Member Info for TheTrotsky

Gone ex-div this morning

Chelsea, Do you care to take a (gentlemanly) bet on the level of growth in the smart manufacturing business in FY25?

Direct comparison YoY will be obviously be difficult because of the timing of the acquisitions and the base comparators OMG cares to use but the lack of such standard accounting vernacular as "material", "significant" or "subtsantial" in the RNS would suggest to me that both organic and inorganic growth are likely less than 10%.

Obviously any growth is to be welcomed but the smart manufacturing business really needs substantial YoY growth (I'd suggest over 50%) if it's going to start delivering a meaningful contribution to adjusted EBIT whilst, at the same time, recognising that despite Vicon's contribution to adjusted EBIT having fallen significantly in the last 12-24 months it will, hopefully, return to previous levels over the next 12-24 months.

Whether the latter is actually achievable remains to be seen. When OMG sold Yotta back in May 2022 it was envisaged that Vicon's future margins would fall but that this would, at least in part if not entirely, be offest by rising revenues over a five year period. Unfortunately, both margins and revenues have fallen significnatly over the last 12-24 months; a "perfect storm" or "the new norm" is the question the new CEO has failed to answer.

If nothing else the growth in the smart manufacturing business will be a test of whether or not the CEO is obfuscating.

As always Chelsea you choose to misquote me.

On 18th June I said that "... motion capture looks to be going into terminal decline ..." which is quite different from saying that " ... motion capture is in terminal decline ...", as you were implying. Also, my comment on 18th June was made in the context of the complete failure of OMG's CEO to appraise investors of what was going on at Vicon.

Furthermore, "resilience" doesn't amount to a complete reversal of fortunes and Vicon's problems still seem to be persisting. We know that OMG has taken some action to cut its Vicon cost base (which may explain all, or part, of the improvement in operating performance) but what we don't know yet is whether there has been any material improvement in Vicon's revenues (the RNS is a bit ambiguous on this point, unlike smart manufacturing).

So, basically, we have a CEO taking over a profitable Vicon business with growing revenues which, in the last 12-24 months, has nosedived at an alarming rate whilst she's been distracted by a new "vanity project" offering much less inspiring profits and revenues for the next 2-3 years at least. Rome has been burning whilst she's been off on a jaunt.

Now, I'm willing to accept that the economic backdrop for Vicon's business may not have been entirely rosy for the last 12-24 months, albeit that I believe that one smaller, unlisted, fellow UK peer that I happened upon circa six months ago in a newspaper article, whose name now alludes me (it wasn't listed so my interest was only cursory), had substantially increased revenues over the corresponding period, but the CEO has singularly failed to keep us appraised of what's been going on and has instead resorted to obfuscation.

What I really want to know (from the CEO in plain language) is whether Vicon has, somehow, lost a march on its competitors (I'd hope not) or whether it's a general sector problem (the fact that a smaller competitor has been able to increase revenues from a much smaller base is not, of itself, proof that the sector is thriving).

As regards the "dim prospect" quote that was in reference to the sustainability of the dividend. The FY25 adjusted EBIT doesn't cover the prospective dividend and, given the CEO's focus on growing the smart manufacturing business, I anticipate some further bolt-on acquisitions, if the opportunities arise.

I could easily see another £10-£15m of expenditure on smart manufacturing acquisitions and/or equipment in the next 2-3 years plus a cash buffer of £10-£15m being kept in the business to fund working capital and/or potentially support further investment into the Vicon business. The cash pile available for distribution would quickly whittle down at that rate unless the Vicon profitability can return to pre-FY24 levels. Smart manufacturing may, or may not be the future, but it looks unlikely to fund the dividend in the next 2-3 years.

Trouts, I'm saying that the universal basic income is a pipedream unless there is a fundamental change in the mentality of those who control the majority of our wealth; I think pigs are more likely to fly. But, more importantly, I think the whole idea of replacing workers en masse with machines/robots and paying the majority of people to "stay at home" is flawed, regardless of whether or not it's feasible. I think that rather than creating a utopian society it will, in fact, create a dystopian society with even greater wealth disparities and that ultimately society will break down and revolution will follow.

Revolutionary France was a classic example of the rich ignoring the warning signs and thinking that they could amass more and more wealth whilst the rest of society sank ever deeper into poverty and starvation. Although the universal basic income might keep the wolf from the door it would be unlikely to ever completely satisfy the aspirations of the great unwashed.

