Kinovo Share Discussion Threads

[qs99] 19/8/2022 08:56

Sorry nico, should have been clearer, was merely talking about the "extra" we now know as quantified, yes the wc facility £3.7m originally means total of £7.7m + costs so say £8m as a cost for the FU!

[patsc100] 19/8/2022 08:43

Lol, you prefer a new management after Bullen grew the core biz like crazy?

Let's hire some old incompetent dude who at least gets investor communication right, but has no idea of running a business?

[nico115] 19/8/2022 08:42

4m extra ?Cost £7.7m no?

[qs99] 19/8/2022 08:42

But play it forward, if this can start generating £5-6m EBITDA and it appears like it could be at lower end this fiscal year, and use this year's cash to finance DCB fiasco, then 6 X isn't unreasonable, gets you EV of around 30-36m and with cash being generated on top from there....so DYOR but previous expectations for holding on for a quid I seem to remember other posters talking about is not unreasonable over coming years. I would prefer new management as well to be clear.

[qs99] 19/8/2022 08:40

totally agree meijiman, maybe these results have saved him with the Board, but agree, someone needs to bear responsibility for the FU that has cost £4m extra ffs - voluntary reduction in pay and no bonuses for a few years would be a nice gesture

but when does anyone in the UK take responsibility or be accountable for anything these days eh?!

[meijiman] 19/8/2022 08:34

The ceo is guilty of bungling naivety whichever way you try to spin it. How can you preside over this fiasco and retain your job?
Have to agree that the share price looks well underpinned and probably set to rise further...such is the snakes and ladders of the stock market.

[qs99] 19/8/2022 08:33

yes but you will also see other posts where I was looking at risk reward, and bought some at 10-15p range, yes I was bloody angry and still think the PGs is ridiculous (having been in M&A all my life) and stand by what I said above especially at those early stages...and yes I would still have changed management to be clear as the deal was just wrong, odd etc. Today's results show the underlying business is going gang busters not sure I have ever doubted that in a post, so I've backed that piece as well as dyor2 who was spot on to be fair to him and put my money where my mouth is.

Trust that is ok!

[nico115] 19/8/2022 08:31

Haha Good to be flexible no ?Mas, what's your fair value here ? 60p ? I'm thinking over time who's will gradually rise with a take out nearer to 60p?I always thought 100p but dcb has obv changed things a bit.

[qs99] 19/8/2022 08:12

And looking back at your old posts, I have bought more this morning as I agree Dyor2 this will be a sitting duck for a competitor or PE house at these levels. The growth it has shown in those figures is v.v. good IMO and Q1 shows it is no fluke....DYOR and looking forward to bagging etc etc etc....

[qs99] 19/8/2022 08:10

DYOR2 mate, you were spot on...well done

[nico115] 19/8/2022 08:04

Totally agree Great figs Generating so much cash Share price should be double this BWTFDIK

[qs99] 19/8/2022 07:25

£4.2m EBITDA, almost no net debt, DCB contained within £4m and cash flowed so move on, 24% year on year increase in Q1 EBITDA

Positive outlook

NO wonder that big stake was taken at c.£15m market cap....DYOR

£5m+ EBITDA next year then?

Well done all those that analysed it, bought at 10p....etc....this should now be trading materially over 30p on that update IMO....DYOR

[masurenguy] 19/8/2022 07:13

Results from ongoing business look very positive. I wonder what prompted the circa £2m share purchase by Tipacs2, at around a 50% shareprice premium at that time, just over 3 weeks ago?

Still uncertainty over the final cost consequence of the DCB fiasco. The following comment, given the publicly available information on MCG Global, must raise questions on the credibility of management announcements. "We are confident that Kinovo undertook all necessary due diligence, with the deal being based on sound financial projections that, since completion, have not performed to our expectations." David Bullen

The following statement also refers to conditions that related to the DCB disposal, which were never divulged in the original sale announcement on 12 January, to MCG Global !

"Agreed to provide working capital support to DCB, which was limited to a set time period and forecast to be cash neutral. At time of disposal, there were in existence certain pre-existing parent company guarantees from Kinovo in relation to the ongoing projects within DCB, which were to be transferred to MCG following the disposal and expire on completion of the projects"

Final results for the year ended 31 March 2022

Financial highlights:

-- Revenue from continuing operations increased by 35% to GBP53.3 million (2021: GBP39.4 million)

-- Adjusted EBITDA from continuing operations up 102% to GBP4.2 million (2021: GBP2.1 million)

-- Underlying operating profit from continuing operations increased by 95% to GBP4.1 million (2021: GBP2.1 million)

-- Strong adjusted cash conversion from continuing operations of 223% with GBP9.4 million in cash generated

-- Cash balance at year end of GBP2.5 million (2021: GBP1.3 million)

