Member Info for KaChing

I'm still here, it's all been said so the wait continues, nothing new to say ...... seems some folk think that others are not bright enough to make up their own minds, mind you to be fair I think some aren't

no one is interested in joining the small band wagon, traders taking the hit me thinks.

I think they will need to show finances are on a sure footing before anyone will see a take off in 2016 It will be interesting to see how much debt has been added over the first full year since the water business was added to the company, the first 6 months saw an almost 450% increase from £856k to £3.76m and that can be attributed to the water business, if the burn from that subsidiary continued then I’d say expect the debt to grow I think there will be a right down in the value of Inventories that have been steadily growing on the balance sheet and of course how is the cash position I guess we’ll find out soon enough as the results should be due any time.

People can live in the CEO’s pockets for all I care but that doesn’t mean they should have anymore info than you or I can glean from the official info in the public domain and that info says that they don’t generate free cash …… the info to hand says that in the 3.5 years since the RTO they have burnt through £3.5m in cash to leave them at the 2015 half year stage with negative cash of £127k Now if people want to believe that all of a sudden that cash burn has stopped and they don’t need funds given the business is as lumpy (their words) as ever, then fair enough we all come to our own conclusions Just to point out that they don’t officially mention “no dilution” or that there is no need for further funds in either the RNS or AGM presentation They do mention in the AGM presentation that one of their objectives is to reduce their reliance on the bank overdraft, which should make anyone wonder how they intend to do that given the lumpy nature of the business and the fact that it’s because they have burned through the cash which means they are now overdrawn. I find it funny how “respected” guys are the ones who are positive, nothing like a balanced view, I wonder how many “respected” guys and girls are being positive while at the same time selling?

The mad storks figures probably show why there was a sell off on Friday as an Und EBITDA of £500k for 2016 is a long long way off the hoped for £1m Net. Using their preferred method of calculating success (underlying EBITDA) and the standard free cash flow scenario of how much cash is left after operating and investing activities in 2012 they managed an Und EBITDA of £305k yet managed to burn through £1.76m in cash leaving no free cash. 2013 Und EBITDA was almost doubled to £601k yet they still managed to burn through £330k in cash leaving no free cash 2014 Und EBITDA was a negative £84k and the cash burn was £564k again leaving no free cash 2015 half year numbers show they got back to a positive Und EBITDA of £80k yet still burned through £400k at the operating and investing level. So the basic maths from 2012 to the half year 2015 show that using their preferred method they made a combined positive EBITDA of £900k in 3.5 years which is not bad, however they managed to burn through £3m in cash before repayment of borrowings that had to paid hence the true cash burn is greater. Discarding the 2012 numbers because they contain numbers that got the ball rolling after the RTO, so from 2013 to the half year 2015 they made a decent Und EBITDA of £600k yet managed to burn through £1.3m in cash before debt repayments Making a positive EBITDA means nothing if a business is burning through bucket loads of cash Hence I think they need a cash injection to help with the lumpy nature of their business, now they might say “no dilution” and maybe that’s true, so maybe a cash injection is going to come from the significant holder who had a word before the AGM …… I’ll guess at convertibles From a passing deramper sticking to the facts and not fanciful predictions because predicting revenue and profit on a lumpy business is very difficult as can be seen by PEL downgrading their 2015 revenue forecast twice.

It doesn’t look like the news was as hoped for, a slight 2015 revenue downgrade from the previous downgrade two months back, EBITDA stays the same at the downgraded £200k and as we all know that isn’t profit. EBITDA for 2016 estimated at £500k so at best a profit of £200k ish which means the sp at 1.85p is on a 2016 PE of around 18 which still looks pricey The big question for me is still the cash position and if I’m reading between the lines correctly a cash injection could be coming from a significant holder, but that is probably just my wild imagination and dilution is still a possibility to strengthen the balance sheet.

The last RNS doesn’t give any detail of profit or cash flow! The components/distribution business normally turns over full year revenue of £12+m so the Q1 £3.5m figure just shows business as normal, nothing more. The water business might well be gaining new contracts and even turning a profit, but is it still burning through the cash that has put a strain on the APC balance sheet, in the 6 months from the Green Compliance full year figures until it became part of APC as Minimise Water it burned through £1.4m in cash, saw trade payables rise by £500k and bank loans rise by £151k …… this all landed on the APC balance sheet and there is no way in the world that that cash burn stopped as soon as it became Minimise Water which is why I believe the water business is the big problem with cash flow at APC. Minimise Solutions which was the driver for the recent huge P/E multiples that saw the SP up near 70p seems to have come unstuck since Morrisons began having problems. I thought they would eventually need to to raise cash to strengthen the balance sheet, but after that RNS maybe it’s coming sooner.

