Shearwater Share Discussion Threads

[2lb] 29/7/2021 15:57

Dear oh dear.

You are missing the key difference between what is a poor performance and what is "hitting or exceeding expectations"

You constant repetition on the drop being "sell on news" or "traders driven" is off the mark and driven by emotion of being invested in a badly executed strategy.

I have also stated that it's oversold and likely fair value in nearer £1.80 - you seem to have been blinkered to that point. It will likely return to that level over the next few weeks but that doesn't make it a decent investment.

[zico01] 29/7/2021 15:52

2lb you are clearly wrong

Over reaction ... results were inline with the trading update issued on 22/04/2021.
The share price was marked up by 5p at the opening 1.78 v 1.80 ... if the results were bad or below expectations MM's would have marked the share price down on the opening.

Traders and short termers sold on the the news.
This share is very illiquid ... not a great deal of free float.

[2lb] 29/7/2021 15:48

You can read it better in the RNS!

[2lb] 29/7/2021 15:47

I would reccomend anyone to look closely into the figures - notably this table




2021 2020
GBPm GBPm
-------------------------------------------------- ------ ------ Underlying EBITDA 3.7 3.4
Exceptional items - (0.7)
Share based payments (0.3) (0.3)
Fair value adjustment for deferred consideration - (0.1)
Contingent consideration - (0.3)
Finance charge (0.2) (0.6)
Depreciation (0.3) (0.3)
Amortisation of intangible assets - computer
software (0.8) (0.3)
Amortisation of acquired intangible assets (2.1) (2.1)
Reported profit before tax - (1.3)
-------------------------------------------------- ------ ------



2021 2020
GBPm GBPm
-------------------------------------------------- ------ ------
Underlying profit before tax 2.4 2.2
Amortisation of acquired intangible assets (2.1) (2.1)
Exceptional items - (0.7)
Share based payments (0.3) (0.3)
Fair value adjustment for deferred consideration - (0.1)
Contingent consideration - (0.3)
Reported profit before tax - (1.3)

[earwacks] 29/7/2021 15:43

See what they have to say for themselves at presentation Aug 4th, Schroder's are the largest institutional holders now with 13%. This could be over reaction by retail investors. They already said they had a poor first half and made up the ground in the second with rev up 39% on previous year. Yet the revenue for year finished down. Got a lot of questions to answer at presentation. these share are very illiquid. I tried to sell a couple of weeks ago and they dropped the offer to pretty much what it is now, well below market price.
This is from December update:
Further to the Group's recent interim results announcement, Q3 trading has continued to be buoyant with recognised revenues for October and November 39% ahead of the same two months in the prior year, as previously announced delays in recognising secured orders have come through in the current quarter. Strong momentum has continued into December. This has materially reduced the year-on-year revenue deficit reported for the first half and the Group continues to track in line with profit expectations for the full year.
So this has actually panned out as expected

[tradingcoder] 29/7/2021 15:42

Outlook We entered FY22 upbeat, despite the ongoing macroeconomic uncertainty associated with Covid-19 and have seen positive signs of returning business confidence with trading in Q1 FY22 strong. We are well positioned in a high growth sector, have a healthy net cash balance, a robust liquidity position and a strong team in place to continue to move our Group forward. Significant progress was made in FY21 and I am excited for the year ahead.This is what I see

[2lb] 29/7/2021 15:41

Yes, that true, however DW is a very high net worth individual for whom SWG is one on many projects and a bit of a toy - indeed he is currently brining another to AIM.

The fundamental issue remains that SWG is really just Brookcourt with a few added extras. Form the original RNS announcing the takeover is the startling line

"for the financial year ended 31 March 2017, Brookcourt generated unaudited revenue of £22.2 million and £2.8 million of EBITDA"

So, FOUR YEAR ago, SWG spent over £30m on something that alone was generating £2.8m EBITDA and have then have spent about the same again on all the other businesses and have produced results that show that everything has basically gone backwards.

The strategy is to produce a group with many capabilities in the same space , show the synergies of M&A and demonstrate material cross sell and upsell.

What has actually happened is the opposite with the sum of the parts now smaller than the parts added up at the time of acquisition - hence the decline in MCAP and share price.

