Cybit Share Discussion Threads

[masurenguy] 16/9/2009 08:47

The total value of the CEO's shareholding (circa 3%) is only around half of his gross pay packet last year. Not a significant investment on his part and hardly reflects any real downside risk for him either. When your pay packet is 5% of the market cap and virtually 25% of the pretax profit, why would you need to expose yourself to any kind of risk by making a really significant investment in your companys shares.

At things stand at the moment it must be really cool for the Chairman & CEO to see that the external investors are taking virtually all of the speculative risk without even the benefit of a small dividend yield. Meanwhile the CEO collects a bonus of circa £200k or more for achieving or exceeding a 'mystery performance threshold' and plaudits for a performance that is 'in line with a market expectation which nobody is able to define either'.

I would like to see much greater transparency and accountability before I invested here. There is a very strong case for the five largest institutional investors, who collectively own 33% of the shares, to appoint at least one NXD to monitor and vet executive pay & bonuses and to ensure that the Board is able to explain to the shareholders exactly what figures represent market expectations prior to results being published !

[ghtt] 16/9/2009 08:34

I have to agree, this is very high renumeration for all parties for such a small company.

The company made £2m profit last financial year, the Board of Directors made over £1m in total, yet owned only about 5% of the company stock.

The Directors are getting paid well above the shareholders.

[masurenguy] 16/9/2009 08:18

Richard Horsman remuneration package for his role as CEO last year was £530,000 (and the market cap is less than £10m remember)....I should also point out that the non-exec chairman, Neil Johnson, takes home close to £100,000 a year, which definitely puts him in the upper quartile of AIM-listed chairman when it comes to pay.....No doubt the City institutions who have invested in Cybit are fully aware of the current situation with regard to directors' pay and are totally happy. I make this assumption given that no new non-executive directors have been appointed for many years. But for private investors, it is a disincentive to invest, which is a shame because the sector looks an interesting one and Cybit certainly seems to be doing well.

Davidosh - There were plenty of City institutions that stood by and let bankers take obscene risks with their money in order to earn even more obscene bonuses so what they are prepared to tolerate carries zero weight with me. I've been monitoring Cybit for some time now since I like their technology and the sector BUT I consider directors remuneration to be excessive and it does not give me much confidence that shareholders interests are as high a priority as their personal rewards. That's why I have held back so far !

[sergelioutyi] 16/9/2009 07:53

Thank you ChesireMoggie that makes perfect sense. Actually I lie when i say I've never looked at it, I was in this name back at the end of 2002 when it went to 2p pre consolidation level. Thought i'd give it another look 7years down the line.

[davidosh] 16/9/2009 03:15

Just in case any of you missed this review of the AGM...

[cheshiremoggie] 15/9/2009 22:01

Hey, that was for serge. You werent supposed to looking at it!

LOL.

CM.

[ffp] 15/9/2009 21:07

CheshireMoggie >>> What am I to say but thank you for that, Summed up very very well. Ta

[cheshiremoggie] 15/9/2009 20:56

I'll have a go - and this is why the accounts arent as straightforward as some.

When a company takes a (say) 3 year lease contract with Cybit for (say) 100 vehicles, there are initial set up costs such as installing the black box in each vehicle. ie. Assuming the client just pays a monthly fee, the contract runs at a loss until those costs are paid back.
For a small telematics company that is growing quite fast it is difficult to generate the profits on the current business in order to offset the losses on any new business. In fact, the faster the company grows the worse the problem gets!

A company could easily go bust by 'overtrading' in this way.

There are 2 possible solutions. The first (and by far the best for Cybit) is to make the clients pay upfront for the installation and other upfront costs - they do NOT like to do this for obvious reasons and currently the telematics sector is so competitive that is is difficult to make them do it.

So - Cybit and most other telematics companies take the second route.

When this 3 year lease is signed, Cybit sells it on to a 3rd party (this is called factoring). Cybit gets a big chunk of cash up front BUT has obviously to pay the factoring company for the privilege. After all, the factoring company takes the risk of the client going bust.

This is where the 'Financing costs...' comes from.

At present, Cybit are factoring about 66% of their contracts (from memory), which means that 34% are taken in-house which means that Cybit do indeed take the hit for those initial costs.

At the moment, unsurprisingly, factoring companies are refusing to do business with many small client companies and so some telematics companies are having to turn away business due to lack of finance for the leases.

Cybit, however, has done a deal with HSBC, allowing it to take up to 100% of its business in-house, using an HSBC overdraft. If Cybit had to do this for 100%of the business, it would affect profits initially (those pesky initial costs) but after they are paid off by the clients, future profits would actually be higher (there would be no factoring company profits to be paid for).

It think thats the basics.

Hope it helps.

