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The words and figures still don’t match after H1. Think someone mentioned earlier that they, I assume meaning directors, were under promising – I hope that was a joke. Debt is funding losses with no realistic sign of them covering interest costs even using Cenkos’ latest work of fiction and oh yeah looks like US$100m facility is in excess (£95m debt as at Jun 23?). Well at least JW is consistent I’ll give him that – these latest financials flag many more questions than answers. As ever good luck.
Wood could have shared interims evidencing they are ahead of plan and as a business are delivering which would have supercharged the SP - don’t get Wood’s MO as a leader. Good luck.
Just watched video. Shipbuilding rather than Export CGS announcement by Government is a positive to the sector in general - though not something Wood has delivered. Wood doesn’t mind taking flak, for the good of the company apparently, though took a swipe at a LTH, I assume, for being negative although failed to deliver any financials to support his answer of increased productivity. Talking of which Wood again advised they are ahead of plan but no half year results to evidence delivery of revenue growth, GM% margin or overhead reductions - something within his control but chose not to. Interesting Wood’s key view on debt is the rate charged not how they are actually going to repay it. Contrary to interviewer’s summary I learned nothing new of any note.
Xenor, maybe it’s linked to Cenkos’ report in Sep 22 projecting an outturn of T/O £70m and LBITDA £12.3m versus JW and co delivering a truly staggering T/O £28m and LBITDA £55m so massively more cash consumptive and breakeven (whatever this is) being pushed out another year. Maybe I’m being too picky and expect too much but if all going great now why not just release some Interims - good luck.
See my post 30 Jun 2023 20:50.
I wonder if Arun/the company will advise the market of the net debt figure at half year so headroom in facility is known and urgency of increase facility/raise can legitimately be allayed.
Whilst I respect that Xenor is not debating their post regarding understanding of the financials for those 13 that recommended the post I’d highlight:
1. The business had a Gross Margin% of c20.6% in FYE Dec 22, they project this will be 20-23% this financial year and aspire to 24-27% thereafter. A 20% EBIT/Operating margin % has never been mentioned by directors or broker for that matter only by Xenor.
2. The underlying Xenor outturn mentioned:
Actual - Revenue: £28m Operating Loss for: £58m (Total 70m)
Xenor re-stated - Revenue: £63m Operating Loss: £23m (Total 35m)
This example shows a 100% Operating Margin % not Xenor’s 20%.
3. Accrual accounting principle – Xenor’s suggestion of inappropriate accrual accounting in relation to contracts i.e. all costs and no revenue suggests the CFO and auditor are fraudulently misrepresenting the underlying profitability of the business. I do not agree.
4. Current cash flows – are not fine the business is heavily loss making and burning through so much cash an increased debt facility/equity raise is needed. Revenue is most certainly not covering costs.
5. H1 23 is going well – if this is the case all the business has to do is provide Q1 MI to evidence this. Simples.
The £6.4m of costs for discontinued contracts, I assume is in relation to the Saipem contract, looks like an operational disaster.
£62m of debt as at Dec 22 plus pro rata, Cenkos projected cash burn for FYE Dec 23, of c£16m puts debt at c£78m now (against a facility ceiling of c£79m) so sorting out new debt deal or an equity raise as auditors confirm is “a material uncertainty and may cast significant doubt on the group’s ability to continue as a going concern”.
Looks like market valuing business at c£102m is pretty generous on this update.
John Wood has now taken Cenkos and Astra Asset Management with him. I’m surprised but is a very interesting business to monitor from a safe distance. If you can accept break even will always be next year this opportunity is definitely for you - good luck all.
When a 70 million facility has been agreed legally and perhaps more importantly reputationally it is very hard for a lender to row back from these things.
Committed facilities are on balance sheet (RWAs) versus an uncommitted which are not so usually have a benefit to borrower in that they do not have to pay some fees e.g. non utilisation which are appropriate for this type of facility.
It's a not entirely clear whether it's a good or bad thing.