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Well, after 5 years in this share its probably time to call an end to the debacle and the consistent burning of cash and bad management.
Just voted to return what's left to the share holders.
As I wrote before I must congratulate who ever created the Board's response document as it contains what appear to be compelling reasons as to why shareholders should vote however for my 3m of shares I have voted in favour of the resolution to return cash to shareholders and I have previously provided you with facts so that you can decide if you want to vote in favour of the resolution or not!
The Board's response document provides reasons as to why shareholders should vote against the resolution however the reasons contradict the Boards 2nd option as well as clearly demonstrating that Shareholders should vote for the resolution and not against it!
For instance
"The Board has actively considered a number of pathways to distribute cash to Shareholders since Q2 2023."
Why would the Board have been actively considering a number of pathways to distribute cash to Shareholders since Q2 2023 when the June 2023 accounts shows SCIR only has cash and cash equivalents of £295k and that they state that the Ruvuma receipts timings are uncertain?
In addition the 2023 AGM presentation dated August 2023 shows EAG/GGL is going to provide a substantial return to SCIR via an sale eventual sale of EAG/GGL after they had acquired a large enough portfolio of AD plants.
If you look on Companies House and search for Tom Hamilton Reynolds you will see that on 8 February 2022 he was appointed as a Director of EAG Eglington Ltd/EAG Ardboe Ltd/EAG Loughall which are the SPV Companies set up to acquire three AD plants that are most likely located at each of the names of the Companies.
Why did the Board did not provide a range of costs for an MVL as surely they obtained two or three quotes rather than just one?
If you seek a quote from one of the top firms who deal with MVL's then the quote is going to be a lot higher than if you seek a quote from a firm that is quite capable of carrying out an MVL but they are not one of the top firms!
One of the risks identified is:
"For transactional options in particular, is the target acquisition in an area where the Board has appropriate experience and knowledge to assess the potential."
The Board paid £100k for due diligence costs to acquire EAG/GGL which was sold at a massive loss so it was a third party that had the knowledge rather than the Board as why would the Board pay a third party to carry out due diligence if the Board had the knowledge?
EAG
I agree this BOD will try and string thing out as long as they can and take money out as salary until all the money has gone . I have voted FOR the resolution every little helps and may get it passed. I agree it has been criminal what this BOD have got away with over the years.
It’s hilarious what this BOD get away with.
Most shareholders now own a tiny amount and probably think it’s not worth voting.
Allows a select few to control the company with a large minority holding and make a lot of money through fees.
My view is that some of what has gone on here would warrant an investigation into whether the directors are acting in the interests of all shareholders.
I expect the BOD to win this one as well and we could see a rinse and repeat until all value has been stripped.
I thought the idea of running a business is that you have to buy low and sell high?
What would I know I only qualified as an Accountant!
So far Ruvuma sold at a loss of c 7.813m and EAG/GGL sold at a loss of between £725k to £875k depending upon whether the contingent consideration is received or not.
Per the Board's document below the keys word is potential and there was potential in both Ruvuma and EAG/GGL
"both these options have the potential to deliver value significantly in excess of that offered by distributing cash"
"To proceed down the path of distributing cash to Shareholders via a MVL limits the full range of alternatives to deliver value."
There is more certainty in a MVL and less risk!
Conclusion
To proceed down the path of distributing cash to Shareholders via a MVL limits the full range of alternatives to deliver value.
Taking account of the options available to the Company, the Board believes that the interests of all Shareholders are best supported by providing a defined period of time to end June 2024 to allow it to continue exploring transactional options in line with alternative 3, while also continuing to evaluate the potential of new investments in line with its investing policy, given the Board believes both these options have the potential to deliver value significantly in excess of that offered by distributing cash.
AGE
It is interesting to note that the expected net proceeds from Ruvuma were expected to be £11.828m on the 31 December 2021 however on 31 December 2022 it was expected to be £7.605m so a reduction of £4.223m in just a year.
