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Excellent Annual Results

Posters who know me will be aware that I scrutinise the Annual Results of all my investments.

I believe not many Posters bother to read Annual Accounts and sometimes the information presented is not in plain English. Well our accounts are easy to understand (imo)

Technically AIM Companies have 6 months from year-end to publish their accounts. AC and the BoD have managed to produce our accounts in 17 weeks (3 weeks earlier than last year) Also the Auditors fees were only £10,000 which when you compare to other AIM Companies is really good as the higher the Auditors fees the more complicated the accounts (generally)

Note 7 in the Accounts is one to focus on as it details the Assets available to sell. We technically have £4,805,000 of Assets and included within this total there is one listed Asset at a cost of £706,000.

Greatland Gold is our only listed Asset and in our books it is “valued” at £706,000 but we all know this is worth substantially more. Last weekend PaulJ996 posted that there was an additional “increase” of £2,513,000 when Greatland Gold was priced at 8.7p.

Our Annual Results have been Audited and they must present our Assets at “cost” so that is why we are trading at present at a discount as the Auditors cannot include the “current LSE price of GGP” as it fluctuates. Likewise they can’t value any of our other Assets at their most recent fund raise price.

Fresho paid A$426,000 for 1,415,723 average about A$0.30 and if valued at last funding round at A$0.475 worth A$1,415,723 or an increase of A$989,723 (about £515,000)

Zusse we are on a free-ride with this investment as we were repaid in full and also received 57,205 shares valued at A$1 and 1 million warrants @50 cents so already in the money for A$500,000 in total about A$557,205 or £290,000.

Engage Technology Partners Ltd invested £1,450,000 and now worth an additional £280,952 when you see that they issued shares at £24.

From the above we have:

Greatland Gold up about £2,476,000 (37 million *8.6p less cost of £706,000)
Fresho up about £515,000
Zusse up about £290,000
Engage up about £280,952

Sub total: £3,561,952

Add in our Audited Assets as at end of 2019 of £4,865,000 and it is £8,426,952.

Shares in issue 139,830,968 and what is the “correct NAV”? 6p and if you look again at the Annual Results note 13 you will see that BoD have Options at 6p that will expire in December 2020, so they have an incentive to substantially narrow the gap between our share-price and the NAV.

RKB

PS Keep a close eye on Companies House as Engage are in process of enlightening us.

Excellent Quarterly Report

The report issued today is a well written and informative report.

We have cash in The Bank and obviously our gold investment in Greatland Gold which consists of 37 million shares (not 30 million as has been alluded earlier)

We have our other investments:

Engage Technology Partners Ltd we have 72,123 shares (not as per our website but Companies House) our total investment in Engage is £1,450,000 which includes a £50,000 convertible loan note. We invested £400K at £15, £500K at £22, £250K at £22 and £250K at £22. Subsequently to our last investment there have been further shares issued at £24 and most recently on 4/03/20 for £49,992 (was this AC converting the loan note?)

Engage value for my own calculations is £1,780,952 (72,123 x £24 = £1,730,952 + £50,000 loan note) Increase of £330,952 or 22.82%

Fresho we have 1,415,723 shares bought at A$0.27 A$0.38 & A$0.475 and invested in total about £260,000. Our shares if valued at the most recent A$0.475 would be worth A$672,468 or £343,832 an increase of about £83,832 or 32.24%

Nomad Energy we have 40,000 shares which at last fund raise at $7.50 are worth about £240,300.

SOA Energy we have 14,977 shares valued at about £100,000.

Sport:80 we have 2.5 million shares for an original investment of £100,000. We paid 4p and there was a further fund round last month at the same price.

Stream TV we invested $200,000 and we are awaiting further news on exiting this investment (see our website)

Truespine Technologies Ltd. We have 1,666,667 shares from our original investment of £500,000 three years ago and as AC said in today’s update that with Ms Annabel Schild now a director they are moving towards an IPO on Aquis Stock Exchange. Now would you believe that Ms Annabel Schild has exactly twice the amount of shares in Truespine that Primorus has? Well that means she has invested about £1 million, now that is confidence.

WeShop we have either 150,199 or 152,500 shares for our total investment of £875,000. I believe we have 150,199 shares as I have taken this from Companies House (think our website is incorrect but it could be Companies House) At the last funding round in November 2019 shares were issued at £5.98 (still a snip in my opinion) our shares are worth about £898,190.

Zusse on a free ride with 57,025 shares worth A$1 along with 1 million options at A$0.50.

RKB

I will let LewisBacon do the maths and “inform” us all how valuable our company actually is.

Annual Results

Part 10

Commercial Lending:

In 2019 our Commercial Lending was about £3.5 billion. Now I have no experience of Commercial Lending and for the purpose of this post it could be Commercial Mortgages or Business Loans or start-up finance, at the moment I do not know as I would need to read several past reports in fine detail to fully understand what Metro Bank call Commercial Lending. What I do know is that I did not want to be a Mortgage Broker doing Commercial Lending and before a became a residential / B2L Mortgage Broker I was offered a job with a firm in Glasgow to be a Commercial Mortgage Broker but I turned it down because I knew then that commercial property was over-valued but I was totally blind to the financial crises that was about to unfold.

