Member Info for mugginsthedog

If you look at all the BBs (and the SP) it is all too obvious that that the strategy of the company is a complete mystery to shareholders and, I suspect, management. Is it a Covid company or not? I am sure that we would all welcome an update on the breathalyser and new orders. After the ludicrously overblown twitter countdown and car crash AGM presentation we deserve better. The lack of breathalyser orders, MoUs, LoIs suggests that the level of interest is weak at best. Instead we see many other organisations making progress and winning orders. We do not seem to even have finished testing.

On the DV homepage there is not even a mention of the breathalyser. As the breathalyser was all the company talked about until recently (eg AGM presentation) there must be concerns about how the testing is going or have we given up on this market. About time we got some proper updates rather than the twitter drivel.

Just addressing some of the issues that have been raised.

At no stage have I suggested that I did not appreciate the work that the teams in DV and MW have been doing – indeed I have been completely supportive of their efforts. It is rather sad when a CEO tries to deflect criticism of him on to his team.

Regarding the MW 20m share award for GB I have searched DV RNSs and I cannot find any mention of these. Perhaps it is buried in an announcement but it really is not obvious and therefore I doubt if many DV shareholders are aware of this and as such it seems entirely reasonable that there is transparency.

As to the argument that the shares have been 'earned' then that is clearly fallacious. The share award was for 2 years work and is triggered only by the merger – a merger with a company GB runs! The shares are awarded at a fraction of market value (0.5p vs 4p at time of merger announcement). In effect GB received 20m shares valued at £800k. GB was only Chairman of MW for a few months and would expect to earn less than £30k. £800k vs £30k really is snouts in the trough time!! Although he may be legally due the shares I do not think that anyone would say that these have been earned and it is certainly of no value to shareholders. This is what gives AIM a bad name.

Given the collapse in the SP and the collapse in MW sales it is difficult to see how this share award can be justified. As I have suggested previously it would be a nice gesture for GB to donate the surplus unearned shares to the hardworking DV employees – at least they deserve it!

Davde – happy to assist.

2020 interims page 6 – operating cash outflow (6 months) £919k. This is pretty consistent from year to year)
Patents etc £87k (note that this is normally £350k + every 6 months so probably not keeping the patents up?)
Other capex £20k
Repayment of bank loan and interest £50k (estimate but probably low as loan repayments accelerate)

Total cash outflow for 6 months £1,076k
Double for year (business not cyclical) £2,152k)
This is probably an underestimate as they will presumably continue to invest in patents etc so cash outflow say £2–3m/year.

Hope that helps

Paul on - I have simply taken and accepted Lansoms operating profits which include sales and costs. These appear to have been accepted - nothing from GB disputing them. They look pretty heroic assumptions give that operating outflow in first half year was £700k plus from memory, so to get to break even over 12 months would take a substantial improvement of which there has been little sign.

Just my best estimates and in particular the spend on the breathalyser is unknown.

Summarising Lunsams financial analysis of DV. The operations of DV will be cash neutral. Some of these assumptions are heroic - the half year operating cash outflow was £772k but let’s accept it. There is £2.8m cash with a further £1.5m of funding available. Lunsam does not address 3 other areas being the impact of MW, repayment of debt and capital expenditure.

MW is a financial basket case. Typically it has an annual operating cash outflow of £1-3m+. For the 6 months to 30.6.20 it had an operating outflow of circa £1m which is consistent with previous years. With the recent collapse in sales this will not get any better. There is some modest capex, say £200k and a bank loan is due to be part repaid – lets say this is £100k/year. Over the year cash outflow is say £2.3m. There may be some warrants outstanding but these are largely under water. At 30.6.2020 they had £800k cash. DV has stated there will not be any job losses and it is unlikely that there will be significant savings elsewhere – certainly not enough to cover the cost of the merger/delisting etc.

DV has an expensive loan. The first call down on this was 29.7.2020 for £1.5m. This is interest only for the first 6 months but principal will need to be repaid thereafter over 18 months. Assuming straight line repayment this is equivalent to £1m/year with highly onerous terms on the final payment.

