Scirocco Energy Share Discussion Threads

[agneissearner] 24/2/2024 12:19

I have just voted in favour of the resolution to return cash to shareholders in respect of my 3m shares!

I would urge shareholders to carefully read the information that I have provided and compare it to the information that the Board provided in their response document and then make a decision on whether you should vote in favour of the resolution or whether should vote against the resolution based upon the facts I have provided!

I think 44J wise words below provide a useful summary of the facts and information I posted here today and yesterday:

"I agree with you Agneissearner; this BoD has been given plenty of opportunity to invest our hard earned cash and return a profit, but have failed to do so with each and every venture they pursue. Why would that change going forward?"

Think carefully about these two well known phrases

"Would Turkeys vote for Christmas!"

"A leopard never changes it's spots"

AGE

[agneissearner] 24/2/2024 12:17

Was EAG/GGL a wise investment considering the Board spent £80k on legal costs and £100k on due diligence costs and £700k to acquire GGL when it had negative net assets of £425k so a liabliity as it was sold at a loss of between £725k to £875k depending upon whether the £150k of contingent consideration is received or not.

If you look at the 2023 AGM presentation dated 9 August 2023 you will see a slide titled:

Strategic progress made through 2022 and H1 2023

Strong operational and financial performance of EAG JV in parallel with identifying follow-on investment opportunities

There is also slide titled:

Demonstrating Scirocco’s robust investment model -EAG

There is also a slide titled

Investment Structure & Waterfall –a path to sustainable capital growth

This information demonstrates how the EAG/GGL business model is going to produce substantial capital returns for SCIR as the loan was to be repaid first and then SCIR would receive its capital profit share.

In period of just 4 months the Board decided that the excellent EAG/GGL investment opportunity was not such a good investment after all and that they should sell it as soon as possible at a loss of between £725k to £875k dependent upon whether the £150k of contingent consideration is received or not.

The presentation contains the normal disclaimers saying "The presentation has not been verified, does not purport to contain all the information that a prospective investor may require and is subject to updating etc etc.

The divestment document contains a number reasons as to why EAG/GGL was being sold at such a massive loss

The Board spent £100k on due diligence costs for the acquisition of EAG/GGL and it should have included the projected revenues and costs within the net present value cash flow table as well as an Internal rate of return calculation.

There should have been a sensitivity analysis to show what would happen if revenue and costs or interest rates were to change by certain amounts.

It was quite obvious even to the man on the clapham ominbus that interest rates would rise substantially after EAG/GGL was acquired!

AGE

[agneissearner] 24/2/2024 12:16

Have the Board spent shareholders wisely and managed to obtain the best value for money that was available?

44RJ raised an excellent question in his post yesterday at 15:53 which is relevant to the point above.

"Why they didn't prioritise Ruvuma and preserve cash to stay in the game is totally beyond me"

SCIR shareholders bought their shares because of the potential upside on Ruvuma and as they had lost so much money on their original investment they were willing to take the chance that it would either come good in which case they might get back their original investment or even make a profit or if not successful then they would lose all of their investment.

The Board stated that they had a duty of care to shareholders and that Ruvuma was very risky and so they sought shareholders authority to sell Ruvuma and then reinvest the proceeds in the circular economy as is was the future and it was less risky.

In a period from the year ended 31 December 2018 to 31 December 2021 which is a period of just 4 years the Board paid £2.132m to Gneiss Energy Ltd for consultancy fees and the current market value of SCIR is £2.7m so those fees represents 78.92% of the current market value of SCIR.

During those 4 years SCIR received a net amount of £7.111m from issuing shares so the £2.132m represents 29.98% of the net proceeds.

Gneiss Energy Ltd was paid a success fee for negotiating the sale of Ruvuma however shareholders do not know how much they were paid as when the Board were asked about this at the AGM they replied that the payment fell within market norms.

If you look at the cumulative P&L account you will see that accountancy services fees amounted to £606k for just 5 years and the cost for 2022 was a whopping £152k

For £152k you could employ a qualified full time Financial Controller for more than a year and yet the accounting related services job is a part time job.

The part time job would involve the following:

Maintaining day to day accounting records

VAT returns

Payroll run for one employee and the Board

Payment of suppliers

Preparation of the interim and annual accounts

The cumulative cash flow shows that SCIR received revenue of just £1.457m and the turnover from GGL was not included in the consolidated P&L account of SCIR as only SCIR's share of EAG's profit/(loss) was included in the P&L.

