Member Info for TheTrotsky

jc1220, The receivables figure has to be considered in context. There was a ramp up in sales in H2 last year and, I suspect because of supply chain issues, a lot of those orders didn't go out of the door until Q4. It should also be borne in mind that the receivables figures will include sales taxes (so aren't directly comparable to turnover). Also, a lot of Modern Water orders are not only going to government agencies (who are notoriously slow players the world over) but may also have additional installation clauses in their contracts (the contract might not be deemed complete until installed and operational). Not sure how DVRG accounts for these sales (on shipment or on installation/operational). I think we should wait for the H1 results to see what the closing H1 receivables figure looks like before drawing any hard conclusions (hopefully most, if not all, of that year end receivables figure will have been collected in H1). However, I think it's fair to conclude that, with such rapid growth there is going to be an inevitable time lag between income recognition in the accounts and collection of debts, and that's why DVRG has negotiated such a large revolving credit facility (a defacto invoice discounting facility).

Which accounts are you referring to Netz? The latest interim accounts to 31 December show £348k cash. That said, the cash burn doesn't look too bad; the cash might be enough to cover them to the end of December under normal circumstances if you ignore the c£350k of net trade and other payables at 31 December! They definitely appear to need more cash and soon, unless they are due any milestone payments from their partners.

robleo, Never overlook diversification; its not good to have all your eggs in one basket. There are a number of companies offering decent yields (over 6%+) outside the insurance sector if you care to look.

On the flip side you might like to have the self-storage sector, the yields aren't as good but the long term growth prospects are currently excellent. I first bought Safestore back in 2017 at 381p. Five years later the shares have nearly tripled in value and my original holding is now yielding 6.5%. Ignore EPS and concentrate on adjusted EPS (property revaluations tend to flatter the bottom line and be cyclical but don't pay the dividends). The sector has taken a bit of a bashing over the last six months (at the beginning of the year I was looking at close to a fourfold increase in value) but they are actually the type of business that can thrive in recession (when the housing market starts to stall people start using self-storage). The sector is still quite fragmented in Europe (compared to the USA) and fairly nascent. Safestore, unlike Big Yellow and Lok N Store, has a presence in Europe. Also make sure to understand the figures e.g. new units coming on-line can flatter/distort year on year growth rates (always check out like for like growth). I honestly think that Safestore, Big Yellow and Lok N Store could all easily double in the next five years (I've recently bought some Lok N Store because I think that could be set to do a Safestore in the next five years as its new property pipeline comes on-line), if not more, because the European market is ripe for consolidation and, if US market is anything to go by, there remains good scope for above inflation storage rate increases.

TDinvestor, I think we should ignore Peaky and his ilk. He clearly has an agenda to bash ANG. He repeatedly posts negative comments but refuses to answer simples questions. I've asked him twice whether his online price for hooks included P&P and he's failed to respond. He's not interested in any discussion. Ignore.

To invest or not to invest that is the question. Personally, I am investing for long term income and, at these current prices, am willing to accept some (hopefully) short term capital losses to secure the good yields on offer, assuming that current dividend payments are maintainable (whether future dividend growth rates will have been impacted is probably the more pertinent question at the moment). It's always nicer to get even higher dividend yields if the opportunity affords itself but I'm not in the business of trying to guess the top and bottom of the market.

My conundrum is however slightly easier; I don't have any large lump sums to invest at the moment. I'm simply reinvesting small sums accumulated from my dividends as, and when, the opportunity arises. The question you have to ask yourself is how much further do you think the market could fall (the economic situation could certainly get a lot worse but markets don't always follow the short term economic trend because at the end of the day there are always funds on the sidelines waiting to be invested) and what income (dividends) might you have to forego before that point comes e.g. if you think the market might fall a further (say) 10% in the next year is it worth foregoing a dividend yield of (say) 8% on the possibility of something that might not occur.