The other area that has not been addressed is the level of expenditure on R&D/capex. Given the focus on the breathalyser and other products then capex is likely to be substantial. From the AGM video it looks as if many DV staff have been working on this. The cost is extremely hard to estimate. However, it appears that there are no big financial backers or governments supporting this and it is a reasonable assumption that DV are picking their share. As an example, Avacta spend £ms on product development and it is difficult to see how DV could develop anything meaningful without investing similar sums.

So looking at the numbers (£k);
Cash (30.6.2020) – DV 2,800
- MW 800
Total cash 3,600
Annual cash outflow (MW) (2,300)
Annual operating cash outflow (DV) 0
DV Annual Loan repayment (1,000)
DV Loan service (200)
Regular capex (200)
Annual Cash outflow before DV product development (3,700)

With the wind behind it DV has about a year of cash starting from 30.6.2020 BEFORE breathalyser and other R&D costs. One can only presume that £millions will have already been spent and millions more will need to be spent developing the breathalyser. Although there is the balance of the bank facility (£1.5m) this will soon have been used up on breathalyser costs.

It is difficult to see how the company can continue much beyond mid 2021 without some additional financing such as a dilutive capital raise, unless there is a sharp pick up in sales (no signs) or a government or trade funder for the breathal

Lunsam makes some excellent points on financing. However, before looking at these details it might be useful to look a little more closely at the value of the nomads/auditors view of the financing position.

Many companies get clean audit reports and confirmation about their funding position and, shortly thereafter, run out of cash. MW was in exactly that position – got a clean report then a few months later effectively crashed and burned resulting in the winding up of 2 principal subsidiaries with the loss of virtually all jobs without, in many cases, compensation. I prefer to do my own analysis which at least highlights the critical factors.

Should I also mention the 20m shares GB receives triggered by the merger? Here is the link

https://polaris.brighterir.com/public/modern_water/news/rns/story/x8lppor

Doubles all round!!!!

There are a number of very interesting, considered and thoughtful comments. It makes much more interesting and relevant than the ‘it will be alright on the night’ platitudes that we have seen on this Board all too often – even when the SP is collapsing.

In my view the market has no idea if this is principally a Covid stock or not. Those that listed to the car crash AGM presentation will understandably be of the opinion that it is a pure Covid play – the other activities were barely mentioned. However, much we huff and puff it will only be speculation until the company makes their strategy clearer. Post the AGM I think that we deserve a clearer strategy statement from the Board including realistic expectations on revenue and sales.

If the breathalyser is such great technology then why has it not had a significant commercial backer? In the meantime many other technologies, which appear inferior, are having much greater traction in places like Liverpool and elsewhere. But then we do not even have a technology that has passed the next stage of trials far less a working model. So much for our process being so much faster than anyone else because all out technology has been proven as we were told. That really was a load of tosh.

I am perhaps scarred by my experience with MW management where there was great technology but no commercial success. DV feels increasingly like MW, with a CEO who wastes so much time on social media while the company is patently failing and leaderless – even today he seems to have twitter diarrhoea. Stop it and get some sales in.

I am a little surprised that there has been so little focus on the cash position. Unless they really have spent next to nothing on the breathalyser (which seems very hard to believe given they do not have a big commercial partner backing them) then funds must be getting a little tight.

There have been some posters who have blamed the SP fall on the new vaccine. No doubt that is part of the story, however, the main falls happened before the vaccine announcement and indicate more fundamental issues.

This is a company that requires a clear strategy which is communicated effectively, more sales and orders and a CEO who focuses on matters in hand rather than shameful self-promotion on social media.

Thank you coolcat and others. I have a not insignificant shareholding and I hoped that my analysis would be proven wrong. Nevertheless one cannot ignore the SP collapse which started well before the vaccine announcement. The market clearly has significant reservations about DV’s performance and strategy.

