Arcontech Share Discussion Threads

[multibagger] 13/4/2016 18:32

Usual for ARC to drop on low volumes....nothing new here sadly.

[janeann] 13/4/2016 11:47

going in the wrong direction at present......any reason for the decline that anyone is aware?

[multibagger] 02/4/2016 21:08

Would ARC be affected if we Brexit ? Apparently a lot of banks would move operations to continent according to BoE assessment...

[multibagger] 02/4/2016 21:07

Let's see what the BOD choose to do....

[napoleon 14th] 02/4/2016 09:51

I prefer share buybacks or an expanded business through R & D investment &/or successful acquisition(s).

If/when the company becomes profitable, its' profits remain tax free until the balance of accumulated losses are absorbed by profits, which does a world of good to the cash position since there is no corporation tax to pay as long as the P/L has a negative balance. Crediting the SPA to the P/L A/C wipes out the negative balance and the tax advantage with it.

The cash available can be used to buy back & cancel shares, thereby boosting eps
& the inherent value of the shares since they represent a reduced number of units by which you divide profits for eps & assets for nav, which is good for shareholders without wasting cash on corporation tax which, once paid, is never retrievable, regardless of what may happen afterwards.

[multibagger] 18/3/2016 08:40

I would have expected to see some upward move on a 2m trade, but nothing as yet.

Nevertheless, good to see a £7k trade - big by ARC standards !

You are most welcome Janeann.

Good luck all :)

[oilbuy] 18/3/2016 08:33

2M buy full ask !

[janeann] 18/3/2016 07:53

many thanks; need to read that through a few times to even start to understand it! Or I might jump to the rather exciting conclusion that they now have 9.4million to spend on dividends!

All in all as you say, another positive step in the development of the company.

[multibagger] 17/3/2016 19:36

From the Notice to AGM which was held on 26 Jan 2016....


Reduction of Capital (Resolution 6)
Background to the proposal
The 2006 Act establishes criteria which govern whether a company that wishes to pay a dividend may lawfully do so. Two such criteria are that, first, the company has sufficient distributable reserves standing to the credit of
46192029-5
5
Notice of the Annual General Meeting (continued)
its profit and loss account and, second, that the board of directors (“Board”) has satisfied itself by reference to
relevant accounts that such level of distributable reserves is present.
The financial year of the Company is from 1 July to 30 June. The Board needs, by reference to relevant accounts, to be able to demonstrate that it is satisfied that such dividends can be declared on each occasion that it wishes to pay them by reference both to the cash position of the Company and the distributable reserves standing to the credit of the Company’s profit and loss account. The proposal to cancel the share premium account (“SPA”) of the Company concerns the creation of distributable reserves; the financial statements of the Company for the period ended 30 June 2015 show retained losses of £7,797,685, and currently the Company is unable to pay any dividend to its shareholders.
The Group, the Directors believe, should in the foreseeable future see its history of making losses turn to the making of profits. Accordingly, the Directors anticipate that the Company should be in a position to pay dividends to shareholders within the next few years. The Directors believe that the Company’s dividend policy should be dictated by its cash resources, financial position and prospects of the Group as a whole. It should not be impeded by the size of the Company’s accumulated profit and loss account, which is a technical accounting reserve, if it is otherwise appropriate to pay dividends. Accordingly, the Directors believe that the Company should now restructure its balance sheet by removing (by reducing to nil) its share premium account since that share premium account is a reserve which is not available for distribution by way of cash dividends to shareholders. As a result of the cancellation of the share premium account, the Company’s accumulated profit and loss account, which is available for distribution, will be increased by the amount of the share premium account. This will provide the Company with the capacity to pay dividends in the future in accordance with the dividend policy determined by the Board.
Cancellation of Share Premium Account
Share premium arises on the issue by the Company of shares at a premium to their nominal value. The premium is credited to the SPA. The SPA is an undistributable capital reserve and the Company’s ability to use the SPA is limited by the 2006 Act. However, with the approval of shareholders by special resolution and the subsequent confirmation of the High Court, a company may reduce or cancel its SPA and in certain circumstances be permitted to credit the sum arising to the profit and loss account. Such sum once the capital reduction takes effect is treated as a realised profit of the Company.
Accordingly, the Board proposes that the SPA in the sum as at the date of the passing of the special resolution be cancelled (“Cancellation”) and the sum arising be credited to the profit and loss account of the Company. The amount currently standing to the credit of the SPA is £9,430,312.
In order to effect the Cancellation the Company requires, first, the authority of its shareholders by the passing of the special resolution number six at the AGM. If the special resolution is duly passed, the Company will then apply to the High Court for the Cancellation to be confirmed. If successful, the Cancellation is expected to take effect before the middle of February 2016. An announcement through a regulated news service will be made at that time.
In order to approve the Cancellation, the Court will need to be satisfied that the interests of the Company’s creditors will not be prejudiced by the Cancellation. For the benefit of certain creditors who either do not consent or who the Board decides not to approach, the Company may be required to provide security in a form acceptable to the Court in order for the Cancellation to be confirmed on terms which meet the objectives of the Board in making this proposal.
The Company does not currently have any such creditors but in the event that a creditor arises between the date of this notice and the Cancellation then the Company may be required to obtain the consent of such creditor to the Cancellation. If the Company is unable in the timetable proposed to obtain a consent from, or is unwilling or unable to provide security (where security is required) for all such creditors, then the amount released by the Cancellation when the Cancellation takes effect will remain undistributable for the time being until outstanding consents are obtained, security provided or the obligations discharged. The Board therefore reserves the right to discontinue, postpone or delay the application to Court if the Board believes that the terms upon which the Cancellation will be confirmed are unsatisfactory to the Company.
46192029-5
6
Notice of the Annual General Meeting (continued)
The Cancellation does not affect the voting or dividend rights of the Ordinary Shares, or the rights of any holder of Ordinary Shares on a return of capital.