The big increase in debt and the cash flow problems are easily traced back to the Green Compliance acquisition, if APC had not of bought GC then they would have been in a not as bad position to ride out the Minimise problems The guy who brought the debt and cash flow problems has now got his feet firmly under the table.

It’s looking like a one man show Since convincing APC to buy Green Compliance and it’s debts etc Richard Hodgson has managed to become CFO, CEO and now he’s apparently capable enough to take over the running of the Sustainable Technologies division Oo err things are not looking good here, watch the debt pile rise and the cash flow keep falling …… IMO

It’s a lumpy business so 2016 isn’t a forgone conclusion I’ve seen the investors Q&A jobby, why do they need it? surely the business is easy enough to understand and relevant market news comes through official RNS’s …. I see the Q&A for pi’s as a red flag. In the half year results they said they had returned to profitability, but they actually burned through £400k in cash which added to the 2014 full year burn means they have burnt through about £1m in 18 months which has used up their cash pile which was bolstered in 2013 through a placing …… which equals, cash needed …… IMO 100% no dilution, that’s confidence …… the accounts don’t back that confidence up IMO

This looks pricey on a forecasted EBITDA of £200k for 2015 and they don’t have much cash

I’m like a few others in that I’m waiting to see if the flippers drive the price lower, but it may not happen and if it doesn’t then fair play to those who got the placing price and to those who have bought in the last few days. People like TW of shareprophets who bought yesterday are doing so because they want to hold to see if fair value plays out in time and maybe they are right to buy now because as R4E have said …….. “the Company will deliver EBITDA for the year to 31 December 2015 in the region of £1.6 million to £1.8 million.” On an EBITDA multiple of 10 that makes the sp north of 3p so there is definitely value to be had now that the placing has been announced.

ramping, lol

More …… the reorganisation is to the nominal/par value of the shares in issue which was 2.5p, it will become .5p which gives them the room they needed to issue new shares at the price investors were happy with. They will now issue 400m new shares at 1p raising £3.75m after fees, which means the shares in issue rise from 75m to 475m

It was mine too …… looks like my weekend post was right after all (well apart from thinking the new nominal value would be 1p, I was only .5p out) I would think there is upside from here once the flippers have flipped

I think you'll see a GM called to restructure the capital of the group from the nominal 2.5p per share to somewhere under 2p (probably a penny) which will give them the room they need to issue new shares ...... you could be right that they issue at a premium, but I don't think it's likely so the dilution will probably be big. The AIB £5m into equity or as it is now warrants just shows that AIB had written off the £5m just to give R4E the chance to find another lender so they can get out while getting some money back (£9m), the 5p figure is just a rampy figure it doesn't mean much. I’m looking forward to seeing what happens because there is potential for a good return here but I’m waiting to see if that potential is going to be from a lower sp.

How many shares do you think they will issue for the £3.5m needed?

Well if it’s worth so much, how come they are struggling to raise the £3.5m they need to be able to pay AIB back £9.5m through existing resources and a new debt facility? The goodwill on the balance sheet has been written down by £6 odd million in a year because it was overstated, which isn’t a good sign (it was £13m it is now £7m, what are the chances of further write downs?) The fact is that R4E has net liabilities of £6m and that’s only if you believe that the goodwill and intangibles are worth what they state in the interims, discard the goodwill and intangibles and net tangible liabilities here are about £16.5m (that’s really close to the fictional £20m the company is supposedly worth, lol) What are the chances of them raising the £3.5m in equity needed at say 2p? who in their right mind out of either the existing shareholders or the new ones mentioned in Friday’s RNS are prepared to lend without there being a significant discount? ……. I’d say not many hence the delay Big dilution coming here, once the dust has settled it will be easier to see where and what the value is.

is going to take a step back ........ x dragon.

Goodwill is worth £20m?!! and I thought it was only R4E that overstated their goodwill value, seemingly not.