The question has to be asked why did it decrease by so much!
It then increased to £7.986m on 30 June 2023
You will notice the wording Loan to ARA however ARA are providing a loan to SCIR rather than SCIR providing a loan to ARA.
The Board clarified the situation with the loan and that is that the loan from ARA to SCIR is not being paid out of the $16m it is going to be paid in addition to the $16m.
AGE
I said I would post some numbers re the sale of Ruvuma and the following has been taken from SCIR's accounts
31/12/2021
£’000
Fair value less costs to sell 11,828
Net book value of assets disposed:
Intangible assets (15,901)
Oil and gas properties (750)
Decommissioning provision 166
Impairment on fair value revaluation at 31 December 2020 810
(15,675)
Impairment on fair value revaluation at 31 December 2021 (3,846)
(4,656)
31/12/2022
Fair value less costs to sell 7,605
Net book value of assets disposed:
Intangible assets (18,368)
Oil and gas properties (380)
Loan to ARA Petroleum 2,944
Decommissioning provision 166
Impairment on fair value revaluation at 31 December 2021 4,656
(10,892)
Impairment on fair value revaluation at 31 December 2022 (3,377)
( 8,033)
30/06/2023
Fair value less costs to sell 7,986
Net book value of assets disposed:
Intangible assets (18,877)
Oil and gas properties (380)
Loan to ARA Petroleum 2,944
Decommissioning provision 166
Impairment on fair value revaluation at 31 December 2022 8,034
(7,765)
Impairment on fair value revaluation at 30 June 2023 221
Cumulative impairment (7,813)
You can see above that the cumulative impairment on assets held for sale is £7.813m which is the £8.034m less the reversal of impairment for the half year of £0.221m.
Ruvuma was therefore sold at a loss of £7.813m as the fair value less costs to sell in other the expected net proceeds from the sale of Ruvuma is £7.986m and Ruvuma cost £15.799m.
Some of the £15.799m must relate to Kilwani as the document that the Board had produced states there is a decommissioning provision relating to Kilwani in the sum of £166 k and you can see the £166k is included in the numbers above so the loss is less than £7.813m but I cannot tell how much of the costs relate to Kilwani ad how much relates to Ruvuma
AGE
I should have a typed a "a leopard never changes it's spots "
AGE
I have just voted in favour of the resolution to return cash to shareholders in respect of my 3m shares!
I would urge shareholders to carefully read the information that I have provided and compare it to the information that the Board provided in their response document and then make a decision on whether you should vote in favour of the resolution or whether should vote against the resolution based upon the facts I have provided!
I think 44J wise words below provide a useful summary of the facts and information I posted here today and yesterday:
"I agree with you Agneissearner; this BoD has been given plenty of opportunity to invest our hard earned cash and return a profit, but have failed to do so with each and every venture they pursue. Why would that change going forward?"
Think carefully about these two well known phrases
"Would Turkeys vote for Christmas!"
"Zebras do not change their spots"
AGE
Was EAG/GGL a wise investment considering the Board spent £80k on legal costs and £100k on due diligence costs and £700k to acquire GGL when it had negative net assets of £425k so a liabliity as it was sold at a loss of between £725k to £875k depending upon whether the £150k of contingent consideration is received or not.
If you look at the 2023 AGM presentation dated 9 August 2023 you will see a slide titled:
Strategic progress made through 2022 and H1 2023
Strong operational and financial performance of EAG JV in parallel with identifying follow-on investment opportunities
There is also slide titled:
Demonstrating Scirocco’s robust investment model -EAG
There is also a slide titled
Investment Structure & Waterfall –a path to sustainable capital growth
This information demonstrates how the EAG/GGL business model is going to produce substantial capital returns for SCIR as the loan was to be repaid first and then SCIR would receive its capital profit share.
In period of just 4 months the Board decided that the excellent EAG/GGL investment opportunity was not such a good investment after all and that they should sell it as soon as possible at a loss of between £725k to £875k dependent upon whether the £150k of contingent consideration is received or not.
