Shearwater Share Discussion Threads

[lammylover] 03/4/2024 16:47

I reckon the Interim CFO will mop up all the cheap shares from today. The share price hasn't dropped despite some big sells. Clearly someone has placed a decent sized order.

If you look at the RNS again, Higgins states "we are actively negotiating several substantial contracts". The CFO will know what stage these contracts are in negotiation and if they are close to a done deal; its an ideal time for him to buy his first shares as a show of faith in the future.

[northwards] 03/4/2024 16:47

Not against that.

[igoe104] 03/4/2024 16:37

Good point, even 500k worth of buybacks, would definitely worth doing...

[bdbd11] 03/4/2024 16:12

Another disappointment. Having said that the valuation is far too cheap. The board needs to invest some of that cash in buying back some shares while the Cap is so low. I suggest all of us push this issue with them, I certainly will be.

[eezymunny] 03/4/2024 11:23

No, net cash has likely grown because customers have finally paid up and so debtor balance is down. At end H1 trade receivables were c 7m which is about 4 months revenue. Terrible IMO.

Take out working capital movements and I would guess there was no positive cash generated...

[weatherman] 03/4/2024 10:13

Presumably, liabilities are paid out of the future income of profitable contracts - which is why net cash is growing y-o-y.

[rivaldo] 03/4/2024 08:45

Incredible that revenues could be down on forecasts by such a huge amount. Cavendish were evidently totally blindsided by over-optimistic guidance from the company.

Cavendish, who now have a 78p target price, have reset forecasts for the coming year to £27.6m revenues, 2.4p EPS and a £6.8m closing cash pile at March '25 (against the current £10.35m m/cap).

The cash/asset backing to a supposedly profitable cyber-security business was the reason I invested here, so at least the downside remains well protected, but SWG have a lot of work to do to deliver potentially substantial upside from here.

I would rather Cavendish had underpromised further and forecast say £25m revenues, as overdelivering is always the way to go. Anyway, they conclude today:

"Valuation and conclusion: Shearwater Group is a company with a unique and differentiated set of capabilities in critical cyber security applications, and a global blue chip customer base. The company has a strong balance sheet and a track record of strong historic profitability and strong cashflow, together with a resumption of positive cash generation delivered during FY24. The current share price corresponds to an EV/Sales ratio of 0.2x. We are reducing our own target EV/Sales to reflect the slower recovery trajectory, but we argue that a new target of 0.5x is justified based on the medium-term potential. This corresponds to a new price target of 78.0p."

[earwacks] 03/4/2024 08:44

One of the many problems they have is the appalling record in forecasting. If they lowered the forecast to something realistically attainable it might not look as bad as it does. To continually miss targets by 30 per cent or more is unprecedentedly stupid. There again paying 30 million for Brookcourt was outrageously stupid. It just makes them look like they don’t have a clue what they are doing. Share price holding up remarkably well considering.

[2lb] 03/4/2024 08:43

Bad to worse , >£60m spent on acquisitions to produce a loss making sub £10m MCAP business with revenues in an endless decline.Higgins cash out on his sale now exceeds the value of the entire business.This will be taken private , I suspect by private equity , before the year is out.

[northwards] 03/4/2024 08:38

Looks like the cash position has provided a floor to the share price

[lammylover] 03/4/2024 08:26

It would be good to see the Interim CFO, Adam Hurst buy some shares and commit to the business long term (was on 6 month contract initially)

[fgump] 03/4/2024 08:01

Target price has been lowered to a point that any offer even close to that would make the directors position very challenging to say no.

[rimau1] 03/4/2024 07:46

The bit that clouds it for me is that FY24 was supposed to benefit from deferred contracts from FY23.

[babbler] 03/4/2024 07:45

 "With small company valuations continuing to remain under considerable pressure, it is important to note that nearly half of the Shearwater market valuation is represented by the £5 million of cash announced today. This attributes precious little value for what is a profitable company with a solid market position and growth opportunities, and one in which the Board continues to see growth potential as we strive to improve returns."

[northwards] 03/4/2024 07:44

They talk about 25 being a particularly strong contract renewal year. 2 things on that - where's the growth, and what happens if a few of those contracts aren't renewed.

[boadicea] 03/4/2024 07:43

Totally abysmal performance. Revenue £22.5m vs 'market expectation' of £32.5m. One of the largest shortfalls I can recall. Raises the question of who is the bigger fool, company or market!
The market has already taken it into account in practice but that probably won't prevent a further drop.
Can it recover? They need to produce evidence of significant progress before the next normal update time, ie a Q1 announcement of appropriate signings. Alternative is likely to be succumbing to a derisory offer as almost anything would look attractive now.

[fgump] 03/4/2024 07:34

This was my previous post. Even that was too generous. How can you miss your revenue by £10m and only just update the market. "On that basis that would imply circa 25m to 26m for this year. Perhaps they will have reduced the loss to a breakeven on that basis. It needs the revenue uplift to 32m in order to get the bottom line profit.I maintain the only hope for this thing is a buyout and that's why I hold a few shares - around 50k pounds. Sadly as I wrote previously what tends to happen is that management have a delusional expectation of value and the thing limps on year to year while they continue to take their hundreds of thousands a year in salaries."

[earwacks] 03/4/2024 07:27

Not entirely convinced there is anything worth breaking up that isn’t already broken. Dire. Year after year disappointment and excuses. The cash balance
Is somewhat of a mystery and quite an achievement considering. They always quote ebitda profit which is meaningless.might well go private. They do seem to manage 1 decent contract. It’s nowhere near enough for the money they laid out.(30 million for just Higgins bit) Can hardly justify being listed.

[ianhamo] 03/4/2024 07:15

Break up of the company on the cards?

[northwards] 03/4/2024 07:13

True, but how many times now have we missed guidance.

[weatherman] 03/4/2024 07:09

Delayed contracts, but £5m cash is now nearly half of mkt cap - maybe the market will overreact, but it is already cheap.

[igoe104] 14/3/2024 16:19

Interesting contract..

[igoe104] 27/2/2024 12:08

Once you've got government approval with your product, it often get rolled out across other departments. Lots of councils and other government apartments to aim for, and thats just in this country.

[sidam] 26/2/2024 22:14

The chart looks like a breakouts.