The great illusion of capitalism is that people truly believe that through hard work they too might achieve all of their aspirations and that, despite the reality that most will never be able to elevate their station in life into the upper echelons, they are content to accept vast disparities in wealth because there is still a chance, however remote, that they might, one day, join those upper echelons. Strip away that illusion and you have the ideal conditions for revolution.

The peverse reality is that this future utopian society promulgated by those who would replace workers with machines is actually more akin to a communist system (where some, the super rich, are more equal than others) and will necessitate the State to monitor and control society even more closely than they do already!

Can we still stop the (inevitable) march of AI, machines and robots? Of course we can, if we have the collective will to legislate and deny access to our end-user markets (tarriffs would be just one example). I'm not a complete Luddite but I am certainly in favour of moderation and ensuring that human beings remain the mainstay of the production chain to maintain social cohesion. I do not want to live in a society that's afraid of itself.

I'm a long term investor in OMG, so it would be churlish of me not to say that this morning's RNS was not welcome news or give Chelsea the opportunity to gloat (although I'm hard pressed to find any comments by me to the effect of "terminal decline" or "dim prospect", if indeed I am the intended target of his snide comment).

However, let's not get carried away and forget the value destruction (temorary or not) that Imogen has presided over since she was appointed CEO or the fact that it's only now, 10 months into the current financial year, that management have deemed it appropriate to reveal their apparent "expectations" (if indeed market expectations were the management's expectations all along) or that, in typical Imogen style, the RNS is silent on whether revenues (one of the easier metrics to determine) have met market expectations (the lack of any guidance would suggest not but we'll have to wait to see).

We need the results from Vicon to be more than simply resilient; we need to see recovery to pre-Imogen levels. Good results from smart manufacturing are all well and good but, unless it's delivering annualised revenue growth of 50%+ and annualised profit growth of several 100%+, Vicon is still doing the heavy lifting and will continue to the heavy lifting for many years to come. As Chelsea is wont to point out at every opportunity, smart manufacturing is a multi-$bn sector with significant growth potential but OMG's smart manufacturing business has annualised revenues c£10-£12m (following the acquisition of Sempre) and operating profits of c£0.5-£1.0m, subject to seeing the actual results of the H2 outturn. New, bolt-on acquisitions and/or capital investment might help grow OMG's presence in the smart manufacturing sector and increase the opportunities for economies of scale but these will inevitably eat into OMG's cash pile.

Plus I wouldn't get too excited about the c£1.7m cash generation in H2. Based on this morning's announcement, OMG appears to have generated c£3m of adjusted EBIT. Adjusted EBIT strips out a lot of the non-cash charges to the P&L and excludes net interest receipts. So, assuming net interest receipts in H2 were not dissimilar to H1, OMG should have been able to generate c£3.7m of cash. The fact that actual cash receipts were c£2m less shouldn't be cause for alarm (the discrepancy can be accounted by changes in inventory, debtors, creditors and capital expenditure) but the c£1.7m generated is well short of the c£4.2m needed to cover the expected dividend.

Finally, for the sake of comparison, the adjusted EBIT in FY24 and FY23 were c£6.3m and c£9m respectively. So, whilst Chelsea is self-congratulating himself on an adjusted EBIT of c£2.6m for FY25, I'm still left to wonder where did it all go wrong! I'm sure that Imogen will explain in due course; not!

Trek, You miss the point. The jobs created will increasingly need greater academic ability; however much we try to improve general educational standards (and the jury is out on whether that's succeeding; personally, I think not - we are wedded to teaching people to pass exams not learn for life) our population will always have a pyramid of capability and there are a lot more people at the bottom than at the top. We already have a swathe of unemployable people because the jobs they used to do have been replaced by machines/robots. Admittedly, a lot of those jobs were boring and repetitive but they were jobs that gave the people some sense of self-worth and a place in society, whereas now they are increasingly treated like outcasts. That doesn't make for a healthy society.

Temple, your phrase "no knowledge no use" just goes to prove my point. It's devoid of humanity and totally fails to take account of the social consequences; it's akin to Mary Antoinette's "let them eat cake". As history has repeatedly proven, if you ignore the plight of the people they will eventually revolt. Making their lives easier is one thing but focusng on removing them from the work enviroment altogether to improve efficiency and reduce unit prduction costs is quite another. If Musk has his way, his EVs will be built in fully automated factories, everybody will use his robo-taxis and all of the menial jobs will be done by his abdroid robots; he'll be the only person working (until AI takes him out of the eqaution too). Meanwhile, 8bn people will sit around on their backsides playing computer games, at best, or living in abject poverty, at worst. I'd suggest that his utopian ideals are in fact dystopian; you've got to consider the detail rather than just assume that the detail will take care of itself.