-- Net debt significantly reduced by approximately GBP2.4 million to GBP0.34 million from GBP2.7 million in 2021

-- Adjusted earnings per share almost doubled from 2.76p in 2021 to 5.33p in 2022
Operating highlights:

-- Strong performance from the underlying business despite considerable macro-economic pressures

-- Streamlined operations focus on three core operations:

o Regulation: delivered 59% of revenues and grew by 30% year-on-year

o Regeneration: grew by 61% during the year, now contributing to 20% of total revenue

o Renewables: accounts for 21% of total revenue, reporting 32% growth

-- Investment in the business development team, contributed to winning a considerable number of new contracts during the period, diversifying the client base and increasing three-year visible revenues by 34% year-on-year from GBP105.0 million to GBP140.4 million

-- Investment in the training and upskilling of employees led to an improved operational performance

-- Full Microgeneration Certification Scheme (MCS) accreditation including PAS2030 installer certification, enables access to further government funding initiatives

-- ESGM strategic report sets out our future commitments and key targets including being carbon neutral in relation to Scope 1 and 2 by March 2023

DCB (Kent) Limited ("DCB"):

-- Disposal of DCB to MCG Global Limited ("MCG") for deferred consideration of up to GBP5 million

-- Agreed to provide working capital support to DCB, which was limited to a set time period and forecast to be cash neutral

-- At time of disposal, there were in existence certain pre-existing parent company guarantees from Kinovo in relation to the ongoing projects within DCB, which were to be transferred to MCG following the disposal and expire on completion of the projects

-- DCB did not perform to Kinovo's expectations following the disposal and working capital support totalling GBP3.7 million was provided

-- In May 2022, DCB went into administration and Kinovo has had to uphold certain parent company guarantees relating to the construction projects in existence at the time of the disposal

-- Dialogue with DCB clients have been positive, outstanding DCB projects are under control with costs to complete expected to be approximately GBP4 million plus expenses, significantly lower than previous external expectations, and will be fulfilled by our current cashflow.

Post-period End:

-- 28% year-on-year increase in revenues from continuing operations during Q1 from GBP10.9 million to GBP14.0 million

-- Adjusted EBITDA from continuing operations for Q1 grew by 24% on the previous year from GBP668,000 to GBP827,000

-- Net debt at the end of July 2022 remains comparable to year-end at GBP345,000 with a positive cash balance of GBP2.0 million

-- Our banking partner, HSBC UK Bank plc, remains supportive of the Group; refinancing of HSBC GBP1.5 million term loan and current overdraft facilities have been credit committee approved and formal documentation is in the process of being completed

David Bullen, Chief Executive Officer of Kinovo, commented:"While the last year has been challenging for Kinovo, we are delighted with the performance of the underlying business. Revenues increased by 35% and adjusted EBITDA more than doubled, a direct result of the repositioning announced last year to focus on three key areas: regulation, regeneration and renewables. This streamlining of operations has allowed the underlying business to prioritise what it does best and flourish. Coupled with the significant investment in our people, upskilling of employees and bringing in additional expertise, Kinovo is well positioned to negotiate this difficult macro-economic environment.

A key challenge we faced this year was the fall-out from the disposal of DCB. We are confident that Kinovo undertook all necessary due diligence, with the deal being based on sound financial projections that, since completion, have not performed to our expectations. The outstanding DCB projects are now under Kinovo's control and we are pleased that the cost to complete will be significantly lower than previously speculated externally, at around GBP4 million plus costs, which will be fulfilled by Kinovo's current cashflow. This disposal was a key component of streamlining operations, and we look forward to finalising the DCB projects and focusing on the rest of the business, which is excelling. We are pleased to have received continued support from our banking partner HSBC, with our facilities in the process of being completed.

Kinovo is in a strong position moving into FY23, with the revenue and EBITDA growth achieved last year continuing into Q1. We have complete confidence that the Group will continue to grow and develop as we reap the rewards of the team's hard work and investment during the last two years. I look forward to updating the market on this progress in due course."

[masurenguy] 16/8/2022 12:23

The silence from the BoD, in relation to both an update on the DCB debacle and when the year end 31 March 22 results will be announced, is deafening.

[masurenguy] 05/8/2022 09:27

There is still no announcement on a date for the publication of annual results for the financial year ending 31 March 2022. Just a further example of the very poor communication by the BoD with shareholders. Over the past 2 years results were published on the 6th and 27th of July. Meanwhile the last update on the DCB scenario was nearly 4 weeks ago.

[masurenguy] 01/8/2022 10:01

Current transactional spread of circa 8.6% @27.7p to buy and 25.5p to sell.

[masurenguy] 31/7/2022 08:45

Good analytical post dyor2. However, your view on the MI Discretionary Unit Fund (MIDUF) sale and the Tipacs2 buy is subject to your caveat "Of course all this depends on the further DCB liability being £5m or less and no fund raising being required."