Clearly this isn't going to deter them from pushing ahead on the same path but they first have to get back to net neutral before making gains on their strategy and with M&A more competitive than ever in the space, paper nobody wants, and a pretty paltry £6m to play with, one wonders what they can realistically do over the next 12 months.

[watcher13] 29/7/2021 15:30

Don't forget the Chairman with 6% - after all he was the main mover behind the Aurum mining to Shearwater cybersecurity change

[2lb] 29/7/2021 15:24

The CEO won't buy because he already holds 9.4% of SWG having already made his millions on the overpriced acquisition (RTO) of Brookcourt and taken the rest in paper. He is no longer doing this job for the money and if things get worse I wouldn't be surprised to see him go. The removal of the original Group CEO and the desire to cut costs put him the the main seat by default.

The CFO holds a paltry 1715 shares worth about £2500 at present. That is where you should be looking to see some buying occur - and it's when you don't see a CFO with an immaterial holding looking to buy some that you have to question why.

Outside of these two, the rest are PDMR all on options and share incentive schemes that are now pretty much underwater - hence the Xcina MD jumping ship to Rackspace this week.

It's still clearly oversold , but the results were poor no matter how much you try to dress them up, so investors now need to hang their hat on the scale of the 2021/22 improvement.

[channel pirate] 29/7/2021 15:24

Was thinking the same pm, somewhere nearer 140p down where we were earlier this year.

[pinemartin9] 29/7/2021 15:09

I bought at 144p on 4th Feb this year. If the results are to be believed then this looks to be a very good turnaround story. Very frustrating not to have cashed in on the spike to 200p plus a while back. However, my original investment case still stands, in fact given the results it has been enhanced. For that reason I'm considering another top up. Might wait on the sidelines though as I haven't been good at timing my top ups recently. Very hard when a share is going down to pick the bottom. Generally things overreact. Whilst I don't like to say it I've a feeling this will be available slightly cheaper over the next few days.

[igoe104] 29/7/2021 14:50

Yes nearly all 26 holdings i hold , the directors have put there hand in there own pockets and purchased shares. CEO at SUR ( which I hold) purchased 84k worth, yesterday. Cant remember the last time any of the SWG directors purchased any shares. If they are confident of the companies future, let's see less talk the talk and more walk the walk..... even 5 or 10k each would be a positive move...

[zico01] 29/7/2021 14:06

igoe,

Completely agree with you directors should be be buying.

[weatherman] 29/7/2021 14:05

I've broken down the half yearly turnover over 3-years. This shows the last half was a record year and evidence of a return to growth. Strong trading reported in Q1 22.

H221 20.6m
H121 11.2m
H220 16.7m
H120 16.3m
H219 19.0m
H119 4.5m

Y21 31.8
Y20 33.0
Y19 23.5

[igoe104] 29/7/2021 13:20

No stability in this share price. All it ever does is spike up then comes crashing down...


Why aren't the directors buying any shares if they are that confident about the business ????

[northwards] 29/7/2021 13:19

Sorry - 34m market cap !

[northwards] 29/7/2021 13:14

24m market cap, around 6m net cash. I'm very tempted to top up. Small trades really move the share price here.

[northwards] 29/7/2021 08:22

Should see a few insti presentations over the next few days.

[zico01] 28/7/2021 16:14

Today was the sell on news effect.

Results are better than expectations ... margins are improving ... costs are falling.

Last year Covid reduced H1 revenue ... a strong start to the current year bodes well for the rest of the year

The company will increase revenue and profits for the current year.

Cash at the end March 2021 was £6.0 million will increase substantially in the current year.

[2lb] 28/7/2021 15:59

240p entirely possible and is at least a sensible target.

Even at that level however note that the MCAP would still be below that raised and spent to put the business together and therefore indicative of a flawed strategy and wouldn't solve the issue of paper not being a viable source of M&A activity.

Retaining /attracting resource to deliver growth in a market where salaries are running away is going to be a real challenge - as indicated by the loss of one of their key players this week.

[weatherman] 28/7/2021 15:41

There is not much point focussing on weaknesses of the past. They have recovered well from the hiatus caused by Covid from last year, with evidence of getting control of costs. Going forward I can see them targeting 20% growth y-o-y, by keeping costs under control, and updating / expanding software offerings. Targeted small software acquisitions can accelerate growth through cross-selling. 12p eps for 21/22 on a PE of 20 for PEG of 1 would suggest 240p as a fair target - imo.