The presentation contains the normal disclaimers saying "The presentation has not been verified, does not purport to contain all the information that a prospective investor may require and is subject to updating etc etc.
The divestment document contains a number reasons as to why EAG/GGL was being sold at such a massive loss
The Board spent £100k on due diligence costs for the acquisition of EAG/GGL and it should have included the projected revenues and costs within the net present value cash flow table as well as an Internal rate of return calculation.
There should have been a sensitivity analysis to show what would happen if revenue and costs or interest rates were to change by certain amounts.
It was quite obvious even to the man on the clapham ominbus that interest rates would rise substantially after EAG/GGL was acquired!
AGE
Have the Board spent shareholders wisely and managed to obtain the best value for money that was available?
44RJ raised an excellent question in his post yesterday at 15:53 which is relevant to the point above.
"Why they didn't prioritise Ruvuma and preserve cash to stay in the game is totally beyond me"
SCIR shareholders bought their shares because of the potential upside on Ruvuma and as they had lost so much money on their original investment they were willing to take the chance that it would either come good in which case they might get back their original investment or even make a profit or if not successful then they would lose all of their investment.
The Board stated that they had a duty of care to shareholders and that Ruvuma was very risky and so they sought shareholders authority to sell Ruvuma and then reinvest the proceeds in the circular economy as is was the future and it was less risky.
In a period from the year ended 31 December 2018 to 31 December 2021 which is a period of just 4 years the Board paid £2.132m to Gneiss Energy Ltd for consultancy fees and the current market value of SCIR is £2.7m so those fees represents 78.92% of the current market value of SCIR.
During those 4 years SCIR received a net amount of £7.111m from issuing shares so the £2.132m represents 29.98% of the net proceeds.
Gneiss Energy Ltd was paid a success fee for negotiating the sale of Ruvuma however shareholders do not know how much they were paid as when the Board were asked about this at the AGM they replied that the payment fell within market norms.
If you look at the cumulative P&L account you will see that accountancy services fees amounted to £606k for just 5 years and the cost for 2022 was a whopping £152k
For £152k you could employ a qualified full time Financial Controller for more than a year and yet the accounting related services job is a part time job.
The part time job would involve the following:
Maintaining day to day accounting records
VAT returns
Payroll run for one employee and the Board
Payment of suppliers
Preparation of the interim and annual accounts
The cumulative cash flow shows that SCIR received revenue of just £1.457m and the turnover from GGL was not included in the consolidated P&L account of SCIR as only SCIR's share of EAG's profit/(loss) was included in the P&L.
The question has to be asked how did it cost so much for accounting related services for the following years when the accounting services role is just a part time job?
2022 £152,000
2021 £ 93,000
2020 £114,000
2019 £196,000
2018 £ 51,000
The Board spent £1,293,000 on the abortive One Dyas deal when it did not have a great deal of cash and how was SCIR going to able to raise the cash if the deal had of been successful?
I will leave you to judge if you think that the Board have spent shareholders money wisely and if they have obtained the best value for money
AGE thanks for your analysis. I have been a s/h for 10years and tbh I am disgusted that we s/h have let ourselves be taken along this path. But until Rivuma’s potential was undersold we had hope. The board tries to make a compelling narrative in option 3 but I wonder who would give a value in an RTO of more than 400% to get to the 2.2p /s they are estimating. Seems pie in the sky yet again so I think I am going to vote with the motion.
44RJ an excellent analysis of the situation!
AGE
Well, what a shame that it has come to this. So much promise in the Neil Ritson / Solo days. I don't have any shares currently, but my wife has a few (...will I ever hear the end of that? I think not...) and I will be recommending to her to vote for option 1, the MVL. I agree with you Agneissearner; this BoD has been given plenty of opportunity to invest our hard earned cash and return a profit, but have failed to do so with each and every venture they pursue. Why would that change going forward? Clearly there is something drastically wrong with this set-up; is it a lack of competence, is it a lack of luck, is it a lack of desire to achieve? Whatever the reason, the track record speaks for itself. I also can't see the RTO option bearing fruit either; it will just be another vehicle for the next chancer to dilute shareholders to the bone chasing some dream.