If Kinovo had sounded out Tipacs about a potential fund raising then they would have had to provide them with some financial information or projections in order to determine how much and at what price rather than just a complete shot in the dark. Surely that is just the same criterion that you applied to MIDUF where you stated that "the sellers of stock can’t have been sounded out about a fund raising either, because if they had been they’d be insiders and unable to trade."

The main problem that we have at the moment is that no reliable information has been provided to determine the quantum of the DCB financial liability and if any figure has been provided to one or more major shareholders, and not disclosed in the public domain, then surely that would constitute insider trading ! There is still a significant Board credibility issue here which goes back to the January 12th disposal announcement where there was no reference whatsoever to the ongoing financial commitment to DCB up to outstanding project completion or the collateral PCG's that still applied to DCB customers. Had I known that at the time then I would most probably have completely exited my position here.

In their last RNS relating to this, issued just 3 weeks ago, they divulged the following information

1. Kinovo continues to facilitate constructive discussions with HSBC regarding the refinancing of its existing facilities. With respect to its financial covenants, the EBITDA calculations are based on continuing EBITDA, which excludes adjustments related to DCB.

2. Kinovo is working with specialist consultants in order to establish the costs to complete for the relevant construction projects subject to parent company guarantees provided in respect of DCB. Kinovo notes that there has been speculation regarding the costs to complete, however, these will only be able to be determined once Kinovo has reached agreement with the respective clients under the relevant projects and the joint administrators of DCB, for the final costing to complete for each project.

3. Kinovo continues to strongly uphold its legal position that any claim from MCG Global Limited ("MCG") is without merit, whilst also continuing to pursue counter-claims, including claims for misrepresentation, against MCG and its associates.

Just 2 weeks after that announcement MIFUD sold, and Tipacs bought, 6.1m at just under a 60% shareprice premium on that date. What information could have emerged in the 2 weeks following that RNS and if anything material had been determined why was it not disclosed into the public domain ?

Furthermore, if Kinovo were to obtain any legal judgements against MCG what financial compensation could they obtain from a one man start up company with no discernable assets. Meanwhile legal fees will continue to mount wth little prospect of any recovery should they be successful !

[dyor2] 30/7/2022 11:37

I’ve been thinking further about this, and IMV the Tipacs2 purchase tells us quite a lot: 1. If they thought a fund raising was going to be needed to pay for the DCB liabilities they wouldn’t be paying a 60% premium to buy stock in the market. They had 14% of the company before this latest purchase and appear to have been supportive shareholders to date, so presumably they would have been sounded out by now if Kinovo thought it would need a fund raising. And equally, the sellers of stock can’t have been sounded out about a fund raising either, because if they had been they’d be insiders and unable to trade. 2. If there isn’t going to be a fund raising, it means the further DCB liabilities are expected to be £5m or less (Kino has £1m in cash and £4m debt facilities). 3. Assuming the liability is £5m and Kino takes on £4m of debt to fund it, that would leave Kino’s enterprise value at c. £22m at 27p (i.e. £4m debt + £17m market cap). 4. The underlying business is on track to make £5m this year, and a bidder could knock out a further £1m+ of Board and public co overhead. 5. With a potential £6m of immediate annual profit contribution (most of which is generated as cash), plus expert and hard to find engineering staff, plus removing a competitor from the market, IMV this would be a no brainer acquisition for Sureserve or Mears at a minimum 6X profit contribution, That’s £36m, which less the £4m debt would be £32m as the minimum bid value, i.e. 52p a share. It could be significantly more. I suspect Tipacs2 can do this calculation as easily as I can! Of course all this depends on the further DCB liability being £5m or less and no fund raising being required. Presumably Tipacs2 must be confident of this, but we won’t know for sure until the figures are announced by Kinovo. DYOR applies here more than ever!

[meijiman] 29/7/2022 12:00

Bidders must be circling as they know the company is run by a naive bungler.

[dyor2] 29/7/2022 10:49

Tipacs2 seem to be pretty shrewd investors and I guess they expect the forthcoming news on DCB liabilities to be good, so they’ve taken the opportunity to buy another big block of shares while they can. I don’t think they’ll bid themselves, but by taking out a weak holder (Northern Trust) and increasing their stake to 26% they’ve put themselves in pole position to ensure that any bid (if it comes) will only succeed if it reflects full value. Personally I think that if the DCB liabilities do prove to be at a manageable level then Kino would be a sitting duck for a bid by a competitor.

[qs99] 28/7/2022 16:05

Ok so now pieces of jigsaw are in place, still surprised nothing from company given the near doubling of share price. So maybe NO concert party in place so no RNS, just price of a willing buyer / seller transacting? DYOR

[ben gibbons] 28/7/2022 14:23

Northern trust sold. Rns just dropped.