Personally I think Cybit are in a much better position than many telematics firms and should come out of this downturn as a much bigger company with much bigger profits - assuming nothing goes wrong - Of course that wont happen.....will it?


Good luck with whatever you decide.
CM.

[sergelioutyi] 15/9/2009 17:34

Hi, I'm new to this name. Looking at the accounts now. Can someone explain the massive $1.7mn 2008 and $1.5mn finance cost they incurred, it cant be interest on debt as debt's too small so wondering if anyone could explain it please. It says "Financing costs of assigning debts to finance companies" wondering if anyone has anymore colour. Thank you

[ffp] 14/9/2009 22:31

singin>>> thats all right then..:-))

[singinsmythe] 13/9/2009 14:53

Agree Cheshire

[cheshiremoggie] 13/9/2009 11:14

It is a nice deal and doubt that Cybit have paid anything for the 'assignment' of the contracts.

The deal 'might' go like this:

All of the contracts are set up and running so there are no initial direct costs of the assignment. I assume that there is a monthly income stream from these contracts.
My view is that if I were Cybit the deal I would do is to split the monthly income with Integra. Cybit would effectively charge integra for running the contracts (allowing for a profit to be made) and would share any excess with Integra.

Integra cut their workforce and sales team, saving cash, Cybit absorb the contracts into their existing infrastructure and so the cost of running the contracts is quite low.
Both companies benefit, with Integra receiving some sort of income from the contracts with no outgoings and Cybit benefit by adding scale and presumably a profit on the deal.

Of course there would be various details to work out such as what happens at contract renewal, but that is how I see this deal working. After all Cybit have been 'assigned' the contracts, they havent 'purchased' the contracts.

I may be totally wrong, but that is how I would have structured the deal if I were in charge!

CM.

[bearstalker] 13/9/2009 07:22

I've also held for five years and continue to build when possible - now have 85,000 of these pups. And the price is 0.7p in old money at a crazy low pe for what is a well run profitable company. The shares are due a re-rating. DYOR

[sdavis] 12/9/2009 23:59

Seems like a nice little deal. One less competitor,a few more clients, a new reseller and some verification that CYH are one of, if not the, leader in this market.

To get the share price moving up to where I think it should be, we need a re-rating. We also need more institutions to take an interest. Not sure how/when these can be achieved, but I have held for 5+ years and still think this will succeed.

[horsepower] 11/9/2009 16:06

A sell of 11,016 has gone through, but SCAP want more. Still willing to pay 36p - any takers?

Would love to see these sells dry up so this can move onwards and upwards once and for all.

[sanity] 11/9/2009 15:48

SSL,

I share your sentiments, perhaps other similar deals will follow as companies look at what they do well v current loss making enterprises.

HP,

Keep the L2 coming cheers!

[horsepower] 11/9/2009 15:21

For those with an interest; SCAP have recieved a fill or kill order and are looking for stock.

edit: L2 now ticked up and strengthened 1 vs 1. Order not filled yet. SCAP will pay 36p for stock; 0.5p above bid.

[sll] 11/9/2009 15:05

I would suggest that this deal is at the lower end of what would be classed as a 'bolt on' acquisition - akin to a couple of other 'smallies' that Cybit has done - Oxloc and Mapmobile (please forgive spelling on both). Those, and this, contrast directly with the Amatics, Thales and Bluefinger deals. I am less worried about what is classed as organic or acquisitive. The KPI is EPS. Will this be good? - in time, I would feel that it will, so long as they haven't overpaid. In this environment, I suspect they won't have. steve

[sanity] 11/9/2009 13:00

SSL,

This deal appears to benefit both companies. The financial benefits are not clear and agree with Bonio that little financial benefit is likely come short term. However, medium term could bring significant benefit as and when contracts are renewed or renegotiated. Just wonder whether this will be classed as organic growth or not?

[sll] 11/9/2009 12:23

If Cybit were splashing out on a big ticket acquisition, all sorts of folk here would be fearing 'overpayment & dilution etc'. Now this one is a nice safe little deal that puts the ex-Integra clients into very capable & market-leading hands (remember: Amatics et al, the market leader for local authorities and public bodies) and will probably be earnings-enhancing in a year or so, with absolutely no dilution, and very little risk. Oh, and Cybit get yet another reseller, and flag themselves up as the 'first door to knock on'. Sorry Guys, but this is just one small piece of evidence as to why he gets paid what he does. Do I like big pay? NO. Do I like deals like this one? YES. steve

[bonio10000] 11/9/2009 12:14

Non regulatory.

Just like they might want to annouce Horseman getting a £100,000 pay rise, but they would not be forced to RNS it.

[horsepower] 11/9/2009 10:40

It was a RNS?

[philwill] 11/9/2009 10:21

agree horsepower...but they're chugging away under the radar..one day