The question has to be asked how did it cost so much for accounting related services for the following years when the accounting services role is just a part time job?

2022 £152,000

2021 £ 93,000

2020 £114,000

2019 £196,000

2018 £ 51,000

The Board spent £1,293,000 on the abortive One Dyas deal when it did not have a great deal of cash and how was SCIR going to able to raise the cash if the deal had of been successful?

I will leave you to judge if you think that the Board have spent shareholders money wisely and if they have obtained the best value for money.

AGE

[agneissearner] 24/2/2024 12:15

Have a look at the AGM presentation dated 9 August 2023 includes the following information which shows that it cost 428K pa to have an AIM listing:

Listing Costs £k

LSE costs 20

Nomad, Broker, FPR & legal 218

Audit costs 55

Outsourced accounting 90

Insurances 30

AGM 15

TOTAL 428k

It is going to take many years to receive all of of the Ruvuma proceeds so at £428k pa to maintain an AIM listing it makes financial sense to go with option 1 which is a members voluntary liquidation which cost £350k in total compared to £428k pa?

I can see no logic in the Boards recommendation as based upon the facts that they provided the total cost of keeping an AIM listing over all the years that the Ruvuma proceeds may or may not be received far exceeds the cost of MVL.

Shareholders have got to take the risk that going forward the Board has the ability to execute a successful strategy when they do not have a record of providing share holder value despite them engaging highly paid consultants such as Gneiss energy and other advisors and subcontracting out the running of EAG/GGL thereby duplicating overheads.

I am going to prepare some workings that I will post on here re the loss that is going to be made by SCIR having sold Ruvuma which is our main asset.

The purchaser is actually paying us out of the sale of the gas that we used to own which is akin to selling a business to someone and them then paying you your sale proceeds out of the cash flow and profits that you would have made if you would had kept it and not sold it to them!

AGE

[agneissearner] 24/2/2024 12:15

I should clarify that the business model was based upon the fact the related party loan would be repaid out of the sales proceeds on the sale of GGL rather all of it being repaid from the cash flows and profits being generated by GGL.

However to make a substantial capital profit from the sale of GGL it is necessary for it to generate a large turnover and to generate substantial profits but SCIR's share of EAG results for 6 months was actually a loss of £42k and not a profit!

AGE

[agneissearner] 24/2/2024 12:14

When the Board have a set of accounts prepared they are required to consider if the carrying value of amounts included in the balance sheet are properly stated hence was the £1,522,000 going to be fully recoverable based upon future cash flows and expected profitability of the EAG/GGL business model.

The turnover and losses being generated by EAG/GGL provide strong evidence that the loan of £1,522,00 was not going to be repaid by EAG/GGL as they were not generating sufficient cash flows and profits for them to do so.

The sale of EAG/GGL was not a post balance sheet event as it did not happen during the period 1 July 2023 and 29 September 2023 which is the date the CEO signed off the accounts as the sale was approved by shareholders in January 2024.

The Board provided various reasons in their divestment document issued in December 2023 to explain why it was a good idea to sell EAG/GGL yet in September 2023 when the CEO signed off the accounts did he consider if those reasons would have an effect upon the carrying value of the related party loan?

The reasons were used to justify a sale at a massive loss however it appears they were not taken account of when signing off the accounts yet the Board were well aware that interest rates had increased dramatically by June 2023 and that this had an adverse effect upon the eventual sales price of EAG/GGL as they explained that in their document.

AGE

[agneissearner] 24/2/2024 12:14

The Board included the following statement in their document:

At the AGM held in 2023, an authority to issue new Ordinary Shares was not granted by Shareholders, preventing the Company from raising capital through equity issuance to further invest in growing the EAG platform.

The SCIR shareholders action group blocked the Boards ability to issue yet more shares as you can see below that the current Chairman and previous Boards had raised a net amount of £35,059,000 and they had spent large amounts of money on consultancy fees e.g. Gneiss Energy £2,132,000 and they had failed to create shareholder value.

The presentations that the Board produced in August 2023 shows that EAG/GGL is a successful business model that is scalable and that it was going to be a highly profitable JV for SCIR when the AD plants were eventually sold however by December 2023 they were seeking shareholders permission to sell it at a loss between £725k and £875k.

In the document that was issued to shareholders for the divestment of EAG/GGL in December 2023 which was just 4 months after the AGM presentation they had a completely different opinion about the business model.

The SCIR interim accounts for the six months ended 30 June 2023 which were signed by the CEO on the 29 September 2023 included a loan from a related party for £1,522,000 which is the loan to EAG.

