Member Info for TheTrotsky

Chelsea, We'll have to agree to disagree. As far as I'm concerned the last 3-6 months have been shambolic. You believe that smart manufacturing is the way to go but I would point out that IVS and Sempre, with combined annual revenues of c£10m, are definitely small, bit-part players. It's taken IVS 23 years to grow its revenues to c£3.6m and Sempre 25 years to grow its revenues to c£6.5m; don't expect fireworks. Vicon remains the bread and butter and it's been badly managed over the last 12 months.

Chelsea, My main beefs with the acquisitions of IVS and Sempre are:

1) They are non-core;

2) They do not operate in OMG's usual markets;

3) One presumes that OMG believes that it can add value to these new businesses by sharing their know-how but that will mean that OMG's executive team will have to take time away from Vicon to help develop these businesses (that's all good and dandy when the main business is all running tickety-boo but clearly it isn't and, as we've already seen, it doesn't take much for wheels to fall off - Vicon needs the executives full attention, particularly in this growth phase an heavy R&D commitment);

4) There appear to be few, if any, economies of scale between Vicon and these new businesses;

5) It remains to be seen whether there will be economies of scale between IVS and Sempre; and

6) To get the best out of IVS and Sempre they will probably need to keep a separate executive team in place to help run these businesses day to day (putting more costs in rather than taking costs out)

OMG is a small company. Running disparate businesses does not lend itself to cost efficiency. Hopefully IVS/Sempre are both sound businesses which offer good growth potential in the future BUT in the short/medium term long term investors are being asked (yet again) to wait to reap the benefits. In the meantime, the share price has tanked.

Good CEOs of listed companies have to have an eye on running the business and looking after investors. At the moment, it looks as if the CEO has decided to follow a personal agenda (she could have spent her time and effort on expanding Vicon and managing its costs). She's decided to gamble on IVS/Sempre and, I believe, in the process taken her eye off the main business.

I wouldn't be totally surprised to see the dividend cut this year because of this mishap (the profits are unlikely to support maintaining the dividend at its current level). That would probably be the sensible, unpalatable decision but no doubt O'Connor will instead dip into the surplus capital to cover the underperformance (but there's only so often that she can pull that rabbit out of the hat).

More than anything, the statement O'Connor made in June has me most concerned. A good executive of a small company should know their business inside out and be able to spot any headwinds before time. She made a very bold prediction in June and ended up eating her words in September. It suggests to me that she's been otherwise distracted and the problem she's got is that neither IVS or Sempre are likely to pay her back in the next 12-18 months (they're not going to plug the lost sales and profits at Vicon). Vicon has to deliver over the next-12-18 months and I odn't know whether O'Connor is now spread too thin.

IVS was/is a niche operation (small business with potential but not likely to make a material impact on profits in the short/medium term). I was expecting them to follow up that acquisition with a bolt on acquisition for Vicon and/or distribute the surplus capital. Instead, what do they do? They announce another bolt on acquistion for IVS (Sempre) and use some of the remaining surplus capital to bolster the share price that they've destroyed in the interveing period.

I do own my investment decisions but that doesn't mean that I can't complain about the BoD losing the plot and becoming rudderless. They set a course and then made a complete about turn! In the meantime, whilst the BoD have been looking for an acquistion to (supposedly) compliment Vicon they've taken their eye off the ball.

How can a CEO stand up in September and say that they have confidence in meeting full year expectations (>90% visibility of full year revenues) to then announce only three months later that they now expect to miss their targets by a very wide margin (c£7-8m or 14-15%)? O'Connor has made herself a laughing stock. Effectively they've not only failed to pick up any additional work in the three month period but have also lost sales she thought they had in the bag! Stop defending the indefensible. O'Connor should now be on borrowed time. Vicon is the bread and butter and the last thing she really needs right now is a new distraction (Sempre).

