Member Info for Pianista

FJ: however let down I feel, I will still be rooting for the company in its potential application for an extension. What primarily interests me, therefore, and what I was trying to set out, was the sort of arguments it might make in support of that application.

When it comes to GT’s resignation, you say they would have been given plenty of warning by GT. However, we don’t know that for sure; and in any case it would have been no less sudden if DX had been given the heads up even a month before, say, since they could not have started looking for a replacement until it actually happened. And sudden or not, it certainly came late in the day in the context of DX's financial reporting calendar.

Also, by saying that DX were “playing poker”, you are suggesting, again without any proof, that they took unacceptable risks. Of course, we’d have all liked DX to have done more to avoid the resignation, however unreasonable GT may have been, but did they take unacceptable risks? It’s hard to say, because we don’t know exactly what went on between them. Moreover, what might look unacceptable with the benefit of hindsight, may not have been unacceptable in the heat of the moment; and we won’t be any the wiser without a full inquest into the resignation, and that’s not going to happen, certainly not for the purposes of the application.

All I can do, as far as setting out my thoughts on the arguments DX may be able to advance, is to take what we know happened at face value, which was a sudden resignation late in the day.

I’m far from relaxed about the possibility of delisting, and I’m sure most shareholders feel the same way. But we’re not there yet, and it may not happen.

Like Ports, I believe they could be close to appointing an auditor, and I wouldn’t rule out an announcement in the next week or two.

We’ll have to accept though that we won’t make the 5 July accounts deadline.

However, given that
- the business itself is healthy,
- they were left with very little time to sort things out, when GT resigned without warning so late in the day,
- there are relatively few audit firms around these days that can cope with such a large audit, and under such time pressure, especially after the disruption caused by Covid and resource issues generally in the audit profession, and
- it is innocent shareholders who would suffer the most in the event of a delisting,
then provided the audit is proceeding at pace as we approach the deadline, I think there’s every chance they’ll be granted a derogation due to "exceptional circumstances", and avoid a delisting.

But everything depends on getting that auditor in place PDQ…

Ports - if you want some more positivity, I don’t see lack of audited accounts as a bar to a sale. A bidder can do his own due diligence, and would in any case need to do that for the period since the last audited accounts. It all comes down to price at the end of the day.

I still think our best hope is a sale of the company to someone who can see beyond the governance issue.

Gatemore referenced a valuation of 50p+ in their December letter, but I reckon we'd be lucky to get half that. However, I'm sure shareholders would prefer that to being stuck with unlisted shares.

Employee-shareholders must be feeling very demotivated.

One other positive is that DX’s NOMAD is still on board, which suggests that they do not consider the corporate governance issue - though obviously serious - fatal to an auditor being found. Hope springs eternal…

Also I suspect audit firms generally are having resource issues, which won't have helped.

FJ: “Not actively considered” (me), or “considered and rejected” (you). The end result is the same!

We’ve waited months for an RNS, and when it finally arrives it tells us nothing we didn’t know (or suspect) already, i.e. that they’ve been having great difficulty finding an auditor, and that there is a material risk of a forced delist.

We’re not told exactly why they haven’t been able to appoint an auditor - so it’s difficult to judge whether their continued efforts will be successful - but it’s obviously linked to the corporate governance issue. However, this aspect is not even mentioned, their main concern no doubt being to avoid any suggestion that a forced delist would be a consequence of gross mismanagement.

But, as I’ve said before, they can’t give up on finding an auditor, because they themselves (the directors) risk disqualification if the failure to file audited accounts continues. And with Lloyd Dunn in particular being key to DX’s success, his disqualification would also be a severe blow to the business.

Whether they can sidestep the problem if necessary by using S490 Companies Act 2006, which gives the Secretary of State the power to appoint an auditor if the company has failed to appoint one, they don’t say.

So the nightmare for shareholders continues, and positives are difficult to find, but at least (if what they say can be believed):
- they imply that if an auditor could be appointed, the audit could get still get done in time, even at this very late stage
- they haven’t run out of auditors to talk to (!)
- they’ll be seeking an AIM extension if necessary (but with no guarantees, probably because the situation is unprecedented).

But at the end of the day, they are finally admitting - after saying that the suspension would be “temporary” - that delisting is a real possibility. However, I don’t think it’s ever been the intention of anyone, major shareholder and board member Gatemore included, to engineer a forced delist and then “take the company private” by buying out the PIs. However should the worst happen, Gatemore will obviously do the best it can in the circumstances to protect its investment and establish an exit route, which will hopefully be of benefit to all shareholders.

Meanwhile, it doesn’t look like the company have been actively considering alternatives to a forced delist, e.g. a voluntary delist or a sale of the company. That wouldn’t stop an opportunistic bid though from someone who can see beyond the governance issue to the undoubted merits of the underlying business. You never know…

KBYK - your post expresses the frustration we all feel about a company with great tech - why else would impressive companies like Adiona choose to go with Trak? - but little to show for it in terms of sales or shareholder return.

After a very good 2021, the SP is almost back to rock bottom again, which I thought we'd said goodbye to!

