The next focusIR Investor Webinar takes places on 14th May with guest speakers from Blue Whale Growth Fund, Taseko Mines, Kavango Resources and CQS Natural Resources fund. Please register here.
You're quite right, I did overstate it.
I was going off this line in the report:
"Operating cashflows before new investments and corporation tax (non-statutory layout) increased to
£2.8m in FY21 (FY20: cash outflow of £0.8m) hence cash inflows from completed cases exceeded
payments to lawyers and IPs incurred on those cases and all overhead payments"
So the cash flow position is definitely improving, which I take as an extremely positive sign since this is, to me, the biggest flag around the business model. But it is not yet positive.
The cash flow statement also provides a powerful argument for why dividends feel premature right now :-/
Also following up to my point on cash flows, I'd be happier if there were NO dividend. MANO is attempting to grow at warp speed in a business where there is severe lag in cash flows, and in a situation where we know there will be less cash next year. Cash is precious, and they shouldn't be wasting it on a miserly dividend.
On the face of it the results are good, but there is still some risk here.
MANO is focussing heavily on growth. The fact that it was able to complete enough cases this FY to overall increase revenue is good, but also expected, as it reflects the growing number of cases taken on in previous years.
in 2019 the number of cases was 61, and in 2020 it was 141, so ~130% growth. In 2021 it was 198, so "only" 40% growth - a significant slowdown.
Again this is expected, but it means we shouldn't forget the impact the current moratorium will have on next year's results, where there will be far fewer cases than there "should" have been able to complete.
To me the big news here is that MANO was cash generative this year, and has access to plenty of credit, which gives me confidence that they can get through a cash-flow-poor year (i.e. next year) without having to raise capital from the markets.
The extension of the moratorium on WUPs is definitely a blow though, as is the new "arbitration mechanic" announced by the government (and not menioned in MANO's results) that may complicate the picture further.
Hats off Paddy, great call!
Completely agree that this is a broad market sentiment issue. Less convinced that this will fly back upwards today. But I can't imagine this being below 350 3 months from now, unless there's some very bad COVID news before then.
Just topped up. Couldn't resist. This price is crazy.
Also bear in mind that historically NEX was viewed as a dividend share, but it hasn't been paying dividends since COVID. That won't be the case forever; when (not if) NEX returns to profitability and reinstates the dividend the price should see an uptick (if it hasn't already).
Agreed. This company has a proven track record, is operating in an industry that is not about to disappear, and has been gobbling up contracts while competitors have floundered. If the price continues to go down I believe the correct thing to do would be to buy more (I won't, but only because my portfolio is already approaching 50% NEX already).
I can't see anything bad...
4th biggest drop on the FTSE 250.
FGP is the biggest drop - but they have a bunch of their own problems. Are we just getting dragged down?
Or is this a wobble over the new variant? Or something else?
Haha well massive kudos for your honesty! I too am feeling foolish for being lured in by this value trap, am likely to be seeking the exits very soon.
Fair enough. Out of interest, what made you reach this conclusion 2 weeks after the update?
There's a grim irony that this company in particular hasn't bothered to set up a virtual event to host its AGM...
Hmm yes - while on the one hand I can see that the message of "we have access to tons of cash" is a good thing to tell potential customers, it doesn't sound great for us investors.
OTOH, at least he was careful to add "if ever required".
The Feb presentation mentions the £20m HSBC facility, of which, at the time of writing, only £8m had been drawn down. Between the remaining loan available and the fact that incoming cash from previous cases is apparently enough to cover costs, I'm hopeful that they won't need to turn to the markets to raise cash.
The interesting thing here is that the dry period for the last ~year almost certainly will lead to cash flow problems at some point in the future - maybe 6-12 months - because of the delays involved. But at the point where that starts to bite, if all goes to plan, MANO will be snowed under with work from all the pent-up cases and will probably be in a much stronger position to borrow money - again, the business model will be proven; current trading will be rampant; and the short-term cash-flow hole that needs plugging would be a very understandable blip.