Hopefully both IVS and Sempre will come good in time but O'Connor may not have that time. The BoD have broken so many cardinal rules that I've lost count. First, no acquisition is better than any acquisition (some acquisition are just bad from the get go whilst other acquistions can just end up spreading the executive team too thin). Secondly, acquisitions are all good and dandy but they should never, ever distract from the day job (this is especially true for a small company with limited resources). Thirdly, never, ever drag out the hunt for acquistions (they've taken two years to acquire IVS and Sempre); if potential acquisitions aren't literally jumping off the page immediately, it's not a good use of executive time to go hunting for potential targets (it's a distraction from the day job - I'd love to know how many potential acquisitions the executive team have run the rule over in the last two years). The BoD have allowed the quest for acquisitions to become a distraction and the Vicon business has now suffered as a result.

Chelsea, What exactly is there to like about the capability of the current senior managment team? Under their watch the share price has halved, they've missed operating targets, they've invested in a new business stream (contrary to the BoD's previous stated intentions) and have dithered for over two years with the company's excess capital (and have now set out to use some/all of the company's excess capital to try and rebuild the share price that they clobbered). You couldn't make it up!

This is actually a relatively new executive team (CEO and CFO) and, thus far, all they've done is fumble the ball. The new smart manufacturing division is SMALL and growth is unexciting to date (IVS was hardly setting the world alight when OMG bought it).

I should have sold at 110p+ and walked away with a small profit. What had promised to be a new exciting period of growth for Vicon has become another long term, tech project. There are many aspects to being a good CEO and, thus far, O'Connor has not proven to be equal to the job in my view (she's let down long term investors). I'm an equal opportunity investor; I praise and criticise senior executives in equal measure (without distinction) based on their performance. On a scale of 1-10, O'Connor is currently a sub-5 performer in my books (the only thing in her favour is that she hasn't run the business into the ground - yet!).

I suspect your guess is wide of the mark. SOS intends to be very selective and regimented in its shop openings. Also, even if the initial shop openings have been a great success the joint CEOs are well aware that "normality" soon sets in and I doubt that successful shop openings will materially change the expected pay back period (2-3 years).

Earth shattering! IVS and Sempre are both niche businesses (you don't pay £5m for a large, market leading business in a multi-£billion market segment). The only thing that the two businesses have in common with Vicon is measurement! The scope for economies of scale and cross-market sales opportunities are both fairly low IMO. Neither acquisition expressly augments Vicon, which was the stated objective when they sold Yotta. Furthermore, a £6m buyback just adds insult to injury.

It may surprise you to hear that automation has been around for decades and AI is just another iteration in the process!

I'm not saying that IVS and Sempre are bad businesses but despite Yotta having relatively low sales compared to Vicon it did have exciting prospects (that's why Causeway was willing to pay cash consideration of £52m). OMG has now bought two new projects for c£14m to replace its Yotta project neither of which really augments the existing Vicon business whereas when they sold Yotta they held out the prosepct of acquiring bolt-on Vicon acquisitions which would not only offer possible economies of scale (critically important when your operating margins are being squeezed) but accelerating organic growth.

OMG offered the prospect of moving into the fast lane but has shown itself instead to be very much a "manyana" business as usual. With sufficient working capital, both IVS and Sempre can be expanded I've no doubt but don't expect fireworks. In the meantime, Vicon struggles with declining operating margins. Way to go BoD!

My point would be that a number of these commentators have a vested interest in muddying the waters for their own vested interests. Nobody is ever going to suggest that the removal of a tax break is going to enhance the of value AIM listed investments so they might as well "go large" on the potential downside (to maximise their potential gains). Don't you find it interesting that these same commentators have never cried wolf about the loss of this tax break when AIM participants have moved up to the main market?!

AIM shares have always been very volatile and, as such, using them to gain a potential IHT break has always been fraught with risk, especially given that you have to hold the shares for at least two years for them to qualify (you can't invest on your death bed). They may make up a part of some people's IHT planning but I would be very surprised, unless they've been mis-advised, if they were ever the cornerstone of most people's IHT planning. People with serious money to "protect" from the taxman have been invest in forestry and have been doing so for years (that's where the smart money is).

I think it's more a case of "Chicken Little" i.e. the issues follow the comments rather than the other way around.

From Note 2.7 to the accounts:

The franchise packages consist of revenues which relate to pre- and post-opening costs mainly for store fit-out; and initial set up costs for pre-opening support, and franchisee and staff training.