Gary, I strongly recommend that you don't invest in insurance companies because you clearly don't understand how they run their businesses. At the end of 2021, AV managed £152bn of savings and retirement funds. Check out the balance sheet; you won't find those funds anywhere in AV's fixed assets (because they are held as nominee on behalf of their customers). Further, if you do look at the balance sheet, you will find that AV itslef held just £265m of financial investments, of which £95m was invested in equities. Of those £95m invested in equities, only £1m was actually held for shareholders. AV is not immune to stock market falls but their exposure is primarily via a reduction in the investment fees earned from the assets under management. PS. I would totally agree that greater understanding is needed on your part.

Shandy, In H2 total outflows were c£6m, of which c£3m related to an increase in net trade debtors and other receivables, c£2m was spent on development costs (which are going to be amortised to the P&L over the next 5-10 years), c£0.8m was paid on corporate taxes and c£1.7m was spent on finance leases. You can't expand without spending money upfront, which was the whole purpose of the fundraising.

In H1, net cash used in operations was c£2.7m whereas in H2 it was c£2m but whereas about £3m of cash was used in H1 to fund operating losses and a further c£1m was used to reapy loans, in H2 they actually generated an operating surplus of c£1m once you strip out the increase in net debtors and corporate tax payments referred to above. We can argue about the capitalistion and amortisation of development costs. There are arguments both for and against capitalising such expenses but the reality is that without upfront development you don't generate rising backend revenues. The finance lease payments and the expansion of the production facility ought to be self-explanatory.

Bottom line. Yes they are spending money but they are certainly not burning it. They are spending the money in the critical areas needed to expand the business, not frittering it away as you imply. They raised the money to fund expansion not to sit in their bank account earning interest. You can't more than double your turnover without outlaying upfront cash and their new £25m financing facility enables them to finance the net increase in trade debtors and receivables that will inevitably be needed this year if they are to reach their c£24m turnover target (it's unavoidable). The trick is to ensure that you have sufficient financing to tide you over until you collect your receivables and I see nothing untoward in these figures to suggest that will be a problem. I currently expect them to generate c£1m EBITDA profit in H1 if they generate £7m-£8m of sales.

Gary, If you are suggesting that insurance companies invest in shares on their own account you are very much wide of the mark. They invest as nominee on behalf of their customers and charge their customers an investment fee which is usually a set percentage of the assets under management (AUM). Obviously if the AUM fall as a result of stock market falls then the investment fees will fall correspondingly but this will be partially offset by increased bank interest income. It should also be born in mind that both AV and LGEN have significant general insurance businesses and insurance premiums are rising.

Why do you think stock market falls will impact their surplus cash? There may some uninsured exposure through legacy defined benefit schemes but defined contribution schemes should not affect their surplus cash. Please explain your logic.

Shandy, The suggestion that DVRG has burnt through £6m of cash in H2 is a complete misnomer. You need to read note the consolidated cash flow statement in conjunction with notes 15 and 28.

Firstly, it has expended £2.4m in the year on development costs that will be amortised over the next 5-10 years. This is not unusual for a company of DVRG's nature and would be in line with its future business growth (it's an incovenient truth that you have to spend to grow and diversify). Secondly, it has expended £1m on corporate taxes in the current year. This is an inevitable consequence of some companies within the group having become profitable and being unable to tap historic tax losses accumulated by other group companies e.g. before 2017 tax losses incurred by UK companies became "locked-in" if they couldn't be immediately surrendered to offset profits in other UK group member companies and effectively can only be used against future against profits arising from the same trade (generally within the same company). Thirdly there has been a £5m increase in trade and other receivables year on year. This is in part due to the heavy weighting of sales to H2 and the fact that governments, in particular, are notoriously slow payers. This money isn't "burnt".

The reality is that DVRG is growing very rapidly and, as such, DVRG needs a large amount of working capital (cash) to be able to fund itself between the time it incurs expenditure on manufacturing goods and when it receives payment for those goods (this is particularly true of Modern Water's equipment). Invoice discounting might be an alternative form of financing but it generally costs as much as DVRG's new debt facility.