However, as I've previously stated, there's potentially plenty of news that could the SP moving again. It's also good news that the ML SP seems to be making a comeback, because that will make it cheaper for ML to launch a takeover.

Probably a sell linked to yesterday's buy - the monetary values of the two trades are similar.

Starting to put the cash pile to better use in an "earnings enhancing" acquisition. Just what the market's been waiting for.

90k @ 17.95p - that's quite a vote of confidence. SAAS also up strongly today.

Legislation to permit e-scooters to be in the Queen's Speech on May 10 apparently. Should get the HFD SP out of the doldrums at last.

In practical terms, I would expect the broker to "re-invigorate engagement" by issuing a bullish research paper in the near future.

In particular, if they reiterate Arden's contention that telematics businesses like Trak's are typically valued at up to c3x annual revenues, this would give Trak a valuation of up to c100p per share.

This would certainly stimulate investor interest and give a shot in the arm to the SP.

I too reckon the governance issue must be a particularly thorny one for the inquiry to take so long. I think someone on this board mentioned bribery even, which sounds bad, but actually it happens all the time, particularly in the defence industry. Even when the SFO get involved, typically a contingent liability is simply noted in the accounts, and the auditor still gives a clean report. He certainly doesn’t resign.

I can only think that there was some needle here between DX and GT. But DX should still have managed the relationship better. They should never have let it come to resignation.

Ports - I get jittery when I still haven’t submitted my tax return 3 months before the deadline, so you can imagine how I feel about DX leaving everything so late, with just over 2 months to go now before audited accounts are due to be filed.

However, I take some comfort from the fact that the BOD’s interests are strongly aligned with ours; in addition they’ll be anxious to avoid being disqualified as directors, which will happen if they don’t meet the deadline (or a possibly extended deadline, which they may well be confident of being granted). By the way, if they do get an extension from Companies House, AIM could hardly delist them before the (extended) date by which accounts are due.

So if no new auditor has yet been lined up, this will be uppermost in their minds: the urgent need to file accounts, and the spectre of disqualification, won’t simply go away. I don’t know exactly what the problem is, but it can’t be insurmountable, otherwise they’d never be able to file audited accounts.

As for planning a delist, they ought to be so focused on wrapping up the governance inquiry/appointing an auditor - whilst at the same time tearing their hair out running a fast-growing business (opening depots at a rate of knots, introducing more mechanisation etc to turn round Express, etc) - that they don’t have time for anything else.

In any case, I think what our discussions about delisting have shown is that it does not provide a particularly trouble-free path out of the current predicament. There are some superficially attractive options, and I’m sure management will have looked at them all, but when you get down to the nitty gritty, wherever you look there are obstacles, or potential obstacles, plus the fact that they are fast running out of time.

By the way, we should be due another depot opening RNS very shortly. If so, I don’t think they could realistically avoid providing an update in the same RNS on the governance/audit issues. Mind you, the last one said nothing, but then that was only a month or so after GT's resignation.

Admittedly, the story is not of much interest to investors who've already seen it, but you can see the logic of re-showing it, because the website is effectively the company’s shop window, and news articles are primarily intended for potential customers who may not have seen them before.

Anyway, the SP looks stuck for the time being… but there’s plenty that could happen to get it moving again (in the right direction): e.g. confirmation of those contract renewals, major new contracts (including relaunch of SB by the AA?), easing of the global component shortage (following the end of Chinese lockdowns and cessation of hostilities in the Ukraine?), a bullish outlook statement when 2021/22 results are published, more directors’ purchases, especially by Raza, a bid from SAAS even…

Fingers crossed!

dc2 - the contract renewal comment puzzled me too. The only way you can make sense of it is to assume (a) they are confident they'll be renewed, and (b) they'll be renewed on better terms.

I wouldn’t say £7k is a “meaningful” adjusted profit before tax, so not the breakthrough we were hoping for.
Revenue’s holding up, but it’s not exactly steaming ahead (Arden estimated £19m, it’s come in at £18.2m).
We'll need to wait a another couple of months for current year guidance.
Not much in the update to move the SP either way. I wonder if Arden will revise their target of 56p.
Merger with SAAS is more of a no-brainer than ever.

To me, the one bright spot in all this is the fact the NOMAD, who is the all-important link between the company and AIM, and who’ll be aware of all that’s going on in the company behind the scenes, and who vets all RNSs, is still onboard, so presumably is not unhappy that they’ve not issued interims, for example. Perhaps there’s some kind of “loophole” here, in which case there’s technically no need for the company to say anything - though I still think, after such a prolonged silence, it wouldn’t hurt to give us an explanation.

Of course, no one will touch the company if it can't find an auditor. So whatever happens, they can't lose sight of that.

But at least, if they delist, they won't have the hassle of appointing an Audit Committee, which was "disbanded" 2.5 months when the two NEDs resigned.

Ports - have you ever traded on the OTC? I briefly looked into it, and it seems fraught with difficulty. The usual stockbrokers through which most of us hold our shares don't offer the service. You'd need to first convert your shares to certificated form. If you did manage to do a deal, the SP would no doubt be heavily discounted. Best wait, as the IIs and directors will have to, for the company to be sold on in, say, 3 years' time.