Apc Technology Share Discussion Threads

[golddigger1] 21/9/2017 09:27

Very underwhelming.

[18bt] 21/9/2017 07:40

Confirmation of move back to profit. Painful, but well done BOD.

[playful] 20/9/2017 20:21

I would expect the broker note to be published immediately following the final results with perhaps a trading update released in the coming days.

[golddigger1] 20/9/2017 08:44

Another good British institution snapped up on the cheap. Lets hope Genuity are as tolerant and supportive as Hargreaves Hale have been over the years.
Playful, you have a good ear to the ground. Any feelings about an illusive broker note as anticipated by GHF?

[encarter] 20/9/2017 07:49

Good call.

[playful] 19/9/2017 22:06

We will perhaps see a Genuity Wealth Group Holdings announcement shortly, this is simply due to a change in ownership at Hargreave Hale.

[kemche] 07/9/2017 11:32

rinson, :)

Let's see how it all plays out.

[rinson] 07/9/2017 07:41

Kemche: just when I thought it was safe to go back into the water you returned lol.
I agree that you do offer a balanced viewpoint but APC is a very different company now than when I feel your initial criticism was hugely justified. We are dealing with the fallout from an abortive manufacturing operation, a water acquisition that should never have been and the immense cash flow problem that caused. As GHF states, from his discussions with management things appear on an even keel so maybe the cash flow is now improving. If not, as you state more cash will be needed. My worry is that unless management have a few aces up their sleeves the share price will never recover sufficiently to attract more investor interest. Contrary to my inner thoughts the share price may make an initial comeback after the anticipated trading update but what do we need for an encore? Our success in new markets has not been good so maybe greater investment in component distribution by way of acquisition? For that to happen more cash or dilution will be needed so you may yet be proved correct.

[kemche] 06/9/2017 23:48

GHF - a rare gentleman and a scholar - if I may say so. How civilised.

Most would have reacted with bile and invective.

[glasshalfull] 06/9/2017 22:27

Excellent post kemche.

There have been a number of false dawns & I think it perfectly reasonable to wonder why it'll be any different this time around. I've spoken at length with the company and confident that they have turned the corner. I hope to learn in the near future that they are profitable & generating cash, with the £375k raised in H2 2017 & appointment of a full-time FD in August supporting their relationship with ABN.

I hope your concerns prove to be unfounded, but nonetheless, you make valid points.

Kind regards,
GHF

[kemche] 06/9/2017 20:50

Whilst I have the greatest respect for the analytical ability of GHF I remain cautious of the company's ability to sustain a profitable AND cashflow positive long term future (bar some unknown embedded value attributable to its energy business).

We have seen that since the 28th February, when their net current liabilities stood at £3.4m, they have had to raise funds twice, once in March (to the tune of £125k, whilst also settling some fees with issuance of shares), and again barely two months later in May (this time to the tune of £250k whilst again settling fees with the issuance of more shares). I suspect the total of £375k raised will prove to be insufficient to address the shortfall which it dwarfs by a factor of nine times and that the fundraising was done out of necessity rather than "showing their confidence in APC".

Remember also that it managed to arrive at the net current liabilities position AFTER having raised £1.3m in February 2016, £1.1m in August 2016 and £1.8m with the sale of Green Compliance in October 2016. That is WITHOUT accounting for a couple of loan note conversions along the way. So whilst it may well have a strong board it has a decidedly weak cashflow.

GHF writes "The company had plenty of headroom as the £2.9m net debt comprised £2.5m drawn on invoice finance facilities (£6m facility), £0.6m of loan notes (due July 2018) and £0.2m cash." Now whilst the statement may be technically true it belies what the term "headroom" actually means in this instance. You see to be able to avail themselves of the extra £3.5m "headroom" the company would need to furnish VALID invoices that are slightly larger than the headroom they seek. That is where they come a cropper and, partly, where their problem lies. As for the loan notes due to become payable in July 2018 I imagine the historical precedent will continue to be observed and they will be converted with the issuance of yet more shares.

There have been many false dawns predicted for this company and all have come to nowt and I suspect more of the same to come.

All the foregoing is simply an opinion held by myself and I may well be totally wrong - as I usually am, so tread with caution.

[glasshalfull] 06/9/2017 18:53

Appreciate the positive comments in relation to my post & nice to see a few other esteemed investors kicking the tyres.

Just to clarify, I'm primarily invested as I believe the management team will deliver & think there are an abundance of growth opportunities available. I only touched on a couple & I'm sure that the management team will update investors & market in due course. I'm also hopeful that brokers Stockdale will release a note in the near future.