By its very nature Commercial Lending involves more risk so the Lender has to have tighter lending criteria to protect their money. So in the Mortgage analysis above I began with what was the “book” below 80% LTV and it was 85.54% of all residential mortgages. Then for the B2L Mortgages 98.2% LTV below 80% but for Commercial Lending I think we should use 70% LTV to get the proper comparison and that is 80.06% of the Book value or to put it in to context out of a Loan Book of £3.5 billion over £2.8 billion is under 70% of the total. At under 80% it is 86.29% of the total book and between 80% and 100% of the book value it is 8.77% or £90 million. Now there are £396 million that are over 100% which is 12.55% and before the shorters aim to shoot me down there are often stringent covenants and guarantees in place to protect the Bank like “pledging shares” etc so it is not a concern for me.

Now looking at some further information on Commercial Lending on Page 40 of the PDF file you see the various sectors covered and it is here were I discover that Real Estate lending is £2.4 billion or 66.95% of the £3.5 billion book.

I will only mention a few of the different types of Commercial Lending but you may want to see the full break-down. Hospitality 8.69% (I put this in because of Brexit and before the shorters try to jump on it) Construction 0.99% (tiny if all our European friends desert us or if there is a recession) and Retail 2.82% (well we all know that that is a struggling sector)

Now the good bit: Consumer Lending of over £3.9 billion the clients that are up-to date with their payments is 99.26% and the balance of 0.74% is between 1 to 29 days past their due date. So shorters have a job on their hands.

Conclusion: There is not a problem with Residential Mortgages, Buy-to-Let Mortgages or Commercial Lending, Metro Bank are good in fact very good at their risk assessment when they lend and they do not have the history of the older established Retail Banks.

RKB

Annual Results

Part 8

Before I Post below about Mortgages there is a massive amount of great detail in the 2019 Annual Accounts about our Loans / Mortgages etc and it is broken down into size, location, type, industry and many more. If the Shorters actually understood what was in the Annual Accounts like from Page 38 in the PDF file then maybe they will have second thoughts.

Mortgages: Obviously I know a lot about Mortgages and had many financial qualifications including Lifetime Mortgages which very few Advisors have. What I did this morning was look on my iphone at Metro Banks offering of Mortgages and to see how easy it was to use. It was easy to access and I looked first at the 8 pages of their Residential Mortgages.

What I want to see is no 100% LTV and clear details of the rate, term and any fees and what the rate will revert to. So a 2 yr Fix at maximum 90% LTV is 2.59% with a fee of £999 and a SVR after the 2 yrs of 4.25%. I believe this is reasonable and then you have to work out how much they pay their savers (to fund the mortgage) There were no Mortgages greater than 90% LTV and some Re-mortgages products did not have a fee of £999 but they had a higher interest rate. Now interestingly if you want a Residential Mortgage (not Re-mortgage) then you have to pay the £999 fee.

Looking at paying or not paying a £999 for a Re-mortgage you have to calculate when it is to the customer’s advantage if they should pay the £999 fee or pay a slightly higher rate. You may not think this matters but is does. Looking at a 90% LTV Re-mortgage 2 yr fixed up to £500K it is 2.69% and a £999 fee but without the fee it is 2.84% but.... it is only up to £100K so obviously you would not pay the fee but when you look at the break-down of the Mortgage-Book you will understand the size of the Mortgages.

Residential Mortgages (excluding B2L) is about £8.5 billion and it is split into less than 50% LTV in 10% incremental steps. But I prefer to change the Billions £ to % and then see the true “risk” Under 50% LTV it is 31.17% of total residential mortgage book and 85.54% is under 80% LTV so the “Risk” for me then is that up to 20% but when you look at the mortgages over 90% LTV it is only 0.32% and that is acceptable for me but it gets better.

On page 41 we have the information that shorters will not like. There are 99.99% up to date with their Retail Mortgage Payments and between 1 and 29 days late it is 0.01%.

RKB

PS Just to be crystal clear in my opinion our Mortgage Book is second to none and the risk is not a concern for me even if there is a reduction in BoE Base Rate.

Your Bank & Observations

I do not think I will have sufficient time to dissect the accounts before Monday (I will continue and complete my analysis) but I may be able to contribute in other ways.

Normally on a Sunday I spend time reading the Business Section of the S Times and then research a bit about what I have read but at the moment I am going to ask sensible Posters for their views.

In the 1960’s companies did not have access to the internet and many of them used Cereal Boxes to garner peoples thoughts. So a car manufacture may have 10 cars to give-away as a prize and all you had to do was say in one sentence what you liked about the car. This was very cheap marketing, covered the whole country and they got 100,000’s of entries(they also got your name & address details) The 10 prize winners obviously got their car but the real winners were the Advertisers’ because they got many strap lines and could see what the public actually liked about their car.

