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Pretty sure they have the wording about the ability to allot shares at every AGM so i don't read too much into it. DB would be reluctant to be diluted and would he really want to put more money in to maintain his percentage holding?
I do think the reducing cash balance will concentrate minds and hopefully spark some change here. It is needed for the long term health of the company. Hard to detect any urgency though.
Bella, what sort of EBIT do you see DX contributing FY23?
Fwiw, i've pegged them as around £20m turnover excl Covid products so perhaps £2m-£3m core EBIT? Not sure what the covid upside is given that broadly speaking 50% of the gm goes back to the vendor.
I view the businesses as extending the cash runway a little, but in the context of a £300m market cap not very exciting.
Do you remember the USM btw. Now that was a junior market!!
Thanks. As you say, Working Capital are a very low profile outfit. Be interesting if they were to go over 10%. They look to be the main buyer currently, probably just as well! Perhaps they will bring some pressure to bear on the board for cost savings?
We don't usually get a TU until January so most probably this will drift until then i guess. Very much a wait and see for me at this stage.
Ok, i'm a bit confused on the II's here.
I can see Invesco have reduced. Also Swedbank Robur as per RNS's 18th August and prior, but they are still higher than the 5.8% shown in the last AR so they must have increased and then thought better of it!
So who are Working Capital Partners? Never heard of them. They must be based overseas as they only disclosed at 5% (5% intervals is the threshold for overseas investors). Are they hedge fund, activist investor? Appreciate any feedback.
Ok, to be clear, for me it's not just about Warhammer: i think there is quite a lot of value in the back catalogue, there are some good developers, but too many of them, there is a chunk of cash still, and i think the market is potentially writing off Warhammer prematurely. The mood is so overwhelmingly negative that it makes me want to buy. I'm a fairly contrarian individual!
I have started with a small investment. If Warhammer flops then i will probably just sell at a loss. No big deal. If i see some cost cutting or takeover interest or improvements to Warhammer i may buy more. If that is at lower prices, great.
I rode this share from £1.70 to over £20 in quite a short length of time so that is why i say it moves quickly. When i bought shares just after the IPO, my buys were sometimes the only ones that day so yes it can be thinly traded which exaggerates moves in the SP.
I try to value the business as another games company would. They might think that £100m is cheap for a business with perhaps £20m of cash, some games such as the Planet games which have shown longevity, and a dev team that they could prune probably quite hard.
It's certainly possible the price could fall by half due to various II's selling out, but if the market cap falls to £50m i would be happy to buy more and average down. I've no ability to time the market i just try to buy stuff for less than i think it's worth. My guess is that the SP could drift lower, but there's always the chance that an RNS pops up one day saying its being taken over and then it's too late to get in. Who knows?
I try and size my investments according to my level of conviction. So that's low currently(!), but the fact i've got a few shares means i will follow closely going forward and see what happens.
ATB
Yank, i don't feel that DB is arrogant. My concern is that he is too paternalistic to make the job cuts required here and perhaps the culture is one where there isn't enough criticism of what is developed - they do seem to release buggy code, at least initially.
That said, i have made a small purchase this morning in the belief (hope?) that the Warhammer RTS isn't as bad as i originally thought. I quite like the editing features which seem to draw on their strengths from the various "Planet" games.
We know the free float is relatively small here which tends to emphasise moves in either direction. A MV of £100m might make them a takeover target, although i've never felt DB is likely to sell.
ATB
I think they can forward sell conversion shares but not amortisation shares as long as it's not close to the quarter end?:
"Convertible Bond Investor agrees not to sell Ordinary Shares (or any interest in them) nor engage in any short sale transactions in Ordinary Shares (or any interest in them) of the Company during any relevant calculation period, subject to certain exceptions"
I'm sure there are ways and means in any case, and we don't know what the exceptions are. Maybe there is a de minimis limit?
Not really sure why HCI bothered tbh - they can't have made much?
Jim. agreed. The bad news is already priced in at £120m market cap. If DB didn't own a big chunk of shares then this would probably be snapped up. It's clear they need to reduce headcount and focus on getting solid releases out on time. Not sure whether current management have the appetite for any significant job cuts? That would be the catalyst for me to get back in here - it only takes one big hit to transform the company's fortunes but i don't see anything on the horizon as yet. The Warhammer RTS looks a bit disappointing tbh. One to monitor for me.
Bought a few more; can't ever remember UK small/micro caps being so unloved, but value will be recognised eventually.
Not too worried about the fall in margins given that software and hardware margins will be vastly different so sales mix seems a reasonable explanation at this stage.
Hopefully we will see some more buybacks as these are very value enhancing at these SP levels.
Interims look good. Nice to see maiden dividend and confirmation of ongoing share buyback programme.
Usual H1 cash outflow (and horrible typo in the cash flow statement - should be (860) trade and other payables movement - but these remain extremely cheap given the net cash position.
Be interesting to see if the market starts to re-rate them.
Cj, whilst it would be cleaner in some ways to sell off Tx i don't think it would maximise value. (For that we need a very public bidding war with lots of FOMO). If the current MV is around £300m then i can't see BP paying much more than that for just part of the company. There could be a private auction for Tx but they are not as effective as public ones.
A secondary consideration is that proceeds from a Tx sale would sit inside Avacta rather than going to shareholders. There could be a special dividend but for PI's that would be taxed as income at their marginal rate if the shares are held outside of ISA's/SIPP's.
I wouldn't rule out a sale of Tx but i suspect i would be disappointed!
BV, my thinking is that the DX strategy currently is focused more on distribution than on manufacture and development of new tests (I hope that may change and it become a showcase for Affimers, but i've shared my frustration on the lack of progress there before). From memory the emphasis from the last presentation was on geographic expansion of the distribution network e.g. expansion into Germany. To me that is a classic "roll-up" strategy which is something that PE do well. In fact some PE houses do almost exclusively roll-ups.
