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As you know I dont want to rush and find a replacement for the chairman asap.
I am happier they find the right person.
But this is food for thought. It just shows you how the news that is out there adjusts the share buyers(sellers).
Even when a long term contract is awarded look at the price after the chairman stepped down......
https://www.londonstockexchange.com/exchange/prices-and-markets/stocks/exchange-insight/news-analysis.html?fourWayKey=GB00BJVWTM27GBGBXSSMM
all on a downward trajectory.........you would expect positive news like long term contracts to have had beneficial effect.
good to know when going against the tide is the right thing to do. the tide changes every so often....have a good weekend.
There is an awful lot in that last message. I will post an answer para by para is the easiest way I can think of.
The chairman (and board appointments).
From my experience you are correct, board resignations cause a big level of nervousness and thus priced in fear.
Equally sometimes board turnover.
A new appointment or replacement giving change of direction or vision can have a massive influencing factor.
There have been two major appointments since the Chairman resigned. Neither had a positive effect on the price as one would expect.. The same with confirmation of long term contracts.
The resignation of the chairman was brought about in some part by Seafox.
The planned savings by GMS (6 million) do seem prompted by Seafox, however GMS has also warned the Seafox planned savings of 15 to 20 million are not valid neither their reduced daily opex rates.
I would hate to see a point reached where Seafox representatives are appointed to the BoD and then not be able to deliver on its savings promise OR A REDUCTION IN DAILY OPEX and then the BoD are carrying dead weight or worst still they are asked to be removed if they cant deliver! This is all yet to play out.
It is something hinted at in one of the GMS RNS.
My personal thoughts are (if there are savings/cost cutting about to take place) these unpopular decision are going to be identified already (as they have quoted the amount believed to be saved) and it would be better to appoint the Chairman after these have taken place.
The new Chairman will not be seen internally as the ex man cometh.
He will be seen as the man to build on and drive the company back to full utilisation and a state of sustained stable profit.
That is why I would not be in too much of a rush find a replacement.
The banking syndicate.
The was fair warning that the banking covenants may be broken, If they were then the existing debt could not be offset (reduced in size) against other operating finances.
That would have increase the debt had it been broken (I think the present loan agreement goes out to 2023 iirc).
I did read something about the exact percentages in debt offset somewhere on this loan but this would take a while to find again.
The covenants have not been broken therefore the debt size remains reduced (offset against other financials) so in that respect it was a big problem taken care of.
This has been completely overshadowed in some respects by other news associated with GMS.
When it comes to renegotiating the loan agreement, all we have to go on at the moment is "GMS is in discussion".
As you rightly pointed out there is the possibility if shariah loan.
Perhaps that could be brokered through the present board members?
There are significant shareholders (non board members) who may maybe also able to broker this deal (and who may be appointed to the board) but this is beyond my ability to see if it is a real possibility that the banking syndicate would be prepared to offer such assistance.
The fact the covenants were not breached and the fact they are in discussions with the lenders to renegotiate all sounds positive. I would imagine the long term confirmation of contracts and year end figures and cost savings and increased utilisation might figure into these negotiations? That would be my best guess.
Maybe a board appointee or two on monday could change the situation, I certainly would expect an RNS Tuesday about the vote and the meeting (possibly even late monday).
Hard to say if the Banking syndicate would feel more comfortable with lending changes or change its position with additions to the board?
"in negotiations" would lead GMS to get a better deal at the end of it. Regarding debt servicing. I would think..
Seafox.
It has triggered al sorts of problems for the board. To the extent the board issued a statement saying if has not been helpful at this difficult time.
Although they state they are not direct competitors there is some overlap and to be honest they have bought a large stake at a bargain price.
My opinion is the price was in recovery it was almost back up to 18p when Seafox offered the 18pps targeting 25% as its goal.
This effectively "halted the price recovery" to within a few pence either side of 18pps.
In some ways at that price it was bound to happen, others in the industry would bound to "want in" I dont think there is a chance of takeover (unless people want to sell heir shares to Seafox at 18pps), it would need over 50% to have control and better than 75 to delist and become private. It could cost Seafox considerably more than it did to acquire more moving forward.
Both of these options would drive the price considerably higher.
The cost savings (apparently of between 15 to 20 million according to Seafox) and reduction in daily opex of around 30% would have tipped to company into profit looking at the last set of figures, that before increased utilisation.
Something to think about. GMS believed these figures to be incorrect.
It is easy to state all sorts of numbers.
The fact there will be cost savings and more importantly the board will see the need to be looking at their expenditure and procedures going forward can only be a good thing.
The fact there is now increased utilisation and that some new contracts have been finalised again WILL ease the pressure going forward.
Even if it doesn't give us all the answers yet. Seafox has started the ball rolling looking at operating efficiencies.
As you rightly say I am sure the BoD will listen to the proposals of major shareholders (what their suggestions appear to be at the moment are operating efficiencies) but there may be other radical proposals such as the refinancing.
Profitability.
GMS has been around for quite a while and has apart from its 2017 results always made a profit.
It made a profit when there was better than 180 million a year revenue. 30 million in fact.
Last year there was only 112 million revenue. 18 Million loss.
To achieve a base profit the company has to have a revenue better than 135 million I would hazard a guess.
This is where the increased utilisation should achieve this increased revenue.
After all a ship sitting idle is a double headache
1 it doesn't earn money.
2 Its still costs to sit idle.
Adjusted net profit is net profit after adding back non-recurring or non-operational costs.
GMS has made a profit every year taking this into account, however this was 46 million less in 2017 than the previous year. Halving the EBITDA too. Adjusted net profit being just 4.6 Million.
The increased utilisation should increase the revenue. from 58% to 72% according to the RNS.
FOR 2019 (ASSUMING NO NEW CONTRACTS........)
So that equates to around 139 Million Revenue.
Loss/Profit approx. nil.
Adjusted net profit should be around 30 million. Or better with cost savings.
Adjusted EBITDA of around 75 to 80 Million.
In line with my thoughts above. 140 Million turnover. Nil Loss.
With the increased cost savings applied to the 180 million revenue (first 3 years minimum revenue) this could estimate to the Adjusted net Profit to better than 70 Million and the adjusted EBITDA close to 120 Million.
All we need are the contracts to get the utilisation back up to 100%.and a revenue of 194 Million.
There is of course the possibility better financing to reduce costs. Better day rates to increase revenue.
But these are just a simple sliding scale I worked on based on utilisation and past profits/loss.
Just as a rough ball park guide.
Last of 4 posts (couldn't think of an easier way to do that).
I dont for a second think all my comments should be agreed with!
mistake mid PROFITABILITY
FOR 2019 (ASSUMING NO NEW CONTRACTS........)
So that equates to around 139 Million Revenue.
Loss/Profit approx.4 to 5 Million.(Not Nil)
Adjusted net profit should be around 30 million. Or better with cost savings.
Adjusted EBITDA of around 75 to 80 Million.