AGE

[agneissearner] 24/2/2024 12:13

Where is the share price currently compared to your average share purchase price?

The current bid price is 0.30p and LSE shows that the market cap of SCIR is £3,150,000 however there are 900.5m shares in issue so 900.5m x 0.30p is £2,701,500

Now lets compare that to the total amount raised from issuing shares net of costs which is £35,059,000

2,701,500/35,059,000 X 100 is 7.7% so there has been a reduction in value of 92.3% of the net proceeds from issuing shares!

Only you know what your average purchase price is.

My calculations demonstrate how shareholder wealth has been decimated and it does so by comparing the current market value of SCIR to the net proceeds that SCIR have received from issuing shares.

AGE

[agneissearner] 24/2/2024 12:12

What is the current and past Board's record on creating shareholder value?

If you look at the cumulative P&L account below you will see that the total losses for the period 2009 to 2022 is £29,955,000

If you look at the cumulative cash flow statement you will see that a total of £37,414,000 has been raised by issuing shares and the costs for that were £2,355,000

The Board spent £1,293,000 on the abortive One Dyas deal

If you look at the document for the EAG/GGL divestment you will be able to calculate that EAG/GGL was sold at a loss of between £725k to £875k depending upon whether the £150k of contingent consideration is received or not.

In a period of just 4 years the Board paid £2,132,000 to Gneiss Energy in consultancy services which is owned by Jon Fitzpatrick and his wife.

Current and previous Board members have received a total of £5,037,000 pounds in Directors remuneration including share based payments.

My understanding of creating shareholder value is that the Board is able to generate both turnover and profits and that it rewards shareholders for taking risks in investing in the Company by paying dividends.

As the SCIR Group was not generating much in the way of turnover and it as has only ever made substantial losses then it is not possible to pay dividends to the shareholders but have they managed to increase the share price and make a profit on the sale of Ruvuma?

Well the answer to that would be a "No"!

AGE

[agneissearner] 24/2/2024 12:12

Cumulative Directors remuneration including share based payments

2009 to

2022

Total £'000

Directors remuneration inc share based payments

Alastair Ferguson 485

Tom Reynolds 587

Donald Nicholson 244

Muir Miller 88

Doug Rycroft 50

Jon Fitzpatrick 305

Don Strang 193

Don Malling 443

Fergus Jenkins 462

Sandy Barblett 249

David Lenigas 669

Kiran Mozaria 124

Vincent Fodera 54

Neil Ritson 1,084

Total 5,037

[agneissearner] 24/2/2024 12:11

I think the cumulative cash flow for the period 2009 to 2022 below give you a a good idea of the financial performance of the current and previous members of the SCIR Board

2009 to

2022 Cumulative

Total £'000

Cash & cash equivalents b/f 272

Cash absorbed by operations (14,094)

Proceeds from disposal of investments 5,265

Issue of shares 37,414

Share issue costs (2,355)

Income tax refund 13

Loans 1,070

Cash movement in relation to assets held for sale (2,467)

Purchase of intangible assets (17,952)

Purchase of investments (4,133)

Net payment on settlement of derivatives (1,310)

(Repayment)/proceeds of borrowings (616)

Cash settlement of shares not issued (362)

Interest/fx 5

Cash & cash equivalents c/f 750

AGE

[agneissearner] 24/2/2024 12:10

I think the cumulative results for the period 2009 to 2022 below give you a a good idea of the financial performance of the current and previous members of the SCIR Board

2009 to Cumulative

2022

Total £'000

Revenue (1,457)

Share of profit of joint venture (40)

Exchange losses 56

No details 4,623

Audit fees 294

Prof legal & consulting 1,832

J Fitzpatrick (Gneiss) 2,132

AIM related costs including investor relations 916

One Dyas 1,293

Accounting related services 606

Travel & subsistence 188

Office and administrative 295

Other expenses 140

Impairment losses 1,384

Directors remuneration 3,549

Share based payments 1,922

Wages and salaries and other costs 1,023

Total of administrative expenses 20,253

Loss before investment activities 18,756

Operating expenses 268

Interest income (233)

Finance costs 786

Exchange losses 81

Amortisation costs 759

Impairment losses 3,332

Provision for losses on financial instruments 1,567

Other income (189)

Other gains and losses (3,384)

Sub total 2,719

Loss/(profit) continuing operations before tax 21,743

Loss discontinued operations before tax 8,225

Total Loss 29,968

Income tax (13)

Total Loss after tax 29,955

AGE

[agneissearner] 24/2/2024 12:10

As the saying goes turkeys would not vote Christmas if they had the choice so if you were a Board member of an AIM Company you have to ask yourself would you advise shareholders to vote for a resolution that puts an end to your well paid part time job?