[multibagger] 17/3/2016 19:16

"From accountingweb query.....so the effect is a non distributable reserve is converted into a distributable one :)

......The purpose of the cancelliation of the Share Premium Account.

From the information you have provided, I gather that the company's profit and loss account has a huge deficit and you have applied to the High Court to cancel the Share Premium Account. The Share Premium Account Cancellation becomes effective once a copy of the order of the High Court confirming the reduction is registered with the Registrar of Companies. The whole point of cancelling the Share Premium Account is so that it can be changed from being a non-distributable reserve to being a distributable reserve. The resulting distributable reserve can then be applied in reducing the accumulated deficit on the Company's profit and loss account. As you are no doubt aware, the Share Premium cancellation requires the approval of the Company's shareholders at an extraordinary general meeting.

All you need to do now is to simply transfer the balance in the Special distributable reserve account to the profit and loss account and thereby reduce the deficit. This in effect eliminates the special reserve account from the balance sheet, leaving a small balance in the profit and loss account accumulated deficit."

[multibagger] 17/3/2016 19:11

Hi Janeann - I'm no accountant so my knowledge on this technical area is very rudimentary. From a pragmatic note, the implications for us investors is that the company can now pay a dividend, whereas they could not do so in the past. This was the legal hurdle that needed to be cleared.

We know that we have £1.8m cash and no debt - in other words some of this money needs to come back to us (barring any other plans for the funds such as an acquisition) as fractional owners of the business.

The company is profit making in a sustainable manner and the Board has said that the intention is to pay a dividend...so this is what I expect will happen.

If we get our dividends before the end of this tax year, then we may be better off given that the taxation of dividends is going to change in the new financial year - but this is unlikely to happen, as I imagine the timeframe would be too tight and there may be other procedural issues to sort out.

I hope there is someone else on this board who may be able to explain the financial aspects of this issue better.

[janeann] 17/3/2016 17:02

thanks multibagger - saw the series of trades and was wondering - but because of the mornings rns hadn't looked for a second one; Agree a positive step.

Ps please can you explain the background re the share premium account - looked back a few results but cant find any mention of it.