Why they didn't prioritise Ruvuma and preserve cash to stay in the game is totally beyond me. This company was always all about Tanzania - for some reason they thought they could do everything all at once. Delusions of grandeur probably.
Sorry to all those that have lost money on this one, but this story needs and ending and it looks like the fat lady is about to step on to the stage.
Highlandmatt,
Have a look at the AGM presentation dated 9 August 2023 includes the following information which shows that it cost 428K pa to have an AIM listing:
Listing Costs £k
LSE costs 20
Nomad, Broker, FPR & legal 218
Audit costs 55
Outsourced accounting 90
Insurances 30
AGM 15
TOTAL 428k
It is going to take many years to receive all of of the Ruvuma proceeds so at £428k pa to maintain an AIM listing it makes financial sense to go with option 1 which is a members voluntary liquidation which cost £350k in total compared to £428k pa?
I can see no logic in the Boards recommendation as based upon the facts that they provided the total cost of keeping an AIM listing over all the years that the Ruvuma proceeds may or may not be received far exceeds the cost of MVL.
Shareholders have got to take the risk that going forward the Board has the ability to execute a successful strategy when they do not have a record of providing share holder value despite them engaging highly paid consultants such as Gneiss energy and other advisors and subcontracting out the running of EAG/GGL thereby duplicating overheads.
I am going to prepare some workings that I will post on here re the loss that is going to be made by SCIR having sold Ruvuma which is our main asset.
The purchaser is actually paying us out of the sale of the gas that we used to own which is akin to selling a business to someone and them then paying you your sale proceeds out of the cash flow and profits that you would have made if you would had kept it and not sold it to them!
AGE
---------------------------------------------------------------------------------------------------------------------------------------------------
I do agree with you, just if you are doing an analysis of ins and outs from selling assets, then you need to include the biggest asset sale.
I would be prepared to entertain an RTO offer from the right company. I wonder if the BOD can be persuaded to detail the approaches received?
I should clarify that the business model was based upon the fact the related party loan would be repaid out of the sales proceeds on the sale of GGL rather all of it being repaid from the cash flows and profits being generated by GGL.
However to make a substantial capital profit from the sale of GGL it is necessary for it to generate a large turnover and to generate substantial profits but SCIR's share of EAG results for 6 months was actually a loss of £42k and not a profit!
AGE
When the Board have a set of accounts prepared they are required to consider if the carrying value of amounts included in the balance sheet are properly stated hence was the £1,522,000 going to be fully recoverable based upon future cash flows and expected profitability of the EAG/GGL business model.
The turnover and losses being generated by EAG/GGL provide strong evidence that the loan of £1,522,00 was not going to be repaid by EAG/GGL as they were not generating sufficient cash flows and profits for them to do so.
The sale of EAG/GGL was not a post balance sheet event as it did not happen during the period 1 July 2023 and 29 September 2023 which is the date the CEO signed off the accounts as the sale was approved by shareholders in January 2024.
The Board provided various reasons in their divestment document issued in December 2023 to explain why it was a good idea to sell EAG/GGL yet in September 2023 when the CEO signed off the accounts did he consider if those reasons would have an effect upon the carrying value of the related party loan?
The reasons were used to justify a sale at a massive loss however it appears they were not taken account of when signing off the accounts yet the Board were well aware that interest rates had increased dramatically by June 2023 and that this had an adverse effect upon the eventual sales price of EAG/GGL as they explained that in their document.
AGE
The Board included the following statement in their document:
At the AGM held in 2023, an authority to issue new Ordinary Shares was not granted by Shareholders, preventing the Company from raising capital through equity issuance to further invest in growing the EAG platform.
