for more information about stanelco click on the links.

driver's research page link
http://www.moneyam.com/InvestorsRoom/posts.php?tid=7681#lastread
website link
http://www.stanelco.co.uk/index.htm

Does anybody have any views on SEO's current cash situation? Blinger (now on FYB as Stainco) is making claims that they are short of cash and about to make a cash-call.

Based on nothing, as far as I can tell - as per normal for his posts. I seem to remember a while back Howard White saying they has enough cash for 18 months even if no further income was received.

ssanebs,

Are you 100% certain that the tooling issue has been resolved?

garyble
Looks like the tooling issue has been resolved I saw this leaving the factory.

sd: agree that it is a somewhat nervous time with the sp testing the support level of 14p. I have reduced my exposure as a defensive measure, although I doubt that the level will be decisively breached. I have noted that ssanebs seems to call it right. If the tooling issue has gone from 95% to 100%, then that is important because we can then pick up delivery speed. I noted the IC comment re 50 installations this year: at one time the sp needed the 200 but I think confirmation of 50 is OK with the balance in first half of next financial year. The approach to concentrate on the US whilst fulfilling the ASDA commitment makes sense even if that involves extending the period of exclusivity. So we need the ASDA news to hold the sp; we can then move forward with good news on Starpol related contracts in the US with these 20m ton licensing deals at the forefront.

However, oblomov, I am concerned with the cash situation. A cash balance of 3.4m at end-October was insufficient then, must be down to around 2m now. Its not a major problem if they do need to raise more cash even on the market. 15m is only 10% of cap and will provide a support level, say at 13p (the last funding level). To me the major problem is that the cash shortage is holding back development. They need to put more support into GreenSeal; clearly the US thrust is going to be costly; whilst the website is indicative of the lack of resources. Do they still have a small company mentality? If bought out by a dynamic and profitable concern, the division would be funded at many times the current level and the breakthrough would arrive much quicker. No, I don't want that because the potential for shareholders is huge but I am getting fed up of defensive closure of investment positions; the point that the market could lose faith is real, though the share could become undervalued and the opportunities greater. I suspect this is why the FD has gone; a good FD would have been taking the lead in building up the balance sheet and providing investment funds for expansion. Just look at the opportunities, like InGel, going begging. Come on Stanelco, get your act together and go for it in a properly funded, professional way!

Eric

At present debt is cheaper than equity issue if revenue is not far away. Looking through they appear to have extended their debt abilities to cover for short term requirements at the time of the Biotec deal. Therefore I would not see any immediate need for any cash calls. With 50 Greenseal conversions done by October, they probably do not even need to call on debt, especially if the short term is news of Starpol deals (and why the need for the microsites unless demand was strong). Thats what I think.

Thanks Driver,

Shame ssanebs couldn't confirm himself though!

papappower: as I would expect from some one with obvious authority, comments are very reasonable. I remember that they borrowed to cover the deal with Biotec and then raised equity taking advantage of a much improved sp. It depends wheterh deals can be front-end loaded. My point rather is that they are underfunded and sailing close to the wind. I would be much happier if they borrowed additional funds and really staffed up for the expansion ahead. Its well known that this is the most expensive part of the product life cycle and they should not be skimping and scraping.

Agreed EWRobson, the present stage is the most difficult for non commercial people. I have watched this happen with SCE, who for years tried to commercialise using their technical people, they have now learnt their lesson and changed. It cannot be done, you have to make the changes, strengthen the commercial side, and then drive it through. It would be nice to get an update on any lower level changes that have happened, some reference to an expanded commerical/sales side would be good, but the flip side is that this could be in place, but the products are not ready yet. Greenseal it appears now will not take off until all the supermarkets are involved and the producers can run single lines for all customers, so we must wait 3 months for the Asda deal to expire. This short term will effect Greenseal conversions, this is why now a target of 50 by October. So this could be simply a circumstances problem, and not a sales one. I do not know.
I think the short term upside will come from Starpol/Biotec, with the peripheries of the likes of FrogPack and PetalPack helping in a small way.
The bio filter patent could be a summer sweetener, I have looked into this and its possibly the "Holy Grail" of filter materials, so that could end up a large input of cash into the system in the summer months.
Not for widows or orphans at the moment, but for those looking for a long term play, with plenty of short term upside potential, measured against some short term risk, then its a good one to be in.

Obvious authority, no, not me :) wrong person ;)

Having just looked at this myself, I cant say I see any problem. In fact the cashflow looks very good in comparison the the previous year.

If you look at the ANALYSIS OF CHANGES IN NET FUNDS/DEBT in the profit and loss account for 31/10/2005 you'll see that the cash in hand and at bank is actually 4,396,000. This was due mainly to share placings, but is a far healthier position than for the previous year when the figure was 920,000.

I dont recall cashflow being considered a problem in the previous year.

Also, presumably income streams have increased since October, from the success of Quantum Finish if from nowhere else.

I'd have thought the financial position of SEO is better than its ever been, even without the expectedGREENSEAL/STARPOL income.

Well, this is a good debate. I resonate with papalpower's analysis. I suspect that both of your scenarios, product immaturity and under-resourced commercial side, are combining to produce an inertia which is difficult to overcome. Your suggestion that the exclusive contract is proving difficult for suppliers seemed to be indicated by earlier posts from those involved with the industry. I had been assuming that ASDA would want to extend the period of exclusivity to exploit leadership with the technology, but it seems likely that their suppliers may be hesitant to commit for this very reason. That would be much more positive as the suppliers would themselves draw in the other supermarkets and the volume could grow more quickly. Seems a healthy scenario.