Then we start getting into areas that I find very hard to judge. Will MANO be able to take out more loans easily enough, based on the above? Woud they turn to the markets instead? If so, would the SP have risen already to reflect the fact that business is booming, or would it still be dampened because of exactly these uncertainties? That would affect the degree of dilution, which would make a low share price even lower...
Long term I'm very positive about MANO, and I think this is a great price to be in at. Medium term I'm a little concerned by the above - and it may mean that it takes longer to realise the returns than I'd otherwise like. Maybe the sensible thing would be to come back later - but with all the unknowns the timing would be very difficult. And with fewer unknowns - more certainty - the price will likely rise, and I don't want to miss out on that. I do know that I'm happy owning at this price, so I'll make do with that!
This article gives the slightly less pessimistic view of the current variant debate https://www.bbc.co.uk/news/health-57150871
Ugh yeah that is grim, but I still think there is light at the end of the tunnel. There is mounting evidence that the vaccine works against the Indian variant and, small hesistant populations aside, the uptake has been fantastic.
But it would certainly be a blow to MANO if the insolvency freeze was extended again.
Trading in and out feels essentially like gambling though. I'm in this for the long term, and whether the turnaround comes in one month or four makes little difference.
Apart from the obvious thing holding the price down - the insolvency freeze - I suspect the complex and opaque accounting of these companies is a turn-off for many, which is reasonable (but could also be an oppurtunity). The main leap of faith is accepting that actual cash flow lags recognised revenues by some considerable time period. This leads to "dodgy" looking accounts that claim to be super profitable while consistently showing low or negative cash flows, but if you accept that that is just what the accounting model is for these companies - and that e.g. ROIC can't be like-for-like compared with other industries in a meaningful way - then it no longer seems suspicious. Essentially it seems similar to capitalising R&D.
Note the low cash flows are also why MANO can't realistically pay much of a dividend.
MANO is growing, taking on more staff and cases each year (Covid mega-blip aside), and for the last few years the cash from the previous year's cases (or the year before's) haven't been enough to cover the current year's operations, hence borrowing and floating. However, in their Feb shareholder presentation they explicitly state that they have now reached the point where cash coming in from settled/won cases is enough to cover the current year's costs - i.e. no more need for borrowing, and potential for higher dividend. And if they did want to borrow in order to fund more rapid growth, I would be comfortable - because the business model has been proven to work.
So this feels like an exciting time to be long MANO. It will definitely take time for the market to come around, and any more delays to insolvency proceedings would definitely be bad, but the overall story feels very positive.
The "opening floodgates" of work just waiting for when the insolvency proceedings are able to start again is just icing on the cake.
https://www.telegraph.co.uk/business/2021/05/13/no-social-distancing-buses/
Apparently this hadn't been made clear until just now.
Wonder whether this will give us a little bump tomorrow - GLA
I've never gone through anything like this before - don't suppose there's any chance of us lowly shareholders getting compensated in any way if it turns out there HAS been manipulation?
Mr_Big your first response here made me literally lol, thanks for that! And I take your point - I won't take any legal advice I read here without a dollop of salt, but it's still interesting to read people's thoughts on the matter.
Docdaneeka - why is it suspicious? I "jump on at the weekend" because guess what, that's when I have free time, and this share just recently caught my eye. I "start 2 guaranteed punch up threads" because I'm hoping to understand some of the thorny issues that are extremely pertinent to making an investment in this share. As the responses to the threads show, opinions are still divided, and seeing the different opinions and justifications for them has actually been helpful for me.
It winds me up no end that anyone asking valid questions about a company / investment thesis gets immediately shouted down by the masses.
If your point is that these questions have alreay been asked and answered on this forum, then fair enough - unfortunately LSE doesn't have a good search functionality to go back through old threads to try to find interesting information. But actually, the investment thesis here depends heavily on the pandemic, which is a fast moving situation, so revisitng "answered" questions can still be helpful. And if this forum isn't about answering these questions as they come up, then what is it for exactly? Copy-pasting RNSs and talking into an echo chamber??