London South East prides itself on its community spirit, and in order to keep the chat section problem free, we ask all members to follow these simple rules. In these rules, we refer to ourselves as "we", "us", "our". The user of the website is referred to as "you" and "your".
By posting on our share chat boards you are agreeing to the following:
The IP address of all posts is recorded to aid in enforcing these conditions. As a user you agree to any information you have entered being stored in a database. You agree that we have the right to remove, edit, move or close any topic or board at any time should we see fit. You agree that we have the right to remove any post without notice. You agree that we have the right to suspend your account without notice.
Please note some users may not behave properly and may post content that is misleading, untrue or offensive.
It is not possible for us to fully monitor all content all of the time but where we have actually received notice of any content that is potentially misleading, untrue, offensive, unlawful, infringes third party rights or is potentially in breach of these terms and conditions, then we will review such content, decide whether to remove it from this website and act accordingly.
Premium Members are members that have a premium subscription with London South East. You can subscribe here.
London South East does not endorse such members, and posts should not be construed as advice and represent the opinions of the authors, not those of London South East Ltd, or its affiliates.
Fft100 you wanted a forecast so here's my thoughts on profits.
In 1H23 all was wonderful, we had UKG baked into the numbers and we made a £500k operating profit.
UKG continued into the 2H 23 but only partially, let's assume 2 months and we made a £200k loss in the 2H 23. (Full year £300k profit plus tax rebate so £400k)
So the differential in 1H over 2H was -£700k.
When UKG ended, we effectively started to lose £150k of profit in the 2H 23 per month (from month 9) of the year, steadily reducing.
So what about 1H 24, well we made a £100k loss. 1H 24 is a £600k improvement in 2H 23. However, if loses of £150k per month had continued (no UKG revenues) then actually the loss would have been £900k and thus we we’re £800k improved (with continued growth).
So - in the 2H 24 the growth trajectory is therefore a minimum of £800k of profit, and thus £700k of FY 2024 is the absolute minimum. However, if the upside of growth is consistent (new contracts etc) we could be nearer FY number of £1.5m.
So to summarise, I believe there will be a profit between £0.7m and £1.5m for FY 2024! And for FY 2025 based on similar a similar approach a minimum of £1.5m to £3m.
Strong BUY
Thanks for that excellent work, Dab.
If anything, NWT is an even stronger buy now than it was at the start of last year, in the 30s: the strongest of strong buys, for what could be one of the all-time great growth stocks, still available for a comparative pittance.
Dab. Excellent stuff. They should have you writing the RNS :-). Don't understand why NWT didn't put the underlying figures in the RNS. The method they choose just causes confusion and the headlines (which most people don't get past) look awful and deter a further look, especially when there are 10-20 companies reporting every day that week.
Only 3 months to see if you are right. Though, if they choose the same reporting style as last year's TU most people will not be any the wiser as to actually what happened or why !
The lack of *any* forecasts in the broker report is also a turn off for potential new investors.
Still think they should get rid of the doors division. Too small and probably a mgmt distraction from the main business in the USA.
Indeed fft100. There are a number of ways we could have put it better, another way (if we were making £150k profit per month out of UKG) would be to have a view that with UKG we'd have expected a a profit in the region of £800k for 1H24, not a loss £100k. And thus if we'd had UKG profit for 1H 24 over 1H 23 would have shown a 60% YoY increase in profitability! That said there are rules and I am no expert on what we can and cannot disclose.
On Safetell, personally I'd run with doors and keep Safetell for a bit a least, the early turnaround signs look good and there was at least some capacity (in protection) that allowed growth without adding too much cost. Move forward and with economies of scale and re-occurring incomes, profits could come on the back of a successful strategy. The spinning out of GT into the US however might be a more sensible move (hedgehog and I shared views on this in the past and I also raised with Marie-Claire). We need to see the full value of the new contracts but if the US grows in 2H and the RoW strategy continues its growth then that business alone is worth $50m.
On your point around forecasts - I have sent the a note to Marie-Claire that I'll copy above.
Dab808 Posts: 219 Price: 72.00 Strong Buy
Thoughts "we remain a strong buy!" (of course I would say that) 30 Jan 2024 11:36
" ... So to summarise, I believe there will be a profit between £0.7m and £1.5m for FY 2024! And for FY 2025 based on similar a similar approach a minimum of £1.5m to £3m. ..."
Dab,
Two particular points to note re this:-
1. NWT would have no tax to pay on this profit, because of prior tax losses (NWT should have c. £6M. in tax credits).
2. Pre-tax profit is stated AFTER debt repayments (capital & interest).
So by the end of its year ending 30.4.25, based on Dab's forecasts, NWT's net debt could potentially be history.
And that's even without any reduction in inventory, which has been held at heightened levels because of global supply chain challenges.
And once the debt is paid off, that alone should give an immediate further boost to profitability.
Note that NWT already has net assets greater than its market capitalisation, despite writing off £ millions of R&D investment to the profit-&-loss account as it occurs - rather than capitalising it like some less prudent technology companies.
And if you were to net off NWT's inventory against net debt, that could potentially neutralise the net debt by the end of NWT's current year ending 30.4.24.
The debt payments and interest are also very well covered, with plenty of leeway.
And the only debt with any covenant requirement is a Coronavirus Business Interruption Loan Scheme ("CBILS") loan, which are treated comparatively benignly.
The rest of the debt is invoice discounting, which is far less expensive than invoice factoring.
In invoice factoring, the customer pays the factor company directly. Whereas in invoice discounting, the customer doesn't pay the discounter company, but pays the same company as normal (i.e. NWT in this case).
Invoice discounting is typically used by larger companies than with invoice factoring, and with more creditworthy customers.
Also remember that NWT's last new placing of new shares was nearly 20 years ago - and even this was to help fund an acquisition.
Since then NWT has successfully navigated the credit crunch a decade and a half ago, and the COVID-19 global pandemic earlier in this decade, all without any real dilution.
So well done to them for that, and I think they have earnt a lot of investor respect and trust for this.
A final point about the debt I would make is that some debt can actually be a GOOD thing.
From Hargreaves Lansdown "Investment Times", Issue 150 - autumn 2021, page 28, re debt:-
"There's a school of thought that says debt is always bad for a company's balance sheet. I disagree. Debt in moderation has the potential to boost results and fund expansion that would otherwise require the issue of new shares.... the important thing is that companies invest in projects with a higher rate of return than the interest rate. ...Of course debt needs to be kept within sensible limits. Unfortunately, there's no iron rule for what classes as sensible - it depends on the exact details of the particular business ..."
Net cash stagnating on a company's balance sheet can be a sign of a 'go nowhere' company with its best days behind it, & no good business use for the cash.
And it can be similar with dividends: Warren Buffet's Berkshire Hathaway vehicle (a 10,000-bagger) has NEVER paid a dividend.
Indeed of the more than 700 companies listed on AIM, only c. 200 are dividend-paying.
So I would prefer a company with very exciting growth opportunities, like NWT, which of course need money to exploit them.
How much do you think it costs to 'conquer America', with exciting technology, like NWT have done?: it's not cheap, but now it's payback time.