Amino Technologies Share Discussion Threads

[speedsgh] 29/10/2015 14:13

from the 2014 annual report...
"During the year the Company’s sales engine has been re-shaped following the appointment of a new VP of Global Sales and additional industry-proven specialists to the team. The team’s renewed energy and sharp focus on customer and partner engagement is now feeding through with evidence of an upturn in tender activity through the second half of the year and stronger lead generation than in previous periods."

rns re VP Global Sales appointment (1/4/2014)...
Amino appoints Karl Tempest-Mitchell as new VP Global Sales -

[lignum] 29/10/2015 08:52

Ps Schroders are obviously comfortable having just gone above 10%.

[lignum] 29/10/2015 08:52

Sharw - agree with that analysis
Vasilis - agree with your observation also, although some finance guys do have some insights into sales pipeline analysis.

In my experience the smaller the number of customers the more difficult it is to forecast sales. The sales concentration at AMO is very high. This also makes it very hard to report on as the directors are effectively describing specific relationships which may not be very helpful if you are in the middle of negotiations with those customers.

[rcturner2] 28/10/2015 18:52

Sharw, that's a useful summary, thanks.

[sharw] 28/10/2015 18:08

Last year's pre-exceptional PTP was £4.2m and the brokers I quoted previously are both saying £4.3m this.

The number of shares in issue during the year is roughly 53m to which we add the 16,153,846 Placing Shares in for a third of the year giving an average of 58.385m for eps purposes. On £4.3m that would give eps 7.36p before tax. The broker figures I quoted (7.0 and 6.6) probably have different tax assumptions (last year's tax was just £29k and there was a £13k refund in H1 this).

RCTurner - the shortfall you refer to is from market expectations, not last year's figure. Prior to this announcement the market expected eps 8.5p.

[vasilis] 28/10/2015 16:35

sharw - you are more than welcome.

Yes, on the whole I would agree that brokers and institutional investors get better access to companies than PIs. But they only get information that the management gives them - and the whole basis of my thoughts above revolve around what exactly consitutes the 'management' at AMO. Bearing in mind that the problem stated in the RNS relates to the sales pipeline, the question is, who at Board level is qualified to fix it, and what exactly IS the problem?

We are talking about the 'life-blood' of the company here - sales - and with respect to accountants, I've never met a 'bean-counter' yet who really understands sales qualification and business prospect analysis. I've met some who think they do - but never any who have actually been really tested in the field and 'smelt the cordite' so as to speak. On that basis, I personally would take any brokers assessment today bearing in mind what I've said above with a large pinch of salt. But as I say, just my point of view.

[imranawan] 28/10/2015 16:34

Shanklin that was my understanding too. I think the share price will be depressed until they issued a TU, as risk/reward at the current level is not in favour of the PI who lacks information about the nature of current trading.

[rcturner2] 28/10/2015 16:33

Exactly, the stock exchange rules are they must warn if they know the shortfall is at least 10%, so at the very least the eps is down by 10%.

[shanklin] 28/10/2015 16:29

Surely its the 2014 PBT they have suggested they will achieve this year, not the EPS.

[rcturner2] 28/10/2015 16:20

I cannot see how they can possibly make those numbers given the large increase in the number of shares in issue. If PBT is the same as last year (as per the RNS) divided by the enlarged number of shares, how can they get to 7p?

[sharw] 28/10/2015 16:07

Vasilis - thanks for that helpful contribution. As you have gathered those of us on this board are still trying to interpret several aspects of this RNS.

FWIW two of the brokers (who have much better contact with the company than us mere PIs) have revised forecasts. FinnCap/Canaccord have EPS for 15 and 16 as 7.0p/6.6p and 8.3p/7.8p. That gives a forward p/e of around 16 and then 12 which strikes me as about right until there is a clearer picture of future prospects.

[vasilis] 28/10/2015 15:24

I've had AMO on my watchlist for a little while now as I was involved with IPTV in the past. I do not therefore hold any shares or other positions but hope you don't mind me sharing the following with you:-

1 The specific reason for what seems to be a significant financial 'hole' was given yesterday as follows in the RNS :-

'The Company has identified that its sales execution efforts in the second half have not been satisfactory. Whilst a small proportion of the trading shortfall is due to the consolidation of certain customers and delays to some orders where the customer is considering the transition to 4K Ultra High Definition (UHD) services, sales execution is the primary factor for the shortfall in revenue. As a consequence, and in order to rapidly improve sales planning and conversion, the Company has implemented a series of targeted actions across the business.'

Right, now look at the composition of the BOD -

These directors have backgrounds in either accountancy, engineering or finance. Where is the Sales/ Marketing Director?

Who exactly has drawn up the sales action plan to 'rapidly improve sales planning and conversion'?

