Member Info for BoringBernie

Alf

Yea, they're still available, but I'd have expected Ford to have already explored that option and there's never been any mention of it, so I doubt it'll happen.

I can't remember if it was someone on here or ADVFN that said that Ford had briefly talked about loan financing at an AGM, with the gist being that likely interest rates would be in double digits.

Given our recent history in the P&L, that sort of charge seems very likely, so, unless we're careful, we could end up running to stand still, which is why I'd prefer an equity raise. You'll know just as well as me that once we have a history of profitability, we become lower risk and so interest rates are likely to become much more manageable.

First a gripe about Ford. If, as people suggest, he reads these boards and sometimes gets upset about what people say about him, then perhaps he should get important RNS's out before the market opens ? As it stands, today's tardy RNS looks him look, not for the first time, unprofessional.

Anywaÿ, my thoughts ...

THE GOOD

As the percentage we pay to DSM in royalties goes down, our Gross Margin on FF II SD continues to improve. For the time just reported on, I make it ~32%. For comparison, in H1 of 2023/24 I made it 26% and, in H2 I made it just under 30%.

Ford's delicate balancing act on funding means our current cash position will be relatively healthy. That's not all good though, because it means shareholders have been diluted, but without him persuading DSM to take shares instead of cash, we'd, theoretically anyway, have been in the red, which would have been disastrous. In reality, it's highly likely that cash would still have been raised from Lucas and his mates, but I suspect the dilution would have been greater.

THE BAD

Nothing major really, but, unless I've missed it, any firm numbers on sales ( confirmed or anticipated ) for H2 is conspicuous in it's absence. The cynic, or realist in me, thinks that means H2 sales are likely to be less than H1.

Despite me continuing to think that FF+O3 is a vanity project, it's still a minor disappointment that it's pretty much going nowhere. Though implied in the text, a formal acknowledgement of it no longer being sold via H&B wouldn't have hurt either.

STUFF WE ALREADY KNEW

Anyone with an ounce of common sense knew we'd need funding, and likely a lot of it, to grow the business until our cashflow improves, so there's no real surprise there, though Ford has put a little bit of flesh on the bones. I'd be amazed if we don't require at least a million GBP to support that anticipated growth.

I very much hope that's done through an equity raise with no more than a minimal discount to the current share price. If Ford has to find another, almost certainly more costly method, I think that could reduce our margins quite significantly and I'm not sure that would work for me.

Our = out

RetiredBanker

Re "SHOE have 2,500 employees so that extra £2,400 per employee fully explains why they expect net profit to be £5m instead of £10m. "

Hmm, that sounds like someone happy to blame everything on political choices who's trying to absolve the board of any blame !

The reality, as anyone who's willing to think a little, is that the FY runs through to Sept 2025 so those calculations are our by a factor of 2 and add up to 2.5 million GBP and not 5 million GBP.

BB

Gixer

Yea, I'd assumed we'd paid too, though I must admit I couldn't square our cashflow and net cash with that, but chose to ignore it

Slam

Yea, well mostly. But reducing a liability doesn't free up any cash. Though it does make us marginally a safer bet to lend to if Ford is still persuing that as an option. I doubt / hope he isn't because our accounts aren't attractive to look at from the point of view of lenders, so interest rates would likely be ridiculous.

Just checked the accounts, our liabilites went up from 188k to 307k in the last two full year accounts.

It'd be a massive stretch to put that increase down to royalties owed, but it's a possibility.

BB

Gixer

I'm no accountant, so take this with a pinch of NaCl, but I think this could have happened :-

Royalty shown in cost of goods for the P&L account

That royalty isn't paid, so isn't part of the casĥflow accounts, but is accrued for and shown as a liability ( something we owe to DSM )

Going forward, it stays as a liability until today'ish when it's paid and is removed from the liabilities.

I think that would explain the situation ?

The royalty payment for Fin Year 2023/24 was up to about 129k ( you can calculate it from the numbers in the accounts )

I can't say hand on heart is was the whole of that 129k, but I'd guess it was. I'd be surprised if the royalty part of what was communicated today was less than 200k, or more than 250k.

BB

Good piece of work from Ford

If my maths is correct it means DSM have only sold 2.25 million shares since March ? Which is pretty good.