I must congratulate who ever created the Board's response document as it contains what appears to be compelling reasons as to why shareholders should vote against the resolution however I have been a SCIR shareholder since July 2011 and I have good accounting knowledge and I know how the AIM market actually works so I am going to vote in favour of the resolution to return cash to shareholders and I will provide you with facts so that you can decide if you want to vote in favour of the resolution or not!

I will provide you with lots of information in further posts and so as to not overload you with too much information I have summarised below why I am voting in favour and then you can read further facts and information in my later posts.

What is the Board's past record on creating shareholder value?

Where is the share price currently compared to your average share purchase price?

Have the Board spent shareholders wisely and managed to obtain the best value for money that was available?

Was the EAG/GGL a wise investment considering the Board spent £80k on legal costs and £100k on due diligence costs as it was sold at a loss of between £725k to £875k depending upon whether the £150k of contingent consideration is received or not.

How good was the due diligence to say that EAG/GGL was sold at such a large loss and that the GGL accounts for the year ended 30 September 2021 included a massive prior year adjustment as the finance leased AD plant had not been accounted for correctly?

The GGL accounts were submitted to Companies House on 18 August 2022 and SCIR announced that it would acquire GGL via EAG on 25 August 2021.

If the new strategy was such a great idea then why did the Board decide to sell EAG/GGL at a massive loss as they had spent a significant amount of money upgrading the AD plant and they had arranged a loan from AIB (UK) and they used it to repay the AD plant finance lease loan as a satisfaction of charge was registered at Companies house for GGL on 19 July 2023?

AGE

[westendwinston] 23/2/2024 15:05

Time to sack this whole board. Ferguson must go

[agneissearner] 17/2/2024 11:42

Dear Members of the SCIR Shareholders Share Action Group,

I am a member of the Group and I wanted to seek members views on the resolution to return the Ruvuma cash to shareholders and also how you intend to vote.

Regards

AGE

[agneissearner] 16/2/2024 08:16

As you will have seen in the RNS dated 6 February 2024 Forest Nominees Limited who hold the shares on behalf of G.P. (Jersey) Limited who own 8.77% of the entire share capital requested that the company convenes a general meeting to vote on a resolution to return cash to shareholders.

The Board have advised shareholders to take no action at this time and that they are going to produce a circular containing an update on the board’s review of the strategic options and voting recommendations.

I am going to vote in favour of the resolution as the Board have so far consistently failed to increase shareholder value and monies have been wasted on the One Dyas aborted deal as well as the EAG/GGL acquisition so the cash from the Ruvuma disposal will be frittered away by the Board so the best option is for the cash to be returned to shareholders in the most tax efficient manner.

The 30 June 2023 accounts shows a loan of £1,522,000 to EAG Ltd and we are going to get back just £702k with a further contingent payment of up to £150k so even we receive the full £150k we will make a loss of £670k plus the associated selling costs so the total loss is in the region of £700k.

The £700k represents a loss of 46% of the loan of £1,522,000.

The Board spent 80k on solicitors fees and 100k on diligence costs for the EAG/GGL acquisition which completed on 25 August 2021 and shareholders approved the disposal on 10 January 2024.

The £700k loss increases to £880k when you factor in the £180k of costs relating to the acquisition.

In a period of just 28 months we have gone from what was to be an exciting new strategy into a complete failure and questions have to be asked about how good the due diligence was to say EAG/GGL turned out to be such a disaster.

[barony] 02/2/2024 11:07

Who is Oliver Butlin, the new owner of ~34Million Scirocco shares?

Second question, do we have any HE1 shares left?

[barony] 22/1/2024 09:27

Good news, getting cash into the coffers, on Friday. Now, give us the Tanzanian cash and, either distribute to shareholders, or make some decent investments please.

[red army] 12/1/2024 11:53

They have to be joking? " Tom is a high quality CEO "

[manual dexterity] 12/1/2024 08:41

Tom has gone. That is a relief. However whoever comes to has to create equity value otherwise this will just be a zombie company which it is at the moment.

[gb904150] 10/1/2024 15:28

and reminder of the Ruvuma sale agreement:

[gb904150] 10/1/2024 15:25

AEX gas deal signed:


and this is still a better thread given that it has the chart and the news.