Playful kindly explained that APC wrote-off their 15% investment in OEM. As I understand, OEM are currently expanding their operation and third party comment to me suggests that the company valuation may currently be worth several £m.

If this proves to be the case then APC may be in line for a potential windfall in coming years. Nothing cast in stone of course, but perhaps one may consider it a further positive.

Anyway, I hope to comment further when the company releases an update to the market.

Kind regards,
GHF

[pugugly] 06/9/2017 12:47

playful - Very many thanks - Just shows that one has to dig byond the accounts - Memo self - If in doubt speak to CEO or maybe it was in the small print and I missed.

Added link - I hope correct one to OEM

[playful] 06/9/2017 12:33

Clarification on OEM directly from our CEO:

We still own approx. 15% in OEM. It is just that we wrote it down to zero in the balance sheet last year. I am a Director of the Company and as their website would suggest they are making good progress.

[pugugly] 06/9/2017 11:44

rinson - It looks as though we no longer have any interest in OEM from the 2016 accounts ;



Discontinued during the year * Open Energy Market Limited 15% (307)

So no help there ..

GHF - Excellent - Got me digging again !!

-

[rinson] 06/9/2017 10:01

GHF: Well my comments to your post last night could not have been more wrong judging from this morning's rise. The way your post was written leads me to believe that you are an experienced share commentator - I only wish that APC's stockbrokers were as articulate. Thanks again!

Playful: I have recently noticed a tremendous ramp-up in OEM's media presence. Regular updates on their website and twitter. Be nice if they were planning a flotation. Similar companies have far greater MC's than APC so our 15% holding could become very valuable allowing us to beef up the balance sheet once and for all. If that happened all that extra profit currently being spent on finance charges would cause a massive share price rise.
Wishful thinking but not too impossible!

[encarter] 06/9/2017 08:52

Just noticed the announcement 31st Aug. All looking good.

[cheshire man] 06/9/2017 08:07

I'll second that playful.... first rate report from GHF :-)

[playful] 05/9/2017 23:13

GHF, first-rate report!

We also own 15% of Open Energy and it’s easy enough to make a comparison with Inspired Energy where the share price has recently doubled.

APC is a company with many strings to its bow..

LED Lighting



RF & Microwave & High Reliability products



Products & Systems



Chairman & CEO are aligned with shareholders and with 35 years of trading this company merits a little more attention, so I’m very happy to read this from GHF tonight.

[rinson] 05/9/2017 22:39

GHF: Thanks for positive write up. Whatever the trading update reveals I see no movement in the share price until their house broker puts out a research note on which their future performance can be judged. If we see a significant increase in profits when the results are announced that alone will not cause the share price to rise. We need positive plans for the future. Organic growth in the addressed marketplace will not warrant support from new II's especially after Octopus' comments in the Mail on Sunday listing APC as one of their disappointing investments.

[glasshalfull] 05/9/2017 21:06

APC

Courtesy to mention that I've been a buyer in APC.

It's been harder to find value in the market recently as momentum trading appears all the rage, but I've been suitably impressed with the drive & ambition of the new management team & hope this proves to be a rewarding long term investment.

Background

APC is a well established company of over 35 years. The share price reached the heady heights of 68p in November 2013.... & it's been downhill ever since, with the shares bouncing off 5.75p in June 2017 - fingers firmly crossed this was the low!

This followed a couple of placings to shore up the balance sheet over recent years with the current share price of 6.75p equates to a market cap of £8.8m. At the end of H1 2017 net debt stood at £2.9m at (28.02.2017) for an EV of £11.7m. The company had plenty of headroom as the £2.9m net debt comprised £2.5m drawn on invoice finance facilities (£6m facility), £0.6m of loan notes (due July 2018) and £0.2m cash.

While I would prefer the balance sheet to be stronger, the new team appear to have turned the business around & have slashed costs by over £2m on an annualised basis. Indeed, the H1 2017 results marked the first glimpse of a new dawn that followed change amongst most managerial positions. This concluded an extensive 18 month restructuring period which included the disposal of a loss making business & progress on refocusing the company.

H1 2017 results highlighted the company delivering a pre-exceptional operating profit of £0.4m on turnover of £8.3m. Gross margin was 34% with net debt reduced by £0.3m.

So, why invest now?

Well apart from the first sign of a company turnaround & buying at what I hope is close to a low (share price is on its knees) my attention was first drawn to the stock when I noticed that a well respected PI had taken a notifiable stake in the company (>3%).

I also noted the share register included notifiable holdings with the likes of Bob Holt at 3% (Chairman of Mears Group); Mark Blandford via Rockridge Investments now at 11.4% (Sportingbet founder); the savvy small cap investors Hargreave Hale now at 16.6% & Octopus at 6.6%. Quite an enviable list for any small cap company.

