Cobus Loots, CEO of Pan African Resources, on delivering sector-leading returns for shareholders. Watch the video here.
Curious, thanks for your calcs but I think the existing shares need be adjusted for the new nominal price. How about:
Company decides on new nominal price - say 5p - and raises equity at the same price. £100m raised to cover all debt and ongoing requirements. That’s 2bn new shares. But the existing 543m shares are the subject of a share split and are turned into 2715m shares at 5p (ie 5x because the new nominal price is 5x lower than current nominal). So now we have 4715m 5p shares in total.
This is too many so a 1:10 consolidation results in 471.5m shares with a nominal 50p price. Existing shareholders retain a decent percentage of the company (>50%). Does this look right?
But here’s a thing. For the new investors not to lose money on day one of trading the market price needs to be 50p. (They now have 200m shares effectively issued at 50p). So that implies an mcap of more than £230m. Really? And, btw, the resulting mcap and proportion of the company held by existing shareholders doesn’t change whatever the new nominal/issue price. Try it. Happy to be corrected in all the above!
This is a good point - the Recapitalisation Plan provides AVO with leverage in sale discussions. If they can say “look - we’ve got commitments to investment of c£100m, which will mean we have zero debt, c£60m of cash and a great proposition” then the sale price will have to reflect that. And would be well north of £100m, I reckon.
Are you sure about the CLN, Kenj? My interpretation of the RNS was that the debt swaps and new equity would all be at the same issue price. Let’s say 5p (I don’t know). So £61m+ equity at 5p would be 1.22bn+ new shares. And 6.4m of CLN would be swapped for equity at 5p less 20%, ie 4p, ie 160m new shares. I’ve ignored consolidation / subdivision here for clarity.
Twogood - so you wouldn’t invest in Tesco or the other big supermarkets, who have net profit margins similar to Totally’s? At the end of the day, if the company is making sufficient cash profits to grow the business and pay a dividend at the appropriate yield then it’s doing ok. EBITDA is what’s most important here. Net income, which is after non-cash items like amortization and depreciation, is not so important. You need to move away from this obsession.
I’m sure this is all seat of the pants stuff with multiple things happening simultaneously, so I’m prepared to give them a pass on this kind of stuff for once. First of all, of course, is getting the bridging finance sorted! Without that we’re stuffed.
I’m hoping one or more of the radiotherapy companies ends up being the / a major investor, because a) for what they can bring to the party and b) because the shares will be stickier than if sold to the wider market. And a full buy-out may give us a better return.
If the terms of the recapitalisation plan turn out particularly poor for existing shareholders then an offer for the company now might be a much better option, in which case the Board would be duty bound to recommend it. (Clearly they have no duty to prospective shareholders who would be thwarted if the recapitalisation didn’t go ahead) That seems to me the best situation for us existing shareholders - then the terms of the proposed recapitalisation would be adjusted (logically, at least) according to the value placed on the company by the offerer, and the Board can decide which avenue looks best.
It all depends at what price they raise the new equity. I’d be astonished if it’s at the (pre-suspension) 2p or so as the Board will argue the resulting mcap would overly disadvantage existing shareholders.
Pleased to see the Plan, need to read it properly. Good to see there is already a commitment to some equity investment, if I read it right.
It’s no secret the company was seeking a partner so if one has been found to fund the business then happy days.
Shandy, it’s the terminology that I take issue with and which gives a misleading impression of the business. Gross margins are perfectly fine at 18.4% - leading to gross profit of £25.0m. It’s the administrative costs at £18.1m that are relatively high for the current scale of the business and which result in EBITDA of only £6.9m. To say that PBT or PAT is then £1.8m or c1.5% of revenues, ergo “wafer thin margins”, is just not correct. This is profit, not margin. The solution, clearly, is to scale the business while continuing to trim admin expenses and reshape the business towards the higher margin stuff, all of which Wendy has said she is focused on.
Sharesforlife - lots of recommendations for your post, no doubt because we desperately all hope you’re right! But do tell us more……
Rubbish. As explained today in the investor prez, all significant contracts have inflation protection included. Also “margins are paper thin” - again, rubbish. c20% gross margins, which is perfectly reasonable. G&A expenses naturally are subtracted from this but cash generation remains at a good level.
The other thing that struck me today was how excited they are by the hugely enlarged 111 tender - as the only provider in the relevant framework they must have a terrific opportunity to win this. If they do I suspect it’ll have a very material positive impact on this year’s results.
You seriously think HUM has connections with Wagner? Ridiculous.
I wonder, would they keep the shares suspended even having raised some money? I’d have thought they would want to give investors the ability to trade in and out but what do I know? The market was rather disorderly before suspension, if that’s a consideration.
Also I doubt the company has had the money to prepare the treatment room and building, as that sounds like significant spend over and above the “keep the lights on” budget. I’d be amazed if first patient treatment doesn’t go back - that’s assuming they can keep going - but I’d live with anything that will keep the company going atm.
I haven’t re-read Hardman’s reports but I think they only said the project had been “technically” de-risked? Which seems fair. Unfortunately we still have more than enough financial risk. And once we’ve got through that (hopefully) we can move on to tackle the regulatory risk, the manufacturing risk, the ....(etc. etc).
A heartwarming story, Meldrew! Of course you could argue they’ve already put *some* money into the CLN, especially the Chairman. And they may not exactly have £2m lying around at home. But you’re right, there’s the opportunity for both them and us to become rich if they can keep things going. I reiterate - 250 investors paying £50k each would raise £12m and keep the lights on until year-end, in which time other fund raising would take place. And at the price funds would be raised right now, these investors would own a meaningful chunk of the company. I’d participate, because under this plan I think the company would survive. It can be done. It just needs this useless BoD to stop being fixated on a debt solution.
The Board have been one pace behind events throughout the last nine months since 230MeV. The short term measures they’re now investigating should have been underway three or six months ago. An offer to be bought should not have been sat on until the last minute (or possibly after the last minute). Reducing the nominal price to facilitate an equity raise should already have been in place. But despite themselves the Board can still save things - put in £2m yourselves, guys, to give time for the EGM to be called.
Surely Kenj’s option has legs - call an EGM and then raise £2m at the current price of 2p (=100m new shares) each month until the loan and/or other options come to fruition. Don’t tell me they couldn’t raise £2m. Anyone would welcome dilution rather than see their investment disappear completely. I suppose the solution would depend on what the other “short term but not immediate” options are - quantum and timing. If they just need to keep going for one month, max two to get there, then don’t let it fail now.
No mention of the strategic review or Nasdaq. No clue if that has come to naught. Just can’t believe this will end up going into administration, it’s hard to conceive.
The FT said that OAM was having to liquidate a significant amount of its investments due to redemption requests, so it’s plausible that their AVO sales are simply part of that.