BB

Slam

On margins, yes, I'd agree with that, though Alf would rightly point out that historic margins may change.

I said yesterday the Gross Margin on FF+ is between 65 and 70% and that's the same as saying the markup is 200%.

Funnily enough, I talked yesterday and today on ADVFN about inventories and Cost of Goods which is where my figure of 40 to 50% as an underlying Gross Margin for FF II SD came from. Again, that 40 to 50% underlying GM equates to your ~90% markup.

But we've still got a few more years of royalty payments to go, so you can't just ignore them.

On profits, who knows ? Currently I'm sticking to my guessestimate that we need between 1.5 and 2 million in revenue before we'll be profitable. It's tempting to take the 700k plus of FF II SD sales in H1, double it and add FF+ sales and say we're nearly there, but it may well be that sales in H2 don't continue at that rate. Income from the AA was always lumpy, so I'd expect our revenue to be lumpy too.

But, to state the obvious, if we start to consistently sell 1 million plus of FF II SD and ByHealth come through on top of that, then we should be in a much better place financially.

Or we can just trust Kev's feeling that something's brewing and the clues are in the RNS ... which he's been saying for years but will, I believe, come true one day !

BB

Alf

Yea, I get where you're coming from but, given DSM and ourselves want to have a long-term relationship relating to gut health I doubt either side would be massively stiffing the other on the price of the old stock. Ford might argue it's not much use to them, so he'd like it at cost ( to them ) or even at a discount ( increasing our GM ) but equally DSM can afford to turn round and say "behave yourself or you'll have to pay for a new manufacturing run".

I suspect we'll be getting DSM's stock at somewhere between what it cost them ( plus a bit for the storage since they bought it ) and the replacement cost, but you're right to challenge that assumption.

BB

Alf - based on what you've said in relation to other shares you've presumably been running a B2C or B2B company for a long time, so you know Cost Of Goods and Inventories Held can be accounted for in subtly different ways, but I would hope they're being accounted for consistently across reports.

Unless the differences are material, I wouldn't expect Ford to go into detail on that so we have the info as presented and our overall GM for 2023/24 was ~35%.

Putting aside the royalty payment issue, the GM for both FF+ and FF SD II will, as well as varying with manufacturing/supply costs, naturally vary with Forex costs ( unless we're hedging ) and, for FF SD II whatever discount customers negogiate with us so it's a bit of a moving target, but it's unlikely to be moving at the speed of sound.

You're right to imply that a new manufacturing run will likely have a different cost / kg, but we don't know which way, so I'm happy to stick with a 30% ( possibly rising to 35% over the next 12 months ? ) GM on FF SD II until the facts suggest otherwise.

End of the day the report says "and expects to make a further loss during the year ending 31 March 2025." so Ford plainly isn't expecting a big gain in revenue and/or margin to tip us into profitability in the v short term.

With net cash of £190k at year end it looks like Ford will have to pull another rabbit of the hat to keep the plates spinning ... which he did admirably with the share issue to DSM so I have a high degree of confidence he'll sort out any cashflow issues.

Continued from below ... that my estimates of ~65 and ~30% were broadly correct for the 2023/24 GM on FF+ and FF SD II respectively, and I wouldn't be happy with a waffly answer

Having had time to go through the report these are my thoughts, others will plainly have different views, some more positive, some more negative. Some, probably correctly, will just think what I've typed is a waste of space !

Anyway ...

On the numbers for 2023/24 :-

For me, these were a bit disappointing. Based on what we were told in the Interims, though I wasn't expecting all the prospective sales being processed in Q4 to come through to the accounts in the FY, I still expected something like 1 million in total revenue with a gross profit of ~350k.

It's pretty obvious that the majority of orders which we were told were being processed in Q4 were either not shipped in Q4 or weren't invoiced for so couldn't be recognised in 2023/24 and so have been bumped through into H1 of 2024/25. I kind of wonder if that was partly because we didn't have enough stock to meet the orders until we agreed the deal with DSM near the end of the FY ? But we'll probably never know

On Gross Margins :-

Apart from one year ( 2018/19 ? ) the Gross Margin on FF+ has consistently been between 65 and 70%. Based on that figure still being pretty accurate, I calculate the Gross Margin for FF II SD to be, very roughly 30%. If my calcs are right then it's certainly between 25 and 35%. As has been pointed out, the royalties being paid to DSM are recorded under Cost Of Goods, so all other things being equal, as the royalties reduce, the Gross Margin will increase.