The idea of a universal basic income has been knocking around for many years now but it has some fundamental flaws; who's going to pay for it (certainly not the tech entrepreneurs who like to postulate the idea), it doesn't provide people with the opportunity to better their lot in life (without attaining the knowledge that they are incapable of learning) and assumes that they will always be content with a relatively subsistent standard of living compared to those in well paid jobs (are they going to paid to buy life's little luxuries, dine out, go on holidays etc.). A universal basic income will require a substantial transfer of wealth to the poorest echelons in society. "Mr Rich, we want to take 50% of your wealth and give it to the poor". Good luck with that ;-)

"... the UK leading treasury company will almost certainly trade at a huge premium to NAV once again when sentiment returns ..."

We'll have to agree to disagree.

The only real advantage that SWC might have over ETFs is leverage and I don't (currently) see commercial banks queuing up to lend money to SWC to bet on the movements of BTC. The last placing was done, more or less, at the prevailing market price and the trend is definitely downwards (placing premiums have been eroded to virtually zero, if not at a discount). Once existing investors have to give new investors a slice of the existing pie you are then becoming wholly reliant on BTC gains to recover what you are giving up.

If fools want to pay a massive premiun to NAV going forward that's their perogative but they'll be unlikely to see any return on their investment unless they can persuade other fools to invest after them - it's akin to a Ponzi scheme. Last one out switch off the lights!

This is nuts. What exactly are the millions of workers who will be laid off supposed to do? Engineering human beings out of the production process altogether may have efficiency advantages but will have huge social implications that should not be simply ignored.

Creating a large underclass of essentially unemployable people (people who, through no particular fault of their own, lack the academic abilities to be able to adapt) will just fuel further resentment and strife (it's not as if we haven't got enough already). Tech nerds often have very poor social skills (like the guy who came up with idea of the robot barrista - trying to fix a problem that didn't really exist) and are incapable of seeing or understanding the social problems they are inadvertently creating. You just have to look at Mark Zuckerberg's "solution" to us having fewer friends/social contacts because of increased use of social media - an AI-friend - to realise how detached from reality some of these tech nerds really are.

I personally think that it's better to be inefficient and keep people in production jobs rather than have huge swathes of our population sitting around on the dole (unless eveybody is going to be paid a decent living by some, as yet, unamed individual/government to just sit around at home and never work for the rest of their lives). I'm not saying that people shouldn't work efficiently, I'm just saying that we shouldn't always be looking to replace people with machines in our endless pursuit of ever lower unit production costs. This isn't some "socialist" pipedream; it's a pragmatic solution to a potential real world problem; we cannot simply ignore the social impact of these decisions.

"Some very strange things are happening in China! They are becoming very hostile."

Pot calling the kettle black me thinks!

Chelsea, Better to know all than to know nothing! I haven't "skirted" around the point that Couerdelion makes at all. I've simply pointed out that the current dividend is just not sustainable unless there is major turnaround in the direction of this business, which there is absolutely zero evidence for at this juncture and is not being helped by what's happening in the US. EPS is less than the current DPS and is likely to continue to fall as cash balances dwindle and interest rates fall UNLESS there is a marked upturn in trading. It's VERY simple mathematics; try it sometime.

I (we) know that you are a great fan of smart maufacturing (mea culpa, I previously unintentionally referred to it as intelligent machines) and I don't disagree with the principle BUT the reality is that OMG is currently a very small operator in that sector, it sales growth is hardly stelllar and it's barely breaking even (those are simply the facts; no BS). OMG 's stated intention is to continue investing in smart manfacturing, both organically and by bolt-on acquisitions, and the simple fact is that this investment takes money, so it's only reasonable to carve this money out of the cash pile and ring-fence it from being used to pay future dividends. Just common sense, which seems to be in short supply.

Meanwhile, VICON is ailing. Sales and profits have been falling for the last 12-18 months and its prospects aren't currently looking any better since the Trump administration entered the White House. All of the current indicators are that US university research budgets are (currently) being cut.

That's the economic background that OMG currently operates in and, until OMG notifies the market different, we can only assume that matters aren't getting materially better (the interims showed falling sales and an operating loss).

