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The problem is the Group does not end up with £25m in cash. £8.1m of this is being used to pay down debt, and the "family silver" has been sold. This leaves a very small, albeit cash rich business, starting from scratch with the Buy and Build strategy in tatters. The main issue is what now happens with that cash, since the Group has a poor track record on that front.
Agree Techtonic, but please note the 25% premium has only arisen because share price has "fallen off a cliff" in the past 3 months; 7.2p per share only a short time ago, so 5p represents a discount of 31% against that. And why does a company sell nearly 10% of stock to a leading supplier at just 5p if there is an expectation of prices rising in the short-term? Nevertheless , I do hope you are right about the sale. We shall see.
Please forgive me if I have misunderstood the RNS, but it seems to me giving away nearly 10% of a company in order to pay a supplier, even if only in part, is surely a bit like "selling the family silver". If this is the pattern for the future, presumably each share we own will be diluted on a regular basis. Where has the working capital gone? Or am I wrong?
Unfortunately I must agree with Techtonic; previous low of 2.65p could be seen again with this stock, which continues to disappoint. The only trades are minute. Particularly distressing for those acquisitions where vendors still have equity originally valued at prices far in excess of today. A bitter blow for them. Time for the Board to get a grip on finances, but any fundraising now is likely to massively dilute value.
Troajan, for those of us holding stock in EAAS, it is perhaps more difficult to see this business model as "doing OK". A Buy and Build strategy usually seeks to add greater value through careful acquisitions, but EAAS has somehow managed to buy successful and profitable companies and yet reduce their stock value to virtually zero. Quite a trick. Let's hope your optimism is well founded.
Presumably K3VMC, you are really advocating a "strong buy" stance, yet you seem to have "no opinion". Not a lot of confidence in your own advice?
May I suggest that rather than discrediting genuine concerns about cash and EBITDA, you start to understand why the market seems so unimpressed thus far; unless I am mistaken you have already declared an intention to exit sooner rather than later, and this would appear to be a perfectly sensible plan. We must all await the upcoming results; H1 plus 58% is meaningless when an acquisition is the underlying reason.
Thanks K3VMC, but given the company came close to running out of funds just a few weeks ago, and has only survived by calling on very expensive emergency finance, it would appear their business model has failed. This in the context of two acquisitions of brokers which were both a) profitable and b) cash generative.
Sadly EAAS seems to be just a "penny share" punt for many investors, and the Board will need to work very hard to regain trust. Maybe they can.
Thanks for that tip. Rest assured I am not looking for anything, just highlighting a concern about the financial viability of a company in which I happen to be a significant investor. Are you now stating my fears about excessive expenditure, poor cash flow and inadequate reserves are unfounded? If so, I am delighted!
Happydayz0 surely this cannot be correct because the RCF is at it's limit already, so how is the company intending to fund new projects? Furthermore, the funding for LED installations is effectively a lease and is presumably between individual clients and third party banks, not EAAS, and would not show on EAAS books. Either way, this does not explain where the cash and profits from the acquired energy brokers has been consumed. Perhaps the answers will be provided in the upcoming and crucial half-year announcement.
Sorry to ask the obvious, but I struggle to understand how a cash generative business, which acquired two perfectly profitable and cash rich energy brokers within the past two years, has been able to consume so much money that it needs a fully-drawn £5m RCF, effectively an "overdraft", plus an emergency funding call. Where is all the money going? Any ideas, anyone? Because this is the key to their underperformance.
I would add that I see EAAS as a good investment opportunity precisely because their shares have such a high degree of volatility. From 3p/share to 30p/share, this is a great AIM listed company for those of us able to follow this journey. And of course, I agree the essentials are there for a highly successful Group, but to date this ambition has not been realised. We must all hope this is on the horizon. I wish EAAS and their shareholders every success, I am one too.
Not at all, I have been a significant investor in EAAS since it started this extraordinary journey and have enjoyed making huge profits as the share prices rise and fall. In fact, I have built a large holding over the past few days and expect to realise large profits again as the price drifts back up to 10p or so, as it surely will. I call that intelligent investment. Good luck again.
Sorry but I fear those of you who are expecting significant growth in value are deluded. Every single announcement by this company has resulted in a fall in value, but with penny shares (which these have been for some time) there is still the opportunity to make a gain for very small investors, which I guess you all are. Good luck.
Agree with you jabberba. We must also remember this is not a capital-intensive business, it is a service provider, and there is no reason why profits should not be retained to yield large cash balances, as is normal in the sector. Both acquired brokerage companies were cash generative prior to acquisition. So, why is the company even suggesting borrowing is necessary? Where has all the money gone since the acquisitions were entirely funded by placement, and none by debt as far as I can recall?
Brooko19, very interested in your assessment when it comes to a placing. You seem very certain about this, but is this just an intelligent hunch or more than that? It seems extraordinary that a company which has quite recently acquired two cash generative and profitable companies should now be out of cash, but this does seem to be the case. Any placing now to raise working capital would be hugely damaging for future shareholder value, but at just 5p/share the number of issued shares would be truly eyewatering. We really would be into "penny share" territory then, with a business model which has completely failed.
Sorry to spoil the party, but for what possible reason would the company seek a placing at a price sub 6p/share? In order to even fund the process, the number of shares involved would be huge and any worthwhile acquisition (which presumably would be the only reason for a placing for a Buy and Build strategy) would be highly diluting. My view is the results are poor and the price reflects continued under-performance, sadly nothing more.
Whilst I agree with your overall sentiment, I fear the reality is not likely to be good news; the degradation in share price makes it very difficult for investors to trust this management team and must be causing considerable alarm to those previous subsidiary company owners, now employees, who hold huge volumes of shares as part of their sale proceeds.
Entirely agree with EnergyIQ in that the growth of the Group has not been achieved organically, solely through acquisitions. No evidence of synergistic benefits, economies of scale etc. Just "bolted on" businesses which are potentially highly vulnerable in the trading market today. Of greater concern is the method of acquisition. Using cash generated from placing huge volumes of shares with institutions, or the issue of shares to the acquired company Management Teams, all now trading at a fraction of their original value. A Buy and Build strategy which is failing. So not only a lot of disgruntled institutional investors (in many cases showing losses of 50%, if they could sell their stock at all), but a lot of very unhappy shareholding staff. EAAS really need to get a grip of their combined business and stop believing their own hype. They could still make something of this Group, at least sufficient to give their shareholders a modest return.