Apc Technology Share Discussion Threads

[simon_64] 08/1/2016 13:44

I can see these dropping now until we see what price the placing will be.

I have no position here, was looking to take a stake if they has managed to drastically reduce cashburn.

[kemche] 08/1/2016 13:26

Uncommon, by negation, would imply common - which it is certainly not.

And yes I do understand "kitchen sinking". My fear is that they have simultaneously "sunk" the cashflow and the balance sheet as well.

The share price is telling you that these results are not as outstanding as some believe.

The company has always promised more Jam than Robinsons could deliver.

[singer8] 08/1/2016 13:25

even his dogs dont like him LOL

[singer8] 08/1/2016 13:24

who wants a laugh ???????????????????
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[sharetips6] 08/1/2016 13:19

Looks like mr 3d has dumped and left the building

[simon templar qc] 08/1/2016 13:15

ELEKTRON PLC has relied on a invoice discounting facility for years its not that uncommon with manufacturers.

[jeffian] 08/1/2016 13:13

Don't have a position here but was tempted to have a look after a New Year tip in an AIM tipsheet. kemche's views certainly chime with me. Whatever is said about 'exceptionals' (aren't they always?!), kitchen-sinking, intangibles etc, I always go to the cashflow statement to see what is really going on. Stripping out the financing bits, they burned through around £1.326 in H1 but also £1.17 in H2. Cash at the period end was £1.239. Unless they've stopped the outflow dead (when? how?) it looks like more financing may be needed (particularly as revenue growth requires higher working capital). Will keep watching, but would like to see that cashflow under control before taking any action.

[kemche] 08/1/2016 13:06

Simon, Do you know of many listed PLCs which operate via invoice discounting for their funding? That should tell you something.

[simon templar qc] 08/1/2016 12:58

kench

The company has "kitchen sinked" all the bad news in one go imo.

The distribution/component business is cash generative and is set to show excellent growth the current year.

The company net debt of currently £2 million is relatively low for a £30 million turnover business therefore I do not expect the company to seek a further placing.

[simon templar qc] 08/1/2016 12:45

Electronic Component Distribution (Advanced Power Components)

These operations are cash generative and contributed £696k profit before tax. Current year 2015/16 broker forecasts are for £987k profit before tax.



Revenues in our specialist electronic component distribution business, trading as Advanced Power Components, increased by 1.6% compared with 2014 in a challenging market. This business has consistently demonstrated that it is stable, profitable and cash-generative with a steady daily invoicing flow and a relatively short working capital cycle. Its success is attributable to our continued focus on specialist applications where our sales engineers provide a value-added technical interface between the specialist component manufacturers that we represent and our customers' design engineering teams. Our staff's technical expertise is particularly valuable in situations where the end-use equipment is operating in extreme conditions or running applications where component failure would be catastrophic. This is a key factor in differentiating us from other component distribution companies. More latterly our connectivity components are well positioned in the fast-growing market for the 'Internet of Things' (IoT).



This business is seen as a cornerstone of the Group's activities going forward. It continues to be managed as a single reporting unit, within which separately branded specialist sales teams focus on specific product ranges and address targeted markets. The performance of these units is described below:



HiRel: record sales exceeded all prior years attributable to design-in success and accelerated customer project schedules. Key applications in the year under review included components for flight critical systems on civil aircraft, satellites and space exploration and oil and gas 'down hole' applications encountering extreme temperatures.



Hero: this business has seen the first real signs of success in the sale of ultracapacitors into a variety of applications including renewable energy systems. Hero has also launched an exciting new product range targeting IoT applications.



Novacom: performance was adversely affected by the rationalisation of some product lines, not yet fully compensated for by their replacements. However, the first quarter of fiscal year 2016 has started well with an impressive order book already secured.



Contech: this unit has some great components, which reduce infection and increase hygiene levels in medical environments. This is obviously a key potential cross-sell into our water hygiene business.



Locator: obsolescence management and an increasing incidence of counterfeit components in all high reliability markets fuels the services and expertise we provide in sourcing obsolete components. In particular, Locator is currently engaging with a major rail transport customer to address a very significant legacy of obsolescence.



Time: the demand for accurate timing systems has remained buoyant, resulting in steady trading for this business.

[kemche] 08/1/2016 12:43

Simon, You have obviously done your own research in which case the very best to you.

Just a quick question, do you think they will need additional funding?

[simon templar qc] 08/1/2016 12:11

kenche yes the note is from the house broker however it does give further insight than your basic perusal of both historic and current analysis.

I agree the company has raised cash a number of times however the company is now on a growth trajectory and in the right areas.

With cost saving going forward and a increased order flow margins will also improve...

Sharecast:

"APC also rationalised its non-core businesses, with cost saving initiatives set to deliver £1m in annualised cost savings, with a strengthened order book and significant new contract wins also reported since year end"

As u said earlier the distribution business underpins current share price that business on its own is set to maker circa £1 million operating profits going forward, the cleantech business will double that figure going forward. The year after the cleantech business should the highest earner.