So, stop being so pompous yourself and smell the coffee. OMG has problems and, personally, I question whether the current CEO is the right person for the job; to date I think her communications to the market have been poor at best. She has tried to mask the declining operating performance and the reality is now coming home to roost. Whether another CEO could have done a better job given the economic background is debatable but I expect my CEOs to always be, at least, upfront and honest in their communications (and I think she hasn't).

StarBright, Just for clarity, I'm assuming that SABA would be the "third party" in this instance not the acquirer. SABA hold the TRS contract(s) that confer the current beneficial ownership but at some point the beneficial ownership will revert back to the actual acquirer, who will then reveal themselves (albeit that I'd have though that they should already have revealed themselves if they'd acquired c5% before entering into the TRS contract with SABA). Is that right?

HarChris, I think LongInvestor makes some good points. We can quibble about the exact figure but a fully diluted figure NAV of c63p (after factoring in the likely exercise of the 2.5p warrants) based on the current price of BTC looks to be in the right ballpark. So, at mid-80s, you are still paying a premium to the estimated NAV. However, I agree that it would be unrealistic for the share price to exactly track the BTC price. There will always be some latency between movements in the BTC price and the share price of SWC, which will inevitably provide opportunity for arbitrage (or sentiment if you prefer) and, as such, it would not be unreasonable to expect the price of SWC to trade at a discount/premium to its estimated NAV at any given time, based on investor sentiment.

I think we can all agree that at c500-600p per share the implied premium was completely out of whack with reality. At c80-90p the premium is more realistic but the overhang from the unexercised 2.5p warrants can't be ignored and, until that is resolved one way or the other (provided the warrant holders have the cash I would currently expect them to exercise on, or before, the expiry date), I think the share price, subject to any BTC price movements in the meantime, will continue to fall and may even go sub-70p before stabilising. The exercise of the 2.5p warrants is a major uncertainty that the market can't simply ignore.

On the face of it the return might not be a reason to invest now but if you invested in AV 3-4 years ago you're earning a decent return plus capital growth. Certainly not a reason to sell.

What I really like about AV. is that Amanda has set out to increase the dividend pool by mid-single digits each year, so buy-backs serve to increase the dividends available to be paid on the remaining shares (most companies commit to only increase the dividend per share, so buy-backs can actually reduce the total dividends paid each year).

Initially Amanda was the subject of a lot of misogynistic commentary but I believe you should be judged on your performance alone and I think she's proven herself to be one of, if not the best CEOs in the FTSE over the last 4-5 years. AV has become a consistent performer and, once DLG has been bedded in, I think AV. will start to look for opportunities to leverage it's capital-light, online general insurance model in Europe.

Listening to the boss of Aegas recently it's quite clear that the model in Europe is quite different to the UK and there is a lot less customer churn. Although the European model may appear to have some advantages to the UK, e.g. in many European countries they insure the vehicle rather than the driver (so as long as the car is insured anybody can drive it), it generally means higher premiums and I'm sure that there would be many drivers who would be willing to consider swapping versatility for lower premiums based on their lower risk profile.

But, for that to proceed, AV would first need to identify suitable European acquisition targets; not necessarily large insurers but businesses with an existing general insurance presence that could be leveraged.

They aren't covering the dividend from profits so, no, the cash isn't "only" dwindling because of buy-backs. Plus there is ongoing investment in the capital of the business i.e. equipment, R&D etc.

If anything, the market outlook is getting worse because of the Trump administration. We've already seen at the interims that there has been an impact on US university spending (one of the key sectors for Vicon). Intelligent machines might be a growing market but OMG is only a very small player and, thus far, growth in this business has been fairly anaemic (a 5-10% per annum increase in LFL sales might sound good on paper but is fairly paltry from a low base).

A non-exec has just spect c£50k on c7,300 shares. Not to be sniffed at.

Must apologise. When I checked the BTC price earlier today I thought the price I was being quoted in USD not GBP (I've not been watching the BTC price for the last few months and have lost track of its movements). 2550 BTC are indeed currently worth c£233m not c£175m as I suggested earlier.

Given that the BTC price has risen from c£78k on 20-Jun (when the closing share price peaked at 500p) to c£91k today, BTC does seem to be "playing ball" but the share price has nevertheless gone into reverse. I'd respectfully suggest that perhaps "peak" SWC has passed and that any future movements in the share price will now be more closely aligned with the value of BTC (as it should have been all along).

