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I realise this is something of a self-evident truth but I think it depends. It depends on whether the ends justify the means and that's the big question hanging in the balance at the moment. To be fair to the existing team, they have developed what would appear to be a superior product in a high-cost-of entry market, previously monopolistic market and backed that up by securing a decent value order book and pipeline. IF things go well over the next 3-5 years then I'd say the ends will have ended up justifying the means in that we could be well on the path to a £100m+ pa t/o business with strong continuing growth prospects within a growing market, high margins, competitor barriers to entry and a self-financing capital expansion programme. At that point, the capital required to date would look like a pretty sound investment. But there are plenty of IFs along the way, as has been reflected on here a number of times.
Fevertreeman
yes ..the main questions must be on the use of the cash raised in the the 2 years or so.... break all that down
Fair comments - would have to go back through Report & accounts which might take a while. My point is that a fair chunk of the monies raised (and look at the share prices) has been clearly wasted......
Fevertreeman
yes....... Taking on the expansion plans, the order commitments and pushing forward on the R&D and doing it without an experienced COO in place to help with the work load was indeed creating a real risk that potential problems would be missed .... and they were...turning managing the process into ..firefighting the process
Very much my take too...... CFO and COO critical to regaining credibility. The presentation by Johnson was extraordinarily poor for a CEO fighting for his company's future. When asked by s/o about management bench strength, he was hopeless. We need granularity on the issues and all we got was "We hired new CFO and COO (why they didnt get one before is beyond me) and then some guff about broadening training and 4 managers being promoted/repurposed/
How much of that £71m has been invested in CAPEX and R&D ? ...
how much would a new competitor need to invest to get to the same stage , with the same customer order backlog ?
Thanks Fevertreeman - the last part would also seriously concern me if I was a client. The trust is lost, and you cannot rely on SCE to deliver.............so it doesn't get the relationship off on the right foot if you can't deliver what you initially promise. Credibility is lost and becomes very hard to regain. I will hold off for the foreseeable until there are tangible improvements visible. I expect it will tread water for the next 12 months
Staggering figures! £72m raised over last 21 years. Market cap is £28m. Management has been disastrous stewards of shareholder capital
Sept 2002 1,446,757 @ £0.90 £1.3m
April 2004 4,142,859 @ £0.70 £2.7m
Aug 2007 5,000,000 @ £0.20 £1m
July 2009 4,516,580 @ £0.10 £0.45m
Dec 2009 800,000 @ £0.10 £0.08m
Nov 2010 7,538,094 @ £0.17 £1.2m
Feb 2013 6,293,902 @ £0.08 £0.5m
Nov 2013 3,843,498 @ £0.085 £0.3m
Dec 2014 8,210,136 @ £0.13 £1m
Apr 2015 2,692,309 @ £0.13 £0.35m
Mar 2016 34,375,000 @ £0.16 £5.5m
Aug 2017 23,725,481 @ £0.155 £3.7m
June 2018 9,000,000 @ £0.17 £1.5m
Mar 2019 12,303,600 @ £0.155 £1.9m
Apr 2020 18,499,303 @ £0.13 £2.4m
Jan 2021 40,000,000 @ £0.50 £20m
Oct 2022 44,963,739 @ £0.40 £18m
Nov 2023 82,918,660 @ £0.10 £8.6m
Total: £71m
Underwhelming presentation for me: overall thoughts
1. No contrition, just slightest hint of apology from Bundred for the disastrous f+++ ups of last 12-18mnths. Quite surreal
2. Neither Bundred or Johnson seemed that bothered by events that have cratered the sp by 60pc, destroyed balance sheet & led to an emergency fund raise....
3. Board change desperately needed to show they mean business - Bundred must go!
4. CFO appears a steadier pair of hands., but I was unimpressed by her answers - a fair amount of hot air, and quite unforensic approach to unpacking (1) what she found on arrival (2) what went wrong & why things will improve
5. CFO seems quite confident about signing commercial loan which she pointed out was EU backed and gave them a fair degrees of flexibility over when it gets drawn down (has to be w/i 2 years of signing)
5. Lacklustre presentation that only increases my view that SCE lacks the management, money and skill sets to go it alone independently and that the only viable option will involve a takeover by PE or an industry player.
