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Jerseysteve,
To answer your original question, a reason for the price not to rise is if people have already priced in the assumption that aporoval will be given. Did the price rise on the Israel approval?
There is a counter-argument that there is still some risk that approval is only (say) 80% guaranteed so the price would go up to cover the extra 20%.
Then again, some people who bought lower on anticipation of the news will automatically sell (and therefore depress the price) when the news arrives.
Arrival of the news could also prompt less active shareholders to do some fundamental analysis which could result in them selling.
Maybe not as simple as you thought....
AIMHO
Lemming,
Thanks for the conversation. These are now 20% of my portfolio against my usual 5% so I want to be careful and not get blinkered to my ideas.
On the main point, I hadn't allowed for the cash burn Jan to Apr so do now agree that £1.1m cash was generated during May and June, net of the deferred tax. Maybe stocks built Jan to Apr with sales lower than planned and stock still arriving and this unwound May and June with sales better than expected and incoming stock reduced accordingly, along with an overall destocking enabled by the new systems (although these appear to date back to last October).
I still maintain that significant further destocking looks unsustainable and so surplus cash can't be generated long-term without making a profit.
If you want to pencil in £550k FCF per month, I would be happy as long as you see profits at a similar level.
It would be great if we can achieve that level of profitability, but then my target would have to be nearer 30p than 10p, and that would be seriously scary for my portfolio management!
Good spot. ERP used to be my day job so I appreciate the difference good systems can make (avoiding any comments about how these might relate to subsequent marketing by the software supplier). One of my concerns is the communication with the outsource suppliers, so this helps neutralise that and could indeed enable reduced stocking levels. Will reply on the other points shortly.
D-German,
Thanks for the reply. That correlates with comments in the Final Results. However, the cash appeared in the last 2 months of the period which was after this.
I'm hoping people will chime in with alternative theories about where the cash came from because I can't see any.
It do hope any destocking is just of additional Covid preparations or a deliberate long-term change (so we can trouser the £0.6m rather than spend it on stock) but these don't sound likely to me when we are looking at a second Covid spike, the management are planning expansion this half and there is no pressing need to conserve cash.
PS: I deliberately stopped short of making the leap from destocking to an inability to fulfil orders - I'm sure they are cute enough with the website configuration and pricing to push what they do have available although any prolonged unplanned destocking would obviously have an effect eventually.
Sorry, Lemming, I would love to be able to agree with you but I see this rather differently.
Of the £1.1m generated, £0.5M has to be paid to the government (in March IIRC), so only £0.6m belongs to Eve.
You could update your spreadsheet with £0.3m per month (still a result), but first consider how they managed to generate £0.6m cash on an EBITDA loss of £1.2m and revenue of £12m. You can't keep generating cash if you are making a loss ( the other side of the coin to your suggestion).
I think the clue is in the reference to 'stock control'. While some of that may be deliberate, I suspect that production has become difficult under Covid restrictions leading to a level of destocking ie cash has come from stock sold but not replenished. With only £1.5m of inventory at year end that might be half the stock so it can't be repeated and it is likely that all of the £0.6m (and maybe more) will need to go straight out of the door to replenish stock. I think that at best, the £0.6m was a one-off and at worst it just represents payments that would have been made last period if stock had been available.
In summary, I'm afraid I don't see your assumption of £550k cash generation per month as sustainable based on the situation as I understand it.
As we don't yet have detailed accounts, I have had to 'join the dots' on the information we do have so would be interested to hear your reaction as you have obviously looked at this in detail as well.
Before I get dismissed out of hand as a deramper, my holding (at an average of 1.6p) is now overweight in my portfolio but I am currently holding for 10p or more unless the situation deteriorates.
That's likely, unless multiple parties are interested and somebody wants to swoop now and pick the company up uncontested rather than have to fight over production facilities and IP. There must also be tax losses in the company that may be harder to use after administration.
I very much like that this is a pharma that has a core business which nearly pays the bills - if all R&D was stopped this would be a nice little earner for a few years.
It would look less good if all the cash is spent on a grass trial which fails.
On the positive side, it sounds like we are trying to retrieve
something out of the failed birch trial and if the grass trial goes well that would provide considerable upside...
In some cases, the entitlement can be traded -
eg you can sell your right to buy at £1 to somebody for (say) 10p so they could buy at £1 (having paid you 10p) and have a share worth (at the moment) 116p. You made 10p and they made 6p. With this offer, you can't trade that right so have to stump up the £1 yourself and then sell at the 116p (if you want to) or lose the right. The spare rights not taken up are then sold directly. You would buy a right to guarantee being able to buy at £1-as long as the price holds up there won't be many shares left in the excess offer.
As ever, don't believe anything anybody says on a BB, but hope that helps you research more credible sources than me!