[multibagger] 17/3/2016 16:33

Always a good sign when the Chief Exec transfers shares into an ISA for himself and family....probably expects some significant capital gains otherwise.

[multibagger] 17/3/2016 10:10

10 March 2016.

RNS re Anthony Cross increasing his holding by 19m to 220m shares.

Cancellation lodged with Companies House

....coincidence ?

As they say coming events cast their shadow before....not a bad time to top up I would think.

[garykc] 17/3/2016 09:58

Well then, that's the Premium Share Account cancelled. What's next????
Surprised there is not more buying this morning.

[multibagger] 15/3/2016 08:42

Back to business as usual....no trades so far !!

[multibagger] 13/3/2016 07:58

Next trading update may take sometime, but I expect a RNS relating to the cancellation of the share premium account this week. I imagine that many/most investors will not appreciate the implications of this very important legal process / authorisation which paves the way for dividend payment.

My guess is that Anthony Cross increasing his stake to 220m shares or 14.3% of the ARC equity is directly related to the prospect of dividends in the not too distant future.

Some people are expecting this to move into 1p territory, but I think we can realistically be nipping at the 0.5p mark in the next few months, which would be a 40%+ gain :)

[janeann] 11/3/2016 19:01

Held up well today. Looking forward to the next update.

[oilbuy] 11/3/2016 08:21

Back on full ask for small amounts. Looks like another good day ahead. Not sure if were expecting good news or we could simply be heading towards fair value.£1.8M cash !

[multibagger] 11/3/2016 07:38

No RNS as yet re legal proceedings....

ARC did well yesterday given the state of the markets. ECB QE and Anthony Cross increasing his holding to 14.3% may offer a bit more impetus to the share price though I am mentally prepared for a flat day or bit of retrace given the spike yesterday.

I reckon about 50% is closely held....and there may be several holders holding low single percent holdings (non declarable)...so free float is tight.

I reckon we can achieve a stable 0.04 to 0.45p range in the next few months based on what we have seen yesterday. If dividends are announced, this could do more I think. The current low share price makes it a tempting buy - more bang for buck when you can buy in quantity.

Pleased that virtually all LTHS are very comfortably in profit now :)

Good luck all !

[multibagger] 10/3/2016 19:46

Here's why I invested :)


Debt free, conservatively run and managed, low profile
Profit making, recurrent and predictable revenue stream
£1.8m circa cash as per recent half yearly accounts, low employee headcount
Bank of International Settlements, Bank of England, Central Banks, HM Treasury Debt Management, Tier 1 Banks (Citibank, Deutsche Bank as far as I know) and top global investment banks,financial instis as customers
Global market, aiming for wider geographic footprint
Market cap undervalued
High Barriers to entry, scalable business with no major capex, niche segment with one major competitor (Contex)
ARC products better value for money and ARC pursuing market of "conflicted customers disillusioned with bigger players" and want value for money
New products being developed which will increase scope of addressable market
High customer retention, with 3 year rolling contracts, unless cancelled
Directors hold about 25% of equity
One of UK Top Fund Managers Anthony Cross holds about 14% - recently added another 19m shares RNS out on 10.03.2016
Legal process underway to cancel share premium account to enable payment of dividends in due course
Share consolidation likely at some point, which will open the stock to fund managers
Increased required for transparency and audit trail following LIBOR and other financial scandals
Potential takeover target due to low market cap
May use available funds for acquisition, organic growth market pretty big
Recent Finncap new target of 0.30p - initial research note out in July 2015, target updated recently, but comfortably broken
Appears to meet Liontrust Economic Criteria for investment

Good luck :)

[janeann] 10/3/2016 12:57

Multibagger - if he was buying for the liontrust it would normally be in that name; so it seems to me its a personal buy

[oilbuy] 10/3/2016 12:45

2M@ .378p super. That says it all !To break .4p is certainly bullish.

[garykc] 10/3/2016 12:43

With over 1.15bn shares tightly held by Directors and Institutions, that only leaves a free float of c380m. As someone else has commented, any large buying pressure could see this push past 0.5p fairly quickly.