The pre- and post-opening costs are required to get the new franchisee trading and are therefore recognised at a point in time which is at the end of the month in which trading commences. Each package is tailored to a specific franchisee’s needs and elements can be added or removed as appropriate which will affect the price. The performance obligation of the Group is met, when the store is handed over to the franchisee and he/she accepts it and commences trading. The franchisee is then obligated to settle the invoices raised by the Group for the costs incurred by the Group in getting the store in a position where it can start trading. Included in the franchise packages, is a franchise fee, the amount of which will depend on whether it is a new or existing franchisee opening the new store.

Holding deposits received from franchisees for new stores are not treated as revenue when received. The deposits are held under ‘Other Payables’ in the Group’s financial statements. If the new store is completed and the franchisee accepts it and commences trading, the deposit is allocated against the costs associated with the new store and recognised as revenue at this point. If the new store does not proceed, the deposit is refunded to the franchisee.

Given the tailored nature of each franchise package referred to in the note above, it's not unreasonable that the amounts might fluctuate from year to year, even if the number of openings is the same. Apart from the franchise fee (from the tone of the note I suspect that the fee charged to an existing franchisee is likely to be less than the fee charged to a new franchisee), most of the revenue relates to a reimbursement of up front costs, including training where appropriate, incurred by CBOX which are likely expensed through staff costs, supplies and professional fees. It's unclear what mark-up, if any, CBOX would make on these recharged expenses e.g. fit out costs may be recharged at cost.

I think more is being made of the potential IHT changes than is merited. I seriously doubt that most long term investors are in the AIM market for the potential IHT benefits.

AIM share prices are notoriously fickle and given that you are required to hold the qualifying AIM shares for a least two years (not all AIM shares qualify for IHT relief) the potential IHT benefits could easily evaporate (or at least be seriously impaired). The way the UK markets have performed over the last 15 years, you could easily invest (say) £1m and end up handing over (say) £600k to your beneficiaries after two years. Okay you might have avoided paying the taxman but your beneficiaries might not have ended up any better off!

Alessandro, RWS is highly cash generative and the £25m initial consideration for PatBase received in May should mean that the debt at 31 March will have been repaid by 30 September (given that there have been no subsequent acquisitions). Also, a further £5m is due before the end of the calendar year. Not so crazy IMO.

Ideally the BoD would have prefererred to buy back the shares at the recent c160p a share rather than at £2+ but that seems to be the way of the world these days. Sometimes it doesn't seem to matter what the management does, traders will always manipulate teh share price to make a turn; I'm beginning to seriously question whether there is any point to investing these days. Apart from a few super rich clients, investment bankers and PE houses seem intent on robbing everybody to line their own pockets! One has to wonder whether there is actually some merit in taxing these people out of the UK markets!

I thought the interim was poor and the update is no better. At the interim the CEO supposedly had "... >90% visibility of full year revenues and with a growing pipeline, the Board believes the Group is well placed to deliver results in line with current market expectations ...". Clearly her foresight isn't up to much and she's wheeling out the old excuses (which may or may not be true). In the meantime, she's still keeping one eye out for potential acquisitions; it rather smacks of fiddling whilst Rome starts to burn.

I've not been impressed with the CEO's communication or her decisiveness thus far. The time to find an acquisition has, in my view, long passed and the surplus cash should now be distributed before the BoD starts becoming desperate. At the moment the surplus cash is earning a paltry 3% (or less) return and we increasingly risk the BoD frittering the money away on an acquisition that's done more to satisfy investors rather than compliment Vicon.

When OMG sold Yotta they intended to concentrate on Vicon and then went out and bought IVS. IVS may have merits and there may be opportunities to cross sell but I'd suggest that it's a distraction from Vicon. OMG has a nasty habot of saying one thing and then doing completely the opposite. OMG didn't really need another new pet project; at least not until the Vicon business had been substantially expanded. You could argue that they've swapped Yotta for IVS. Nobody, least of all me, will complain if they can turn IVS into another Yotta down the road but, in the intervening period, IVS, like Yotta before it, will likely be a drain on working capital/investment and a distraction for both the CEO and BoD from Vicon. Vicon and IVS will remain separate businesses which will likely necessitate separate management, sales, marketing etc. with limited scope for the economies of scale that might have been afforded by a comlimentary Vicon acquisition.

I think it's a bit too early to say that "OMG is not trading well".