A doubling of operating profits underpins a forecast target price of at least 20 pence imo.

Can u show me any other company set to deliver the same growth in profits the next 2 years?

edit: Sterling weakness of late will assist its US operations sterling is now on a 6 year low against the $. I also expect the "internet of things" to pick up steam soon.

[kemche] 08/1/2016 11:48

Simon, would that note be from the house broker? All objective then! Righto.

Let's just bide our time and see how the obvious funding needs are addressed shall we?

And since my memory is not what it used to be could you just remind me how many times the company has been to the shareholders to raise cash? And what has been the subsequent effect on the price? Just curious you understand.

And Simon, in my experience, the "past future" always ends up resembling the "future future".

But that's only my opinion you understand. And who am I to argue against the house broker?

[pugugly] 08/1/2016 11:46

kemche: Very fair valid points - APC is (imo) a high risk investment at this stage. If management fail to bring magins and execution risk under control then could fall back by some (say) 50%+ until taken out by a major facilities coy.

If howve they can control costs and execute contracts to deliver the margins built into their quotes then I suspect the Cantor targets could be left behind.

It very largely comes down (imo) to Management execution - As I think I said above they are now talking the talk but they have to prove they can walk the walk.

Declaration - Holding from a blended price of just over 8p and on balance prepeared to give new managment the benefit of the doubt at this stage -

QUESTION. Anyone close to the coy got any direct knowledge/experience of the new team either here or with previous companies?

[simon templar qc] 08/1/2016 11:34

What matters is where the company is now going!

The C note explains that kemche's analysis does not.

[webpax] 08/1/2016 10:53

I agree with kemche's comments, I am concerned here about the overstretched balance sheet so have top sliced after a good run up from 8p.

[kemche] 08/1/2016 10:12

Without wishing to urinate on anyone's parade I think it may be wise to temper the unbridled optimism of some on here.

Yes turnover has gone up by 50% which is highly commendable. But for what benefit, and more crucially, at what cost?

In 2014 they achieved a gross margin of 36% which has dropped to 25% in 2015. Or to put it another way, the 50% increase in turnover seems to be have been won at a paltry margin of 2.5%! Which is to say that the increase in revenues of over £10m produced an incremental gross margin of a woeful £255k (not a typo!). And according to the company "Gross margins improved" - well certainly not from where I'm sitting!

Operating profit (before all the "other stuff" - aherrm) shows that EVEN with the increase in turnover, they managed to turn a PROFIT of £573k into a LOSS of £1,139k. That's at the OPERATING level!

It gets worse. PBT, after all the bad stuff (aherrm)goes from a profit of £0.382m to a loss of £4.799m.

And where can we see the strain that all of the above causes? In two places, namely:

1. The haemorrhaging cashflow, which has always been a bane of the company, worsens from a cash outflow at the operating level from a sorry level in 2014 of £657k to a tear inducing outflow of £2.79m outflow.

2. A working capital surplus of £2.296m has turned into a deficit of £2.965m! Or to put it another way, a turnaround £5.221M! In my opinion this is unsustainable without a cash injection.

Now remember that when you are buying the share of this company you are effectively buying the company itself. So at a capitalisation of £10.3m what do you get? Well you get £13.7m of net assets, but of which £16.3m is intangible - or "air".

So £10.3m buys one a loss making company worth a negative tangible £2.6m.

And for that reason I am out!

Now there should be one of two responses to this. The more strident and "damp behind the ears" investors will chime in with the usual cry of "deramper". Whereas a few will offer a reasoned and sensible rebuttal.

The above only represents my opinion which has been known to be completely off the mark so do beware. AIMHO and DYOR - especially the second one.

[simon templar qc] 08/1/2016 09:39

100,000 just gone through at 11.84 over current offer.

Clients of C probably now taking stock.

[simon templar qc] 08/1/2016 09:06

Cantor note forecasts were

Distribution business this year 971k and Minimise?Cleantech 899K next year Minimise/Cleantech £1.8 million operating profit.

[rinson] 08/1/2016 08:56

Simon: Really 2m? that ought to get the share price to the 50p mark when it happens.

[rinson] 08/1/2016 08:54

Got to say that Cantor are certainly doing a good job of managing the boom or bust share price mentality we experienced under the former brokers.

[simon templar qc] 08/1/2016 08:42

rinson I did forewarn on brokers figures the company set to generate nearly £2 million operating profits the next year or two.

Eat your heart out bears 20 pence will come soon and be smashed near year end.

I am a professional investor with friends and my club has deep pockets!

[rinson] 08/1/2016 08:35

Simon: I hope so. Certainly a sudden surge of buying.

[3dimensional] 08/1/2016 08:34

for sure 25p short term for me

[simon templar qc] 08/1/2016 08:26

Rinson with the benefit of the C note I think u will see 20 pence sooner than u think.