Who on the BOD can really understand what a sales prospect conversion strategy should actually look like and, more importantly, how it should be put into operation in terms of priorities, manpower, budget, offerings etc.?

And bearing in mind the significant change in tone between July and October this year, it's worth having a read of this with regard to the Chairman himself
-

I know that the article is old, but you need to ask yourself whether the phrase 'plus ca change' applies in respect to the way the Chairman behaves in the face of actual and changing facts. How can anyone reconcile the comments made just three months ago with what the Chairman said in yesterday's RNS? It begs the question as to whether the Chairman was somewhat overly optimistic in July and got caught out in the same way that he was over optimistic in his flotation plans when at Fujitsu. Something to consider if nothing else.

2 The key aspect here is why and how the sales function appears to have badly underperformed and when was the underperformance actually identified. Why, for example did the sales tracking system (assuming there is one) not pick this up in July? Are there not monthly sales meetings? If yes, who on the BOD attends them?

For what it's worth I think that RCTurner2 raises some serious and valid points - as do others regarding the finance aspects. The sooner the BOD actually makes clear what the actual problem is then PIs will not know - never mind be able to assess - its impact on the short and medium term prospects of the company.

I hope my comments give food for thought if nothing else. All in my opinion of course.

[rcturner2] 28/10/2015 15:23

lignum, there are 2 possible explanations, one is the acquisition meant that they took their eye off the ball and the other is that the saw a black hole coming and decided to fill it with an acquisition (and issue shares while the price was high).

[lignum] 28/10/2015 14:52

Another case of value destruction via acquisition?
Market cap c 75m within months of forking out 50m on 2 acquisitions leaving core business valued at 25m down from 50m +. Great.

[rcturner2] 28/10/2015 12:47

lignum, my numbers are no more than a guess, and make some probably quite big assumptions about the contribution from Entone.

[lignum] 28/10/2015 12:32

Lack of guidance is a problem but given the concentration of sales it only takes 1 or 2 of their critical customers (e.g. in the US) to delay purchases for there to be a material impact. My question is why have they deferred purchases (which is the opposite side of poor sales execution) - is it (i) because of uncertainty arising from the Entone deal - what's the strategy etc (ii) product set is no longer competitive (iii) other. Until these questions are resolved there will be a risk discount applied to share price

RCT - will be interesting to see what he actual sales drop is - your £10m or my £5m. If it's £10m they must have taken out a lot of cost to achieve the same pre-exceptional PBT.

[rcturner2] 28/10/2015 09:23

I sold yesterday when I worked out the drop in sales as £10m, over half the the H2 when compared to last year. This implies complete incompetence or a business that is extremely vulnerable to changes in customer behaviour. Neither is something I look for in an investment.

[caradog] 28/10/2015 09:13

I, too, have exited today. Suddenly discovering that sales execution is poor and needs company-wide revision doesn't seem plausible, and in the absence of more precise information investors must fear the worst. Incompetent sales people need retraining or replacement. This should quickly put things right provided there is a market demand and the company's products meet that demand. If demand is falling or the company's products aren't competitive, It will take more and longer to put things right, especially when simultaneously integrating 2 acquisitions. Too risky and uncertain for me.

[shanklin] 28/10/2015 08:30

As somebody who exited first thing yesterday...

... the biggest problem I see is AMO's decision not to give more precise details of the reduction in sales in its core business. AMO could have been explicit about this but has instead left investors to guestimate exactly what has happened, as per the posts above attempting to work out what is going on.

How are we meant to trust directors who think its acceptable not to tell investors what has actually happened? Things may well improve in terms of trading but I cannot invest in directors who think its acceptable not to give us more details on WTF is going on.

All IMHO.

Cheers, Martin

[rcturner2] 27/10/2015 20:03

Lignum, many thanks. I did well on this from 80p originally. Very disappointed today, I made my decision I'll move on. I hope they do get the business motoring again for holders.

[mg1982] 27/10/2015 17:34

Martin from PrivatePunter fame said this:

Regular visitors to this site will be aware of my long standing interest in AMINO TECHNOLOGIES, which I have covered here on a number of occasions along with going along to visit the Swavesey HQ.

Although there is never a good time to deliver bad news to the market, I guess Amino’s downbeat Trading update today has left a sour taste in the mouth for holders, given the relative close proximity to previously announced positive Interim results back in the summer.

That had seen the company expressing confidence in meeting market expectations for its full year.

While Amino is not alone in announcing such news and there is nothing new in such things of course, private investors nevertheless gave a big thumbs down to the fact that full year profit will now be lower than expectations, due to a fall in revenues from its core business.