Not so convinced by your argument, oblamov. My point is that the size of investment in marketing, commercialisation as they put it, should have increased many times during roll-out. It seems likely that cashflow is acting as a constraint. This would be reason enough for changing their FD who may well have been out of his depth.

But more healthy finish to the day; we have bounced off 14p yet again. Poor old Eric having reduced as a defensive measure fearing a break south. Never mind, happy with the current average weight holding until we see more solid progress.

Eric

Eric,

Much of the investment in marketing and commercialisation was already included in the profit and loss account at the end of October (unless you believe it only began after October). And still the cash flow was healthy. No reason, IMO, to believe anything has changed since then. If anything, it should have improved. An increase some fivefold in the cashflow account over the previous year would not prove to be a constraint - quite the opposite. It shows good financial planning.

the tooling problem was sent of to engineers at birmingham university where they have resolved the issue, and it is now working correctly under tested conditions.
sorry to see eric unload but understandable when the price broke 14, but someone mopped all the loose stock up today and it was not me!

Thanks, oblomov. I'll take a closer look at the financials. But they went through msot of the funds raised and the revenues hardly picked up which was the background to my concern. My view that there people costs are far too low in relation to the size of the opportunities remains a concern. But i will come back to you.

Thanks too, ssanebs. That's good, substantiated news. If I'd known. I might have constrained the sell finger! But I retain half my holding. I don't have a problem in reducing defensively as I can easily make good, whilst, with CFDs, you can't risk the sort of fall many of us experienced last year. The news does, in my view, sharply reduce the risk of a significant break S.

Eric

Thanks ssanebs...clears that up nicely....hopefully.

EWR, I'm not sure SEO borrowed to cover the Biotec deal, as PapalPower stated, they extended their debt facility around the time of the Biotec deal. This was approved at the EGM along with the issue of a certain number of shares etc.

The Biotec deal was funded by the 9m raised, that was in addition to the $1.23m paid upfront.

SEO only needed to pay $6.25m for Biotec last year. $3.125m later on this year, and a similar amount 12 months from then.

EWR,

The annual results only accounts for 2 months of Biotec income. The SPhere agreement for 10k tonnes of material initially resulted in a plan to increase production to 12k tonnes pa, a potential revenue in excess of Euro 24m. At the EGM the proposal was increased to 24k tonnes pa for a reduced investment of Euro 2m. The annual results stated that both parties have so far paid Euro 1.5m for the capacity increase.

Eric
Completely sound strategy to reduce on CFD's. I held my overweight position - just - since we did not actaully breach 13.75p bid (not that I saw anyway!) and am relieved to see us back above the tested 14p mid price today.

You can always wait and buy in on first real movement north - even if you lose the first 1p or so, it's a much lower risk approach given the stagnant share price with it's current inherent capacity to head south on any bad news.

I am trying to time switching out of a trading account into an ISA account for some of my holding without losing on the spread before end of the tax year. It will give me great joy to also crystallise a capital gain within the CGT allowance at the same time from my earliest purchases - alas not so from my later bragadaccio trades.

Discussion of cashflow is most relevant - have not done my own figures on this yet, but it is a classical malaise in companies at a point of fast growth or gear change to underestimate the amount of cash they need to throw at jumping onto the moving conveyor belt of their chosen market.

sd

sd: like your comments and agree with them. Of course, i accept their prophertic value as I have been espousing on the DGT thread. I think I have learnt the lesson to take action to reduce the risk. Unfortunately, with SEO, I have tended to buy when they appear ready to break North and sell when they appear to be breaking south - the opposite of common sense. Having said that, it is a risk averse prophecy, although, as you say, better to wait until the break-out N has occurred even if you lose an odd penny or two. I believe that the news from ssanebs that the tools problem is solved diminishes the downside risk. Its only a matter of time before they break north. I suspect our common view is that, if they had invested properly in this phase of products coming to market, they could have moved more quickly and with less hiccoughs. Are they learning or is this two step forward, one back (or the inverse) going to continue?

ssanebs - thanks for your update. I still have a substantial holding in these plus cfd's which I hld for long term and have not traded these for a long while now preferring to hold for the long term. As always - appreciate yours and others comments and debate.

baza

baza: you remind me of my daughter, Sally, who describes herself as 'the loyal one', her two sisters being abroad in Thailand and Vancouver respectively. I am quite aware of what my problems ar with cfd's. If you leave a margin to allow for short term vagaries you can relax and absorb the price fluctuations. I set out on 1st february with 10K to invest in CFDs which I split between AZM, ASC and SEO: after 7 weeks I am plus about 800 but that is made up of plus 2K at least on AZM and ASC plus a decent negative on SEO. What happens is that AZM, say, go up, I but some SEO: then SEO fall, I go negative and have to sell, goodbye SEO. Its a good way of getting rid of profits. That's the lesson of hindsight. But I will be there when (not if) they do go decisively north. Its just a matter of time. In the meantime, i will just concentrate on building up the other two places which have, in my view, got past this immature stage.

I am fairly sure that SEO is a good buy at the present price BUT they have spent so long promising jam tomorrow that the punters have got a little fed up, cynical and jaundiced about company statements. The recent Walmart announcement was only 4 days before some not very good results and seems to have been timed to help soften the blow. The punters are not impressed by such things.