If I was to hazard a guess, I suspect our Gross Margin without the royalties would be between 40 and 50%

On the numbers for 2024/25 :-

Based on the above and sales of FF II SD of 724k at an estimated GM of 30% and assuming no change in the contribution from FF+ I estimate the gross profit for H1 to be ~275k. I'll be surprised if it's outside the range of 250 to 300k, but I've been wrong, badly wrong before.

If accurate, barring a ( unlikely ? ) fairly chunky drop in either admin or R&D costs that would still leave us loss making. However, although I havn't checked, I'm pretty sure that'd be our best ever H1 gross profit since SiS was part of the business, which is an achievement.

That ties in with the board telling us they expect to be loss making in 2024/25 btw.

If Gross Margins improve over the years to, say, 45%, then, very roughly, I think we'd need to be turning over between 1.5 and 2 million to be profitable. So, even without ByHealth, there's light at the end of the tunnel, but it's too early to tell how bright it is. If, primarily, the reason we've had a particularly good H1 is because of a big order from a single customer and sales drop back in H2 then it won't feel as good.

For me, PXS is currently a hold and, barring anything exciting happening before the H1 report comes out, will remain so until I've read that report at the end of December.

I won't be going to the AGM ( life's too short ) but, if I was, I would ask Ford is it correct to read from the results that th

I'm kind of with Alf, I see no point in removing, or trying to remove Ford.

I think he's reasonably competent without being anything special. I do find his written communications frustrating though, because like most CEOs of loss making companies, it's designed to appeal to eternal optimists and I'd prefer a more upfront approach, warts and all, but that's pretty rare on the markets in general and almost unheard of on AIM, so I might as well wish for world peace.

He's probably overpaid, but again, the vast majority of loss making boards are, so that's not unique. If he was to be replaced you'd either replace him with someone similar or large amounts of cash would have to be made available to any new boss to enable growth.

At this particular moment in time I trust him with the small percentage of my portfolio that I have invested here, but that's about it for now.

It's kind of damning him with faint praise, but it would seem to be change for the sake of it rather than with any real purpose.

Re "time for a change"

I think we all know that, unless Lucas agrees, then that's just hot air on the Internet. Even if 4 or 5 of the 2% holders actually managed to talk to each other and agree on it, it'd still be a close run thing.

Ain't going to happen unless SL as ad enuf.

Wellsite

He didn't lie, though you could argue he knew that the truth he was telling could easily be misinterpreted.

Firstly, we're paying DSM a royalty payment which is lowering our Gross Margin ( fair play to Ford for clarifying that, I dare say I wasn't the only one to ask him where it was being recorded ) so that's not "like for like".

Secondly, we have no idea if sales in 2023/24 were similar to when DSM was running with the sales, so they may not be "like for like" either.

So his statement of "From 1 January 2023 the net profit accruing to Provexis on sales of Fruitflow in the calendar year - on a pro-forma basis, assuming like for like sales and margins - would be materially ahead of the net share of the profit that would have accrued to Provexis with like for like sales and margins under the 2010 Alliance Agreement. " will have been factually correct, but really meant very little and people shouldn't have read too much into it.

BB

Looks like % not in public hands has changed ? You can see an old version at

https://web.archive.org/web/20240423195802/https://www.provexis.com/shareholder-information/major-shareholders/

Dr Horrible

You may well be right, but I strongly suspect you're wrong ... but that's part of what makes investing interesting in that two people see the same data and interpret it in different ways.

Dr Horrible

Re the sales pipeline. I'd assume the biggest item in that will be ByHealth, which is why the pipeline keeps growing without, on the face of it, much move on actual revenue.

Within that ByHealth item Ford will, or at least should have, a probabalised value for the hoped for ByHealth sales, and should also have some indication of the expected phasing of those sales ( so when, in terms of quarters, years or whatever ). They'll very much be guesstimates though because we're in uncharted territory in getting a tick ( or not ) in the bluehat boxes.

So until ByHealth places an order ( or, worst case, it dies a death ) the total pipeline value is always going to be big compared to actual sales.