OMG suggests that macro economic factors are causing its customers to currently delay/defer orders, rather than cancel; I don't know whether that's true or not, or whether it's just a fact that OMG is losing sales to competitors. Only time will tell.

What's certain is that OMG has committed to R&D spend and has not, as far as I'm aware, scaled back its spend to match its current trading; the upshot being that it's operating margins are being slaughtered.

Personally, I think there's only so much management can do to counteract short term trading downturns (the question is can/should management do more if short term becomes medium/long term) and I'm willing to give them some leeway on that but I cannot accept management being economic with the truth. The last trading update was very poor; rather than say that they were experiencing delays/deferrals they said nothing and allowed the interest income to cover up the cracks. The CEO is on thin ice as far as I'm concerned and needs to brush up her act.

LSE is having another one of those "outage" days which makes me wonder what I'm paying for. The RNS was issued at 7am this morning and can be found in the Investors' section of PEB's website and on the official London Stock Exchange feed. Whether a link up with Nvidia warrants a massive share price spike is open to debate (it's not a contact win) but what is clear is that LSE's data feed has, yet again, failed to provide information to PIs in a timely manner.

Case of caveat emptor? Your opinion, your loss? This isn't showing any signs of turning just yet.

The share price is currently heading towards sub-Covid levels. I agree that, based on past history, the share price should rebound from here. The only question is when to buy in; sub-75p is better than 80p!

Then again, as I've said previously, this may be different. If you strip away the investment income, operational returns were comparatively poor at the interims and the new CEO just glossed over the operational performance in her comments. OMG should not be relying on sub-par investment returns (the interst rates available to companies are significantly less than the rates available to PIs) to bolster its bottom line. Bold, decisive financial management is required and is distinctly lacking at this moment in time.

The BoD should stop chasing "pots of gold" at the end of the rainbow. They've now had more than two years to identify a (large) potential acquisition without success; all they've managed to do is identify another small work in progress. From a financial perspective, IVS is another potential Yotta - it doesn't really mesh with Vicon's business and is in need of financial investment to accelerate its fairly moribund business growth (historically 6% per annum on average). To restore confidence the BoD needs to act now; it needs to distribute OMG's surplus cash without further delay. Holding the cash in the hope that an acquisition might now appear is a fool's folly. Time and time again history shows us BoD's making foolhardy acquisitions for all the wrong motives - ANY acquistion in definitely NOT better than NO acquisition; arguably the IVS acquisition already demonstrates that (IVS is not a bolt-on VICON acquistion, the opportunities for cross-selling appear limited at best and it's a distraction from the BoD's previously attested VICON focus). IVS may be a nice, small business but it needs a lot of work; the same rationale for selling Yotta!

I am a long term investor in OMG but at the moment I despair at the direction in which the BoD are beginning to take the company. They need to focus on growing VICON's turnover and improving its worsening operating margins. I'm hoping this is simply due to increased R&D spend temporarily getting ahead of investment returns (you have to invest before you can grow) but the CEO doesn't see fit to share her thoughts on this with us, allowing investment income to muddy the results presentation instead. Anything else is just a distraction. The surplus cash and the search for a bolt-on acquisition is now becoming just such a distraction.

I am surprised by your "surprise" that the US should be an issue too. Trump is an avowed climate change denier (in public at least) and if he's re-elected plans to roll back Biden's green technology grants/incentives in favour of (cheaper) coal and oil. This would likely have a signficant impact on new green technology investments in the US for at least the next four years and significantly reduce IES's sales opportunities in the US accordingly.

If history is anything to go by, there might be an opportunity shortly to buy at c75p with the reasonable prospect that the share price might rebound to c120p over the next 3-6 months.

Then again, the market might have finally given up the ghost on this BoD actually being able to make a decision. This is no way to run a business. The BoD may be technically astute but financially they seem to be all at sea; they've had two years to find a suitable acquisition and should now be returning the surplus cash without further delay. Retaining surplus cash on the off chance that they might find a suitable acquisition is financially naive.