So what do you like about “Your Bank”?

Posters who know me are aware that I often have a coffee 4 days a week at McD’s. I drive my daughter to work most days and leave most days at 7:10am so I am restricted on what I can read from any RNS that may appear. I often get to McD’s just before 8:00am and then I check my alerts and if I feel it advisable then I alter my limits.

I know the Manager of McD’s well and late last year I asked him about the Take-away guys / girls that were always collecting and if it was “making money” He said his takings were up £40,000 a week and he also mentioned the % fee that they took (this was before McD’s had a UK wide agreement with a national delivery company) Now by just asking a simple question I can work out the maths and calculate the potential this could have on profits. Obviously there are more complicated calculations to make if more people are working from home if we have a pandemic but will the delivery companies increase their share? What I am really saying is that by asking relevant questions and observing you can learn and this information can be utilised for your investment decisions.

So what I think may happen if Posters are honest is they will say they have always been with their Bank and they “just like it” others may say they “hate their Bank” and say why and if sufficient Posters air their thoughts on their Bank then you and I would be able to use this information to our advantage.

RKB

PS Normally as a “treat” I have cornflakes on a Sunday but had my usual Porridge as it is very wet, cold and stormy in Scotland today.

Annual Results

Part 5

Highlights: continued

Our Assets decreased by £247 Million to £21.4 Billion.
Our Loans increased by £446 Million to £14.7 Billion.
Our Loan to Deposit Ratio moved from 91% to 101%
Our CET 1 Capital Ratio moved from 13.1% to 15.6%
Total Capital Ratio moved from 15.9% to 18.3%
Liquidity Cover Ratio moved from 139% to 197%
Total Underlying Revenue basically the same at £400 Million.

Basic Loss was £11.7 million when previous year there was a profit of £50 million (this has to be looked at in more detail to understand it) and we have to understand how / when we are able to utilise these tax losses as the rules have changed and it is a bit more complicated (I think Fred is the problem because his new Bank racked up so much loses that the Chancellor has to get some tax from them)

Actual Loss was almost £131 million when we made a profit in the previous year of almost £41 million (again we need to look more closely at this but imo it is not as bad as posters are making out)

Net interest margin down from 1.81% to 1.51% and this does give me a concern when the BoE base rate is already so low.

But the good bit for me is that although our earnings per share are negative at 10.8p last year we were at 38.2p and this is really the key as to when / if our share price will increase. Also it should be noted for reference that in 2017 the basic earnings per share was 12.6p. When I do my own personal calculations I can see a substantial increase in earnings but before I can post them I need to do a substantial amount of research and then work out some variables and then proffer them up for scrutiny.

RKB

PS Panderman, I tried on numerous occasions to have quality newspapers publish what I knew about Fred and none would. Why? Because they were aware that all the advertising that they accepted would not continue. Do you still think even quality newspapers are truly independent?

PPS I did have a hand in getting his Pension reduced as I proved his salary and pension pot were out of sync and the powers that be removed a few million £’s. Small conciliation to the millions who were impacted by the financial crash.

Annual Results

Part 4

Good Morning BigDano (continued)

This Fictional Bank was poorly run from the top and most of the senior staff were in my opinion incompetent. They normally promoted staff not on merit but on moving them around. They seldom recruited externally and if your mum, dad, brother, sister or granny worked there, then the chances you would get a job also (I joined externally because I had computer skills that the Bank badly needed) Nobody ever got pulled-up if they messed-up in fact they got promoted to well out of their depth.

My boss was one of the worse and I basically did her job but she got the big bonus I did not. I had access to many documents and could see how poorly they made lending decisions and how they disguised massive losses. One example which I know personally about because I knew the Branch Manager was that a Hotel loan of several million was going to be called in but the Manager said the owner had a dickey heart and he may not “live” if the Bank Foreclosed so they wrote the loan down substantially. Who do you think the owner of this Hotel was two years later?

Another thing this Fictional Bank did was write off 1,000’s of small loans each year, some for a few hundred £’s and some for a few thousand £’s. Then unknown to many the “debtors” were paying back £1 or £5 a week and this all went into a big big pot. These small loans went back for decades so the money coming in each week was unbelievable. Now when I say a “Hotel Loan” was written off for say £2 million that would have an impact on the balance sheet, would it not? Wrong, you forgot there was a big big pot of money “to sort” this. Fictional? I could write here many things that would open your eyes but I think you will now realise I have knowledge of “bad practice” and I can bench-check that with Metro Bank.

RKB

PS What Fred did not know is that my cousin used to work with him many years ago when he was an accountant and I knew back then about his affairs and at his other Bank he spent £100,000’s trying not to have his affair with an employee made public so he knows how to throw money around.

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