The CEO, Chairman and some other notable investors recently subscribed for shares in the company. They invested £125k & £250k into APC during March & May 2017 respectively (at 6.75p), thus showing their confidence in APC while boosting the balance sheet at the same time.

I've subsequently spoken at length with APC & v impressed with CEO Richard Hodgson who I believe is implementing the steps that will lead the company into a period of sustainable profitable growth.

What do APC technology do?

"APC Technology Group PLC provides design, specification and distribution of specialist electronic components and systems, lighting technologies and connectivity products to the defence, aerospace, industrial, real estate, logistics and healthcare sectors."

They describe themselves as a “design in” distribution business focused on the high end electronic components sector alongside a division delivering LED lighting.



In English, my understanding is that APC's engineers engage with their UK customer base to "design in" the products that are supplied by a distribution base that comprises companies from throughout the world.

We are talking product lines where the, "end-use equipment is operating in extreme conditions or is running applications where component failure would be catastrophic."
Think power components for the military or aerospace or....the ExoMars Trace Gas Orbiter launched from Kazakhstan by the European and Russian Space Agency in 2016 that used the DC-DC converters supplied by APC.



The companies (suppliers) that APC distribute on behalf of may be small in size or operate in niche markets which negates the need for a UK distribution & admin base. In other words, APC provides a number of value-added functions that not only includes the supplier with an end market to sell into, but also the addition of value added services such as the modification or design-in of the products supplied to meet the end customers requirements. It may also include the provision of an admin, importation & logistic function to assist the supplier e.g. the UK defence & aerospace market is highly regulated & requires accreditation and certification which APC can progress & gain on behalf of the supplier.

Worth mentioning that the company may be a beneficiary of BREXIT as the complexities of dealing with the UK end user market of the UK may be more problematic for ROW companies without a UK base or specialised distributor like APC

In the 2016 Annual Report the company indicated exclusive distribution agreements with over 60 manufacturers of electronic components and systems for the UK market. This included components for flight critical systems, power distribution in civil aircraft, high voltage components for power supplies, custom filters for harsh environments, satellites and space exploration, transportation and hybrid vehicles and extreme temperature oil and gas components.

The following presentation from April 2017 provides a summary of the APC proposition & their addressable markets in p4 & p5.



Where is growth coming from?

As mentioned APC are an established company with c.£18m turnover per annum via a number of longstanding suppliers and end customers.

With the cost base realigned (£2m costs removed on annualised basis) the company is now profitable & indicated during its release of H1 2017 results that March 2017 bookings stood at £2.1m and hopefully operational gearing should now be emerging.

The first signs of the growth strategy emerged in the RSN Reach released last week with the appointment of a Business Development Director & securing 3 new distribution agreements in RF & Microwave and also High Reliability products.

Worth mentioning some other snippets, such as their launch of APC Smartwave last year to provide Internet of Things (IoT) products. APC also highlighted via their web site the growing requirement of companies to meet MiFID II legislation by the Jan 2018 deadline & the increasing focus on subsidiary APC Time's relationship with supplier Meinberg to meet the requirements.



Forthcoming trading update?

I believe that the company may issue a trading statement in the near future in respect of the 2017 year end which occurred last week (31.08.2017). Any update will hopefully confirm the progress highlighted in the interims, indicating the business both stable & profitable, while confirming the growth drivers in 2017/18.

If APC can drive growth, maintain gross margins of c.35% & generate cash, then with operational gearing kicking in I don't believe it fanciful to think that APC could generate profits of £1m+ EBIT moving forward. Such performance would bring the company into sharper investor focus, although it looks as if a number of focused investors have already taken positions.

Well, I hope that proves to be the case!!!

Disclosure

I have a modest holding.

Please DYOR

Kind regards,
GHF

[brownie69] 24/8/2017 10:30

Thanks Playful.

I'm optimistic on the outlook as the business seemed to have turned a corner in the interim results and I'm hopeful of further improvement as I think the share price could move significantly if APC can demonstrate that the reshaped business can scale.

[playful] 22/8/2017 09:46

We are arriving at our year end next week so we should see a trading update imminently and full results later this year perhaps November or early December.

[brownie69] 22/8/2017 08:20

When are results due? Any one know?

[golddigger1] 03/8/2017 15:43

Encarter - agree but not sure why. Gap getting larger so are they trying to milk the buyers and the sellers at the same time or just stop the sellers? I believe that the directors are alienating us PI's when all that is needed is a meaningful update so we know what to expect when the year end results are announced. If there is no forecast out there the year end results are meaningless and will have little upside effect on the share price Who will take a gamble? I would guess that the II's are also getting tired of the current situation.