Peaky, If I recollect from the last results presentation ANG only has one UK warehouse and that's somewhere in Norfolk if my memory serves (hardly a central UK location) and I wouldn't therefore be wholly surprised if ANG is fulfilling many of its online orders from its retail shop network. ANG sees its retail shop network playing an important, and profitable, role in its UK business expansion. Having a decentralised online fulfillment system may not be considered the most efficient way of running an online business but it does allow the shops to serve a dual purpose, increase staff utilisation and, importantly, help increase the brand awareness amongst dedicated anglers.

PS. You never said whether the fish hooks inlcuded P&P. It would be unusual for a small (sub £10), one-off purchase to be so much cheaper online once you have factored in P&P.

Newuncle, Have a look at TP's research note from August 2021 (on which current 2022 expectations are based) below:

https://www.deepverge.com/wp-content/uploads/2021/08/Deepvergeplc_Research_Update_3August2021__FINAL_BGv2.pdf

You will note that DVRG is projected to generate c£5m of comprehensive income, akin to PBT in UK parlance, if it generates £24m of turnover. I think if DVRG was to achieve PBT of c£5m this year we'd all expect a significant re-rating in DVRG's share price. Obviously the economic outlook has much changed since TP issued it's broker note and it remains to be seen whether DVRG can still achieve PBT of c£5m even it turnover does hit £24m. So, that's the first caveat. Secondly, I wouldn't be surprised to see a similar turnover weighting towards H2 this year as last and, as such, I think we will be kept waiting in suspense until early next year before there is any signficant re-rating (hopefully I'm wrong but I'm being prudent).

To be honest, I don't see anything in today's release that we didn't already know. DVRG has deliberately (as last year) kept quiet on its Q2 performance and we will probably need to wait until the interim results are released in September to learn more (I would hope that GB would limit any further announcements between now and then to order updates and or other tangible news, rather than his usual diet of tantalising titbits that the whole market is sick of listening to, if the share price is anything to judge by). As I've said previously, I think we need to see £7m-£8m of turnover in H1 if we are to have a realistic chance of achieving £24m this year.

Newuncle, Groups are required to assess the recoverability of inter-company debts and, as such, can choose to write down or waive (forgive) debts if appropriate. Both adjustments effectively disappear on consolidation in the group accounts but, at the entity company level, a write down is a "one-sided" provision (the liability to pay all or part of the debt is provided in the payee but not in the payer) which may be reversed at a later date if the debt is subsequently reassessed as recoverable, whereas a waiver is accounted in both companies and is "permanent". Neither inter-company provisions nor debt waivers have any UK tax bearing (the transactions are excluded in computing taxable profits/losses).

The fact that the term forgiven was used suggests that the £3.2m was permanently waived. It would appear that the group considers the remaining £1.2m to still be recoverable i.e Innoven UK is expected to be generate sufficient future profits to enable it to repay the inter-company debt.

In a group context, whether or not a debt is waived is largely irrelevant; it generally has no bearing on the group's borrowing capabilities and if the company subsequently recovers and becomes profitable, it can always pay inter-company dividends which are neither taxable or deductible for UK tax purposes. However, a debt waiver can improve the balance sheet of the payer and can be advantageous in the event of a future sale or listing. I wouldn't read too much into it at this juncture (from the group's perspective, waiving all, or part, of the debt can be administratively easier and more pragmatic - no longer have to continuously re-assess the recoverability of the debt each and every year). The fact that some of the debt wasn't forgiven may simply have been a reflection of the group's short term income expectations (to assess the recoverability of a debt you have to project future cash flows and the further forward you project the less certain those projections become); it may just reflect their next 2-3 year income expectations.

Retireby40, The researh note doesn't add anything new but I would suggest you actually read whole sentences rather than selectively reading the start and end of sentences. The note says that turnover was £9.3m but that orders exceeded £10m. It does not say that turnover exceeded £10m!

If anybody had cared to notice, these are consolidated results. Management charges made to wholly owned subsidiaries by the parent company are irrelevant; they disappear on consolidation and, as such, they neither affect turnover or operating expenses of the group. Management charges are not directors' remuneration; they are internal recharges within the group. The management charges are only dislcosed because they affect the parent company and are required to be disclosed for accounting purposes. As Dingodog says, they are normal practise within groups, particularly if the parent company incurs HQ costs and does not generate income from trading.