As you say, DX is quite consistent with big pharma but i would characterise them more as developers/manufacturers of diagnostics and not that interested in physical distribution - which is why operations like Launch exist i suppose (happy to be corrected on this btw).
Also, i just see the DX business as fundamentally lacking in interest to big pharma due its small size. The value of the Precision platform must dwarf any value that can be attributed to DX as it stands. Maybe an acquirer would see the potential but it feels like a bit of a distraction to Avacta never mind a multi bill pharma company.
Who knows? It serves to pass the time i guess whilst we try to wait patiently......
Indeed, lots of activity around UK listed Life Sciences companies. Instem (admittedly software) was bought last week by Archimed, a specialist healthcare investment fund.
Fully expect a big pharma to buy Avacta and spin out DX to PE. In that scenario it would be interesting to see where the Affimer IP resides and indeed where AS ends up. Could see the attraction for Alan of moving into DX and making a second fortune working for PE, away from the public markets. Maybe that is the thinking behind the DX acquistions?
BV, as far as i can tell AS's holdings really haven't changed for 3 years.
There were some options at 50p which lapsed Jan 2022 (page 65 of the AR), but otherwise his holdings appear unchanged:
432k shares owned outright - a decent chunk to be fair.
1.64m shares he has a beneficial interest in via the Employee share trust; these vest on a takeover basically and it seems that AS stumped up 1% of the cost and the company 99%, with some profit share depending on take-out price . These date back to 2012 and 2016.
Around 5m of options, none of which expire before 2026 so no reason for him to take up as yet.
So interested in around 7m shares in total, of which 431k owned outright. No invisible shares - pretty sure regulators have spent the past 100 years trying to outlaw such things!
JT, that was another strange comment tbh as directors are obliged to disclose their interests in the company's shares in the directors' report section in the AR (and do in fact do so on p.51).
Interests would include shares held by family members (spouses and children under 18) and any trusts in which they hold a beneficial interest.
All looks normal in the AR so why would AS say their holdings were invisible?
Gmcc - haha yes i do feel better for a bit of a whinge. I also have no doubts about the value here - only whether it will be spread across 300m shares or 3 trillion!
Yup i get all that, Pl. Just not sure it needed to be said quite so bluntly? Why not just say the board feel that the company is currently undervalued?
The comment came not long after he made some comment about revenues "in seven years time". I think from memory he was referring to a third party forecast which showed revenues peaking in seven years' time, but a potential investor could have easily thought it meant zero revenues for another seven years. He just comes across as a bit downbeat sometimes.
So yes, another cohort then some data collation and a takeover by Christmas remains the central scenario here. I'm still hopeful that they will licence the Precision platform for another substrate before then. It doesn't have to be a mega deal - in the early days of ARM they did a deal with Texas Instruments which was a bit of a shocker commercially, but the company never looked back. The affirmation of a big player in the industry brought on severe FOMO....
I don't remember Elon Musk ever saying that he doesn't want his sp too high because it would make it difficult for him to raise money. Most companies seem to think that a buoyant sp makes it easier to raise money - certainly less dilutive to existing shareholders.
AS might also have said that they were looking at non-dilutive sources of funding.
The statement simply gave out the wrong vibe to any potential ii's. Why would you invest if you think the company needs to raise and the CEO doesn't seem that bothered about the sp?
agreed, bein. the new bdo role is a very positive move and exactly what the company needs.
the 'we're too expensive' comment was bizarre tbh. to be charitable, i think he may have been trying to say that the market is broken (consistent with his letter to the times), and that if the sp was where they thought it should be then their valuation would be so far out of line with their peer group that potential investors would baulk at committing new money.
came across as "we don't give a **** about our shareholders"! perhaps not surprising that ii's are a bit reluctant to invest here - as we know, for most fund managers career risk is more important than investment risk, and there are tens of thousands of other companies out there which aren't likely to embarrass them (but neither do they have the potential to multi-bag of course which is why we are all here). ironically i think there was a later comment that the company would 'block' any bid that they believed was too low. how? without supportive ii's? many pi's would sell their granny for a 25% gain (not to mention all those spiked over the past few years by the twatter mob who would be happy just to get their money back).
not expecting any news before september. hopefully management are getting some r&r because it could get interesting once holiday season is over.
That's correct MCB55, only formal offers need to be put to shareholders. Generally in the UK (don't know about the US) that would be an offer in writing and demonstrating how the purchase would be funded. Funding is one of the key issues that the board would consider in establishing whether the offer is serious or not, along with the percentage premium to current SP of course.
Whether the board recommends the offer or not, is not relevant to whether they must put the offer to shareholders, although it seems to be the case in pharma that recommended offers are the norm.
Of course any bidder may announce to the market their intentions (or leak to the press, forcing the company to make a statement).
A bidder might also buy shares in the market but that would be pretty apparent if it were the case.
Sticking with my prediction of a takeover by Christmas.......
Ice, you've got me thinking. If HC are forward selling their quarterly allocation of shares and AVCT were to make the next payment in cash, then HC would actually be short AVCT which might be a bit uncomfortable! Not sure AVCT have the surplus cash to do that really, but it would be interesting.
The convertible bond was a canny piece of fund-raising given how markets were at the time, but i wonder if the company thought the SP would be higher now than it is, and they planned to get a placing away at say £1.20+ and redeem the bond? Personally i'd be glad to see the back of it.
Still think a TO could come at any time. You wouldn't want to be head of M&A at a big pharma company and see one of your competitors steal this away and then spend the next twenty years releasing Precision-based products (amongst other things).
ATB