The SCIR shareholders action group blocked the Boards ability to issue yet more shares as you can see below that the current Chairman and previous Boards had raised a net amount of £35,059,000 and they had spent large amounts of money on consultancy fees e.g. Gneiss Energy £2,132,000 and they had failed to create shareholder value.
The presentations that the Board produced in August 2023 shows that EAG/GGL is a successful business model that is scalable and that it was going to be a highly profitable JV for SCIR when the AD plants were eventually sold however by December 2023 they were seeking shareholders permission to sell it at a loss between £725k and £875k.
In the document that was issued to shareholders for the divestment of EAG/GGL in December 2023 which was just 4 months after the AGM presentation they had a completely different opinion about the business model.
The SCIR interim accounts for the six months ended 30 June 2023 which were signed by the CEO on the 29 September 2023 included a loan from a related party for £1,522,000 which is the loan to EAG.
AGE
I do agree with you, just if you are doing an analysis of ins and outs from selling assets, then you need to include the biggest asset sale.
I would be prepared to entertain an RTO offer from the right company. I wonder if the BOD can be persuaded to detail the approaches received?
Indeed there is however it is better for the Ruvuma monies to be returned to shareholders rather than being paid to highly paid consultants to find yet another supposedly great investment opportunity
As the saying goes "Once bitten twice shy!"
EAG/GGL turned out be a disaster so I am not willing to give the Board another opportunity and I am sure lots of shareholders agree with me!
AGE
-------------------------------------------------------------------------------------------------------------
There is the future value of Ruvuma to come.
There is the future value of Ruvuma to come.
Only you know what your average purchase price is.
My calculations demonstrate how shareholder wealth has been decimated and it does so by comparing the current market value of SCIR to the net proceeds that SCIR have received from issuing shares.
AGE
Where is the share price currently compared to your average share purchase price?
The current bid price is 0.30p and LSE shows that the market cap of SCIR is £3,150,000 however there are 900.5m shares in issue so 900.5m x 0.30p is £2,701,500
Now lets compare that to the total amount raised from issuing shares net of costs which is £35,059,000
2,701,500/35,059,000 X 100 is 7.7% so there has been a reduction in value of 92.3% of the net proceeds from issuing shares!
AGE
What is the current and past Board's record on creating shareholder value?
If you look at the cumulative P&L account below you will see that the total losses for the period 2009 to 2022 is £29,955,000
If you look at the cumulative cash flow statement you will see that a total of £37,414,000 has been raised by issuing shares and the costs for that were £2,355,000
The Board spent £1,293,000 on the abortive One Dyas deal
If you look at the document for the EAG/GGL divestment you will be able to calculate that EAG/GGL was sold at a loss of between £725k to £875k depending upon whether the £150k of contingent consideration is received or not.
In a period of just 4 years the Board paid £2,132,000 to Gneiss Energy in consultancy services which is owned by Jon Fitzpatrick and his wife.
Current and previous Board members have received a total of £5,037,000 pounds in Directors remuneration including share based payments.
My understanding of creating shareholder value is that the Board is able to generate both turnover and profits and that it rewards shareholders for taking risks in investing in the Company by paying dividends.
As the SCIR Group was not generating much in the way of turnover and it as has only ever made substantial losses then it is not possible to pay dividends to the shareholders but have they managed to increase the share price and make a profit on the sale of Ruvuma?
Well the answer to that would be a "No"!
AGE
Cumulative Directors remuneration including share based payments
2009 to
2022
Total £'000
Directors remuneration inc share based payments
Alastair Ferguson 485
Tom Reynolds 587
Donald Nicholson 244
Muir Miller 88
Doug Rycroft 50
Jon Fitzpatrick 305
Don Strang 193
Don Malling 443
Fergus Jenkins 462
Sandy Barblett 249
David Lenigas 669
Kiran Mozaria 124
Vincent Fodera 54
Neil Ritson 1,084
Total 5,037