While clearly unwelcome, a fall of close to 30% to £1.10p per share looks a touch overdone to me, particularly with the dividend seemingly intact and now once more presenting a chunky yield

In my last comment on the company I stated.

(AMINO TECHNOLOGIES has also been a great story as previously mentioned here and although on the face of things the current £1.65p share price now looks up with events, delve a little deeper and taking a medium term view, I am perhaps not alone in hoping for further upside from the company which is successfully expanding its product and range.)

To that end, I remain of the view that the medium to longer term story may still present such upside, potenatial, particularly from these revised levels.

The recent acquisitions are, according to the update performing well, which although given their relative limited contribution will not offset a fall in revenue from its established arm, should assist going forward.

While a lack of visibility and lumpy orders have often been part and parcel of the Amino business, someone has clearly taken their eye off the ball in this instance, resulting in today’s news.

The board states that it is addressing issues, which I presume will no doubt see some head rolling, if my reading between the lines of the following comments are correct.

“The company has identified that its sales execution efforts in the second half have not been satisfactory”.

In terms of full year numbers, pre-tax profits of £4.3m are now expected against a previous estimate of £5,7m while there should be a small net cash, or breakeven position on the balance sheet.

While the previously hefty cash cushion has gone, through the acquisitions that were made, I am still of the opinion that in terms of the longer term picture it will prove to be the correct strategy.

Amino has been through similar, if not quite as bad situations before and bounced back, defying critics who cited it as being ex-growth.

Part of its new path is one of diversification, which given the changing and competitiveness of its market must surely be essential to secure an ongoing growth in revenue, profits and dividends and hopefully it will transpire that this proves merely to be a short term step backwards.

Further ahead, revised forecasts are now anticipating pre-tax profits of £7.8m for next year, with EPS of 8.8p and an improving net cash position of £2.5m.

That would imply a forward PER of just over 12, backed up by a yield of 5%, which on such measures looks to offer decent value.

While the news today has clearly been enough for some, I won’t be writing Amino off on the back of this and it should be interesting to see if there is any change or movement regarding some of the major institutions on board.

[lignum] 27/10/2015 17:08

Masurenguy - yep, back to where we were - the market clearly wasn't factoring in any execution risk. I don't think we'll get any more clarity until full year results are out.

[masurenguy] 27/10/2015 16:57

"if they do achieve £68m, £8m of PTP should be achievable."

lignum - if they were to achieve this then the eps should be circa 11p. On a forward PER of circa 12.5 - 15 the shareprice could then be in the range of 140p - 165p with some net cash also factored in.

[lignum] 27/10/2015 16:47

RCT - I'm a long term holder here.

The announcement says that (i) there is a revenue shortfall in core ops (ii) Pre-exceptional PBT will be in line with FY14.

Pre-exceptional PBT in FY14 was £4.2m.
H1 Pre-exceptional PBT was £2.8m (assuming Duty refund is exceptional).
Therefore H2 pre-exceptional should be c £1.4m (excluding additional amortisation from acquisitions).

Entone revenues 11 months to 31 May 15 were $47m (c £30m) with ebitda of $5.1m (c £3.3m). This is ebitda run rate of c £0.3m pm. Accounts are based on US GAAP so R&D is expensed as incurred with no R&D amortisation; ebitda can be used as proxy for PBT.

Booxmedia appears insignificant from revenue / ebitda perspective (H1 revenues c £0.6m ebitda nil)

Putting these pieces together:
H1 PBT £2.8m H2 forecast (ignoring amortisation on acquisitions) £1.4m Total £4.2m
If H2 consists of £1.2m from Entone (4 months assuming run rate to May) then core Amino will be slightly positive £0.2m. At 50% margins a reduction in H1 pbt £2.8m to £0.2m in H2 would correspond to c £5m reduction in sales (to c 13-£14m).

Almost all sales in US and Holland (2/3rds of total core sales) are to 3 customers and it would not be a complete surprise if the US customers said whoaah - let's just wait and see what's going on here. Let's just put some orders on hold until we know what the strategy is.

Sales were also already trending down in Europe (it was the US that was performing well in H1). e.g. sales to Serbia £3.6m in Fy14 but no mention in H1 FY15; sales to Chile £2.4m in Fy14 but only a substantial order in H1 15.

I'm not saying I'm not nervous - I had my finger hovering over the sell button a couple of times today but having travelled so far with them I am inclined to give them another shot. I also take comfort from the management team who appear to be at the other end of the spectrum to the GBO bandits. They understand the need to rationalise and this todays share price reaction will hopefully encourage prompt action.

Re Canaccord Fy16 estimates of £68m - these look like they will be split roughly 50%/50% between core Amino and Entone so any reorganisation needs to managed carefully as there is big execution risk. But if they do achieve £68m, £8m of PTP should be achievable.