Individual points:
1. Focus seems to have shifted to 2025. With Johnson saying new business not a prioirity given their focus is fixing current clients etc, it sounds like s/holders will be treading water in 2024, as I can see no catalysts for rerating. Disappointing if true
2. Extraordinarily , there was no admission of the lousy way they handled the announcements. Didnt answer why interims Sept signed off by board then lead to emergency fund raising 5 weeks later! Clear there were questions about this but Bundred wouldnt answer them! That is a huge issue as its all about TRUST
3. Johnson fitness as CEO remains major issue.... evidenced by bizarre answer to legitimate question about why they overpromised and underdelivered rather than other way round. Johnson's response was worrying imo: he indicated that they has got themselves into a corner by dint of their first prioirity being to their customers who needed to be assred SCE could meet their demands & deadlines. Effectively he seemed to be saying that " We told the customers what they wanted to hear because they are our most important stakeholder and we didnt want to disappoint, so that's why we got ourselves into position of overpromising to the market."
A very troubling answer as it shows he does not understand about the relationship between company and its owners (the shareholders) and his responsibility to his owners in terms of providing credible forecasts that crucially decide the share price and hence the value of the company.
I felt that Isabel (CFO) came across well which was comforting.
There was some (albeit only a little ) acknowledgment of over promising but under delivering. The situation is regrettable but taking ownership of the problem is a very good starting point for putting it right.
I’m glad of the explanation of having identified 7 pieces of equipment that are posing a potential risk to future production, and that each has been assessed as to the various options to mitigate that risk, including overproduction to create a buffer, and more specific planned maintenance. An update on this would seem particularly appropriate in the weeks ahead, since this was central to the bottleneck problems mentioned.
It was stated that the future is bright, that the OEMs are supportive and that quality exceeds expectations which is clearly positive, but it’s a missed opportunity not to have made more of both what has been achieved and what’s still to look forward to…in order to close the presentation in a more positive manner.
Poole, the session was recorded and so will be available to view, though there wasn't the granularity of detail on the question you're asking. I thought on the whole it was good. Without wishing to get personal, Isabelle Maddock is a very different creature to Michael Cunningham. More expansive and reassuring a presence. October sales were reported as £1m. There was some candour that whilst customers aren't happy with the ramp up issues, it is such a commitment to select a supplier and integrate it in the first place that withdrawing from agreed contracts is really not an option. It's the follow-on contracts that will be telling and you'd hope that if they can permanently resolve capacity issues, the quality of the product will encourage them to do so. There was also a vague scent of contrition and self-awareness. There was little to no recognition (although I suppose how could they really) that the financing story they are telling with the current fundraise is the same story they told with the previous (40p) fundraise and then promptly burnt through that cash.
Found it impossible to join Zoom meeting - were we meant to have been supplied with an ID? Tried to contact Hardman but they don't seem to have a phone number!
Why on earth did they send out their report today just ahead of the proposed meeting rather than a day before?
As regards the report very little that is of any real help as to the production problems and whether they have been permanently solved. I am now wondering what the company had to say at the meeting about the issues. It is still not clear whether the main furnace issues are in Stage 3 or Stage 4. The website refers to 'furnace' at Stage 4 but all the earlier stuff was about relining the graphite which would suggest Stage 3 albeit is not described by them as a furnace. Perhaps it is problems with both? Hopeless communications with shareholders.
I will be joining the presentation later this morning. Given they can handpick which questions they choose to answer, I wonder whether they will have the courage to answer some of the tougher questions they will have been posed. Bundred's tone today is very important - will there be any self-awareness/humility or the usual blustering?
Guess some investors are probably forward selling
Into any rises Before the open offer shares hit the market
Admission of the Firm Placing Shares and the Subscription Shares is expected to commence at 8.00 a.m. on 17 November 2023 and admission of the Conditional Placing and the Open Offer Shares at 8.00am on 19 December 2023.
Kinda sums it up. The difference in content of the two statements within a matter of weeks of each other drive to the heart of the problems of the last 24 months: complacent & out of touch board, misleading communications, poor operational management, under-skilled workforce; stone age financial controls & finance function, and an arrogant 'we know best mindset' of Chair and CEO
Hi Pokerchips, I think a good deal of what you say is fair but not sure I agree that a fund-raise was inevitable - at least not now and in these circumstances - and all the rhetoric, confidence and assurances from the Board were to the contrary. If it was indeed inevitable, then you have to conclude that the update statements that came immediately prior to it were disingenuous at best, given how the narrative changed dramatically in a matter of a handful of weeks. It's about the respect and courtesy that you demonstrate to your shareholders, not least when you're about to ask them for more!