DV has over promised and under delivered for many months. At the risk of upsetting the cult of GB there are a number of serious issues and questions that need to be addressed;

• What is the company strategy – is it a Covid play or not? All the recent presentations have suggested a Covid play.
• If it is a Covid play then why are there no sales or announcement of significant partnerships with governments or substantial trade partners? Without those partnerships DV is simply too small to be credible and certainly does not have the domestic or international sales reach. The sewage testing is supposed to be ready to go with lots of talk about sales to cruise companies and the like. But nothing appears to have been achieved. Where are the sales?
• What is happening with the breathalyser – does it work, has that been proven and if so how will it be commercialised? Why no results from the labs? In the meantime it would seem that competing products are already out there, working in the real world and generating sales. We are not.
• If DV is not a Covid play then where are the sales in the other parts of the business?
• Why does GB spend so much time effing around on twitter? Looking through his torrent tweets over the last 24 hours he seems to have a severe case of tweeting diarrhoea. No wonder nothing of substance gets done – so much time is wasted.
• Under GB’s Chairmanship why did MW sales crash?
• Why, when the entire MW North American sales team up and left to start up on their own, was the market not told? How will these people (who presumably should be the people selling to the cruise industry et al) be replaced?
• Will GB acknowledge and apologise for inferring that I was wrong when I said that MW sales will from now be consolidated in DV’s sales and be included towards DV’s sales targets?
• Is it really equitable that GB received 20m shares triggered from the MW/DV merger given that the SP has halved since the merger announcement?

Perhaps most serious is the potential cash crunch. Without detailed knowledge about the capital expenditure on the breathalyser et al there must be a real question mark about DVs cash position – frankly I do not believe the companies assurances on this. The cash crisis is not helped by the merger with a company that has lost money every year from its inception and will certainly make DVs cash position worse. I am afraid that I am not at all convinced that the company has adequate financial resources and as a result may well require a fund raise sooner rather than later.

Time for GB and the BOD to stop talking and focus on sales, financing and strategy. GB is talkin’ the talk but is not delivering.

A few more sale and contract wins would be rather more welcome than being an also ran in another meaningless award ceremony. Great technology but terrible execution must not be allowed to be imported from MW to DV

Ontheverge

The fundamentals are not awesome. All we have to judge the company on is a car crash presentation. No wonder the SP is consistently falling

His latest post just reconfirms it. Embarrassing and sad that potential investors will see his rubbish smeared all over this Board

He has finally lost it.

I dont think even he knows what he is talking about

Well said.

It is like trying to have a conversation with a 6 year old

GB – in my post I made it clear that DV will not consolidate all the sales of MW, a point I made clearly. DV will consolidate sales after the merger which you have confirmed. As such my comment, far from being false, was completely accurate and fair.

If you would like to engage in misleading statements I am happy to do so. You will recall that in February you stated that MWG’s consumable orders were up, I recall, 48% or thereabout. Consumables are one of MWG’s main source of revenue and as they are recurring sales should be readily available off the shelf. Any reader of that statement might reasonably expect that sales are growing steadily – if not exponentially. What actually happened was a collapse in sales and at the half year they were down 60%. Therefore I regard GBs comment as completely misleading.

Pathetic.....

Open your mind and let your brain engage for once. I really do not understand what you are objecting to - the fact that sales are being overhyped or being told that.

Truely, truely pathetic....

DV is blowing trumpet of sales success with forecast of £4 revenues in this year. As DV will consolidate a chunk of Modern Waters 2020 sales (2019 revenues £2.9, down from £3.6m in 2018), then forecast revenues of £4m is less than stellar for a company with DVs aspirations

Unfortunately virtually the entire water monitoring sales team left in Q1 this year and set up on there own. I suspect that this was one of the reasons why sales collapsed in the half year

Snow boots you make an excellent point. DV really does not have the Finacial resources or access to the retail markets and does indeed require appropriate partners for the breathalyser . If they find the right partner then the SP will shoot up, if they do not then I fear it will languish. They need the credibility of a big partner to get this to market.