I.e. the value of BTC would currently need to reach c£500k for the share price to recover to c500p assuming that those "squillions of 2.5p warrants" aren't exercised in the meantime. If the 2.5p warrants are exercised then there would be a very significant dilution of the existing shareholders in favour of the warrant holders because the money raised from the exercise of the warrants would not be sufficient to buy the BTC needed to offset the impact of the number of new shares being issued (it would be the reverse effect of the £1.50 warrants being exercised whilst the share price was below £1.50).

Thinking about it, the c96m 2.5p pre-IPO warrants are a very good reason to avoid this share with a barge pole until at least either the warrants are exercised or lapse (25-Apr-26). Whilst the share price is above 2.5p dilution is inevitable if these warrants are exercised. Increases in the BTC price might help to offset some of the impact but unless the BTC price really moves into the stratosphere you're currently on a hiding to nothing. If all the 2.5p warrants were exercised before 8am tomorrow morning the indicative opening price would be c68p, all other factors being equal. The BTC price would need to increase from c91k to c£124k overnight to leave the share price unchanged! The outbreak of WWIII might just about do it but you'd be hard pressed to enjoy your good fortune ;-)

But the swap has not only given SABA the total return BUT it's also given SABA the voting rights too. Transfers of beneficial ownership have to be notified to the issuer, just like a buy or sell, IF they breach the normal notification thresholds. That's why SABA has had to notify GSF of its new position. So, I say again, assuming that they have acquired, albeit temporarily, these beneficial ownership rights from another shareholder (rather than multiple shareholders), why hasn't that shareholder yet notified the market?

No disrespect but If you don't understand this then perhaps complex investments aren't for you ;-)

PS. StarBright seemed to imply that new investors sometimes utilise these TRS contracts to accumulate large positions without the need to immediately notify the market once they'd breached the normal notification thresholds i.e. they might (say) buy 2.99% of the shares in the market, transfer beneficial ownership of the newly acquired shares under a short-term TRS contract to a third party and then plough back into the market to buy more shares, rinse and repeat, until they'd been able to accumulate all of the shares they'd intended at the outset and then notify the issuer. The only fly in this ointment seemed to be the fact that they'd already breached the 3% threshold if this was indeed a new investor doing exactly that.

Debatable whether the dividend is generous or sustainable. The current dividend is currently costing OMG c£4m per annum and given its intention of investing in its intelligent manufacturing division and/or acquiring additional new, bolt-on businesses, whilst also retaining sufficient working capital to avoid the need to borrow, I'd suggest that OMG can only maintain the current level of dividend for two, perhaps three, years, at best, unless there is now a signficant turnaround in the performance of their existing businesses, which at present is looking like a dim prospect. The share price is lingering at these levels for a reason.

That assumes that it will eventually turn upwards. Personally I'm not convinced that there is any commercial logic in paying (say) 2x the BTC price to invest in SWC. If I wanted to invest (say) £5k in BTC I'd be better off buying it through (say) Coinbase.

SWC currently holds 2,550 BTC (which are currently worth c£175m) plus an amount of (as yet) uninvested cash (not sure what the current figure is) whereas SWC is currently valued at c£260m. That would suggest that SWC is still currently trading at a premium to its underlying assets (hope and hype are worthless in my books). Let me know if, and when, SWC is trading at a discount; then it might represent an actual value proposition.

HarChris, don't lose sight of the fact that the warrant holders aren't idiots. If they can buy the same number of shares in the market for half the price, they're not going to automatically exercise their warrants. If they buy/exercise, it will be because they think the share price will rise but they aren't going to miss an opportunity to maximise their gains.

That said, despite the disparity between the current share price and the warrant exercise price, it's by no means certain that the warrant holders would be able to buy, sight unseen, the same number of shares in the market at an average cost materially below the warrant exercise price. Also, if they exercise their warrants, rather than buy in the market, they'd be able to direct the proceeds to SWC to enable it to buy more BTC. So, I'd agree that there are several "real world" factors that will come into play in deciding whether or not the warrant holders exercise their warrants in due course.

I'd agree that revaluations are par for the course for SAFE and similar businesses but they don't represent realised income and are normally discounted for assessing KPIs. Also, the valuations tend to mirror the state of the property market at any given time (valuations can go up and down periodically) whereas the underlying rents tend to reflect the wider economic situation (the property market and the wider economy aren't always in sync).

Unlike other commercial landlords, SAFE and other similar storage businesses are much more susceptible to the wider economic situation (their tenants are generally on short leases and aren't tied into the normal upwards only rental agreements) and rental rates are therefore prone to rise and fall with economic sentiment but, as a result, they are generally able to charge a premium to the rates charged by other commercial landlords for properties of a similar nature.