I'm a long term investor and am used to the share price yo-yoing like this but am slightly concerned that the income earned on the suprlus cash in the last interim results may actually have "hidden" some rather uncomfortable operational failings. The operating return was hideous and well below their medium-term target which, in itself, is fairly lack lustre compared to a few years ago. It's unusual for a business to set out a medium-term plan to grow turnover whilst at the same time reduce operating return. OMG has committed to a higher level of R&D but to what benefit? They seem to want to run faster just to earn the same level of profits as a few years ago. I now fear the BoD need to retain the surplus cash because the interest it's generating is covering up a faltering operating performance. Hopefully I'm wrong and the annual results will show a much better operating performance. If not, the BoD may have a lot of explaining to do and a few heads may need to roll.

Tick, tock! The share price continues to drift lower while the BoD dithers. The share price is beginning to approach the bottom of its recent historical range. It'll be interesting to see if if it rebounds or drifts lower still.

Not quite sure what to make of this statement:

"The Company does not plan to announce further order intake for the E-band SSPA unless they fall outside the expected pattern or are material in the context of our anticipated financial performance."

In accordance with the Strategic Agreement, SpaceX now needs to make annual minimal orders of $10m to avoid the warrants lapsing (so they are going to need to confirm that SpaceX is making the necessary minimal orders) and I would consider orders of $10m per annum to be material to FTC's financial performance. With anticipated annual sales now in the region of £35-£45m they'd probably need to disclose any new orders of (say) £2m+.

I think people continue to overdo DLG's previous faux-pas. I've always been of the view that the previous DLG management saw an opportunity after Covid to try and increase customer numbers by undercutting their competitors and ran full tilt into a maelstrom, the likes of which nobody had previously seen (nobody ever foresaw the price of second-hand cars exceeding the list price of new cars).

With the benefit of hindsight they look foolish but, at the outset, I'm sure their competitors didn't think so (now they're just glad that they dodged the bullet). I don't think any of the major insurers had predicted ahead of time that the market would be as challenging. Indeed I'm not aware of any major insurers foretelling the woes that would be caused by the supply-side breakdown. They might initially have expected some short-term problems but I'm not sure that anybody anticiapted that it would take 18+ months to resolve the chip supply shortage (I don't recollect anything akin in the last 40-50 years).

Obviously the problem was further compounded for DLG by their re-insurance policy and, perhaps, none of these problems would have come to pass if the management hadn't been trying so desperately to sustain an excessive dividend. Something had to give. The share price might not have cratered as much if they'd simply cut the dividend but that's hindsight for you ;-) Unfortunately they decided to jump out of the pan and simply laned in the fire!

Winslow is a new broom and has bitten the bullet to consign one of DLGs USPs (not to use price comparison websites); he's open to change and should be given credit for that. Direct Line and Churchill are strong, well known brands. They can, and will, prosper again.

As regards future dividends, I think that too many DLG shareholders are ignoring the fact that DLG has had to dispose of a highly profitable commercial business to rebuild its balance sheet. Even if they try to re-build the commercial business it will take years.

DLG's dividend will rise but I have a suspicion that it will disappoint if Winslow wants to stick to his 60% target. Across the industry, despite recent increases in insurance premiums, combined ratios in the mid-90s, rather than the low-90s, appear to have become the norm and, despite improvements in performamce, I'd be very surprised if DLG fired on all cylinders in 2024. I also think that it's important that Winslow abides by his 60% target, otherise he risks falling into the same trap as the previous management. The current dividend consensus amongst analysts would suggest that they expect DLG to lapse into its old habits; we'll have to see. Personally, I've pencilled in a cautionary 6p for 2024 and 10p for 2025.

Long term investors should want Winslow to stick to his 60% target because that will give DLG the scope to invest and grow its business; overpaying dividends now will only reduce investment and sacrifice future potential growth.

By my calculations, FTC is currently trading on a forecast 2025 PEG of 0.69 and a forecast 2026 PEG of 0.54; a PEG of less than 1 is usually considered to be a good BUY signal (according to Jim Slater's Zulu Principle). Also, FTC only currently supplies its communications antennae for use in ground-based satellite stations but, subject to the outcome of ongoing customer projects, there is a distinct possibilty that they might soon be approved/supplying for use in satellites too. FTC will never be a high volume business (like its pre-2000 incarnation) but it can carve out a very profitable high end, niche communications business with potential sales in excess of £50m within the next 2-5 years.