I think if I were the board of Churchill China I would be feeling somewhat uncomfortable given the financial forecasting debacle & lack of controls all occurred under Cunningham's aegis
The big holders imv will have insisted they have a head (if not more ) on the plate in return for their support. There isn't time to faff around
1. Bundred has to go in the New Year (or announce he is leaving) because his credibility is shot to pieces & be repaled by a chairman with proper international plc experience
2. Johnson has at most 6 months to show he has the skills to turn the ship around; if he doesn't he should be replaced or moved internally
I can tell you with some confidence that Bundred & Johnson both possess that engineers' certainty that they are right despite time and time coming up short. Bundred has batted away countless questions about operations in past 22 months, and Johnson clearly had no idea what was happening. And for good measure they both have a huge aversion to folks down south, their advisers, and shareholders.
"The finance team in particular should have been pushing to raise larger amounts at much higher share prices to cater for any eventuality."
I suspect they raised what was offered to them.... I am sure they pushed on price etc...but ...they inevitably got what is offered... 40p was a good price considering what has happened to AIM the past year
I am not so sure investors want to give out cash to cover what the company is suggesting might be their future c*ck-ups ..you don't exactly suggest that in your presentation
" The timing of reassuring trading updates followed in very short order by a fundraise at 10p has done possibly the most damage to credibility and integrity"
I think when you re-look at it....the fund raise was inevitable anyway...to get the loan ( i suspect)... and to progress further with the working capital for the expansion plans...which if the loan comes through promptly ...would be needed straight away.....the loan has been worked on in the background and only recently advised it at late stages...maybe they need the fund raise to secure a better payment rate on the loan... reduce its cost
They will no doubt have consulted with investors etc ..and the 10p fund raise price was offered to them....you have to take what they offer, not what you want....
The production hiccups have been costly .... but with the R&D expenditure and cost of sales/admin etc there was always going to be a need for more fund raising ...IMO
The rush to buy shares from the market today, is suggesting that some now believe that once this is done and over the line and the loan is in and the point hiccups get resolved.....there is a good chance things the team can really move forwards
I did think Bundred was good in terms of inviting the NEDs to present themselves and whilst he does give the impression you can ask anything...he can push certain questions off as not really important...when to the person asking, they clearly ..are important
I haven't posted since the last update and the financing. It's all tremendously disappointing of course.
The current management have done an incredible job in taking SCE from nowhere to where they are today, given the barriers to entry and the absolutely massive contract and order pipeline.
But they've failed in getting a commercial operation up to speed quickly from scratch. Which is a difficult task in any circumstances, especially during and following a pandemic, but not one which was insurmountable with depth and quality in the management team.
The finance team in particular should have been pushing to raise larger amounts at much higher share prices to cater for any eventuality. There must have been plenty of opportunities to do so (although no doubt there would have been grumbles from many here at the dilution!).
IMO the likes of DB and KJ have likely built up such tight relationships with the top 12 or whatever OEMs - with more OEMs apparently in the pipeline - and have such intimate knowledge of the product and the manufacturing process, which is vital, that they should stay. In what capacity I don't know. The new CFO and other appointments using the new funds should support a smoother production scale-up from here.
I'll probably top up in the placing on the view that the upside here remains a multibagger given the pre-money £26m m/cap.
For me, it's perhaps less about Johnson and Bundred's ability and experience to lead SCE (take it as a given that they haven't done so) and more about the tone-deafness and apparent lack of appreciation about how crucially important their credibility is. Without getting personal, in past Q&As, I have always found Johnson to be very measured and an excellent communicator, whereas Bundred tends to brush some very sensible shareholder questions aside with almost irritation. The timing of reassuring trading updates followed in very short order by a fundraise at 10p has done possibly the most damage to credibility and integrity. I realise it's a fairly standard convention of announcements but even beginning with '...is PLEASED to announce' gives further impression of tone-deafness. I'd personally be in favour of Bundred stepping aside once the ship is steadied a little, hopefully next Spring/Summer, but I suspect there is too much arrogance there. Cunningham making an odd-looking lateral move was the warning sign, I guess.
To a certain extent it depends what advisors he has (internally and externally) ..and who he turns to help manage his role
They seemed to realise too late that they needed new help brought in ...
The next 3-6 months now that there is some new blood will test how well he "manages" the operation and uses
I would be more inclined to support Johnson and change the Chairman
But is he the RIGHT MAN to lead the company from scale up through to the sunny uplands of ever growing sales? Very different skill sets needed to run a growing international business than what he has to do to date.