres outside of FDEV comfort zone, to create new market audiences"
Those two games completely failed to create new audiences and delivered a £15m loss. That is what we expect when a company wanders a mile outside its competance zone. The fact the board didn't expect it is one of the reasons they have to go.
"The adjusted EBITDA figure is the one that they look at" Yes and the one they want you to look at. The CFO's claim it measures cash profit is utter bull. EBITDA is fairytale accounting. Cash, not EBITDA, is what pays the bills.
Yeah i would agree that most adjusted EBITDA numbers are nonsense and typically i ignore them, but to be fair this one does subtract all the cash costs of development that were capitalised in the year so it doesn't look too bad a proxy for cash flow.
I'm estimating the cash burn here at around £10m pa maybe, taking into account lease payments and purchase of shares for the employee trust, so adjusted EBITDA of (£5m) isn't a terrible proxy.
The shares seemed surprisingly strong towards the end of the week. Maybe a "dead cat bounce" or maybe someone picking up some shares. Interesting.
Crypto, we have no need for the CFO's so-called proxy for cash flow because we have the actual cash flow.
£26.4m is the true cash burn for this FY, projected from the given figures including the next two payments for the Canadian aquisition which you left out, assuming unchanged rates of earnings and hiring.
From starting cash of £28.3m leaves year end cash at under £2m.
Looks like quite a problem.
Fair point on deferred consideration, but if i add in the remaining £1.5m payable then the company still has plenty of cash through to the end of next calendar year.
Can you give me a flavour at how you arrive at your figure for cash burn? Thanks
Where did you get £1.5m remaining payable for the aquisition? Financials explicitly state £3.3m, plus conditional £7.5m over five years.
I got £26.4m cash burn for this FY completely from the current financials' figures and declarations. Take Q1 burn from Current Trading add additional spends such as costs of the aqusition, EBF, staff increase to 1100+, etc.
This consevatively assumes the declared "headcount growth plans" do not exceed the current rate of 230 heads added per year.
Note 6 is pretty clear that only £1.5m deferred consideration is payable in FY24 so that's what i've included in my estimate of annual cash burn:
"Deferred cash consideration of £1.6 million was paid during FY23, with a further £1.5 million due for payment during FY24 and is included within trade and other payables. "
I would be surprised if they add much if any headcount this year. Certainly if they were to add 200 plus heads then they would deserve to run out of cash. Given they've signed the accounts on a going concern basis that doesn't seem likely.
ATB
I see your point but then that £1.5m to pay plus the £1.6m already paid does not add up to the £3.3m total.
Anyway, the difference is just one month respite before cash runs out. Even including that, how do you come to the conclusion they have plenty cash and will not hit zero?
On headcount, they have declared growing the teams a major pillar of their recovery plan. I can't see why would you think they won't do it.