In the past UK companies used management charges to avoid losses becoming "trapped" in non-trading companies and, where applicable, to try and fully utilise the small companies tax band band, but management charges have become less important from a UK tax perspective since the tax losses and group relief rules were reformed in 2017 and the mainstream rate of tax and the small companies rate were aligned in FY16 (the rates will be out of alignment again from FY23 onwards).

Management charges can be effective for tax purposes between different tax jurisdictions, to the extent that you are able to shifft profits from higher tax jurisdictions to the UK, but their effectiveness is limited by transfer pricing and the converse can also be true e.g. shifting profits from Irish companies to UK companies is unlikely to be tax beneficial (assuming both have taxable profits and aren't utilising historical tax losses). Bottom line, management charges are now less about saving corporation tax than they once were and more about redistributing central overheads to reflect a more accurate economic picture.

LTI you clearly have your head in the sand. We lose c13k truck drivers and yet we are still supposedly better off than the EU? Have you actually looked at the size of the EU population relative to the UK? The EU currently has a population of c447m whereas the UK has a population of c67m; then per capita, if the EU was short ot c400k truck drivers then you'd expect the UK to require c60k truck drivers or, if the UK was short of c90k truck drivers, then per capita you'd expect the EU to require c600k truck drivers. We need more truck drivers per capita than the EU, so the point you are trying and failing to make is an own goal.

I rest my case! Figures were never a Brexiter strongpoint!

LTI, High employment tells us nothing. It may be due to Brexit, it may not. The fact that the UK's population is aging means that we were already facing higher demand before Brexit. However, I'm willing to concede that because Brexit has reduced the available worker pool there are more job vacancies and likley more of the UK population in jobs. Whether that is a good thing in the longer-term remains to be seen; it's likely to lead to wage inlfation. Personally, I think some wage inflation is long overdue but I'm sure the economists amogst us will tell us that that is a slippery slope.

I'm over Brexit and willing to discuss both the pros and the cons but clearly you are not. GET OVER IT. If Jacob Rees Mogg's 50-year mantra is correct then you are clearly in the wrong because he is effectively saying that the UK would be in a better position today if we were still in the EU (he's willing to trade off today for a better future in 50 years time). Personally, I think he's talking tripe but we'll never be able to prove the point one way or the other.

LTI, My mate, a Brexit supporter, told me that we were short of c90k truck drivers last year and that c13k truck drivers left the UK because of Brexit. Now, tell me with a straight face that the loss of c13k truck drivers has zero impact! I've already said that Brexit wasn't the primary problem but that does not mean that it's having zero impact!

LTI, Have you actually looked at the WTO regulations? I did. You can play King **** all you like but us gown-ups know that actions do have consequences and that people, like you and Boris, who sit in their ivory towers telling us that it's all going to be plain sailing need to be institutionalised. I'm over Brexit; now I'm dealing with the aftermath.

LTI, Get your head out of your probverbial and read what I actually said rather than what you think I said. I said the problem was inevitably being exasperated but that it wasn't the primary cause. GET OVER IT. Everything is not bright and beautiful in the Brexit garden; there are financial consequences (even Jacob Rees Mogg expects it to take 50 years for the benefits to be manifest). Some of the financial consquences will be short-lived; some will be longer term. We can't turn back the the clock, and I'm not asking to turn back the clock, but to refuse to accept that Brexit is causing any problems is obtuse. We can agree to disagree on the quantum of the problem but total denial is daft.

LTI, The current NI situation is a result of Brexit. GET OVER IT. Everybody, apart from Brexiters, understood that if we wanted to maintain the Good Friday Agreement (and avodi a repeat of the Troubles) we'd have to agree to customs checks on all goods moving between the UK and NI. The protocol did not provide for the free movement of any goods and, if the UK chooses to implement the articles in question, it will not only breach the Good Friday Agreement but will also breach WTO regulations. You need to compromise because absolutely nobody outside of the UK (including the USA) has an ounce of sympathy for the UK's position.