LPE - Locality Planning Energy Holdings

[galumay]

Pretty disappointing 4C today, missed targets, still cash flow negative (I have track FCF, not OCF.).
It doesnt really make sense but guidance is for cash outflows of $16m next Q - which would be disastrous if true.

 

[PZ99]

LOL > When that's done / dusted / digested by the market.... I'll re-invest

 

[Klogg]

Pretty disappointing 4C today, missed targets, still cash flow negative (I have track FCF, not OCF.).
It doesnt really make sense but guidance is for cash outflows of $16m next Q - which would be disastrous if true.

Not sure I agree on that... 35 of the 60ish staff are sales focussed. That's over half your staff (excl. Damien/Ben) spent acquiring customers. This is what enables 12%+ customers (greater in terms of revenue) per quarter. You could quickly trim that to 5 sales staff and save $3m annually.

Perhaps (likely) the $12m outflow for operating/product costs are energy and network related. When you onboard that many SME clients, you have to buy energy to sell... and there's a lag from when you buy it, to when it's paid by the customer.

I think their forecasts on cash intake are silly. They can't control usage by clients, but they can control (to a degree) number of additional clients. Just forecast client numbers, that's more than enough.
But that doesn't take away from their ability to (overall) run a lean, high growth energy retailer with locked in customers. Nothing significantly wrong in my view.

Even if they hit 80% of their 20000+ new customer target in the next year, it's still very impressive. On a run-rate basis, this could be very cheap.

 

[Klogg]

View attachment 96481

LOL > When that's done / dusted / digested by the market.... I'll re-invest

I don't see how this is a problem. This isn't like a typical retailer that increases working capital in the hope of selling stock... That $12m expense is directly related to the amount they sell.
They're estimating they'll need to sell $12m worth of energy and network usage, which they bill to their customers. The higher this number is, the higher the cash intake for the next quarter...

Also worth mentioning that last 4C they forecasted $7.2m for this item, ended up spending $5.4m. They usually over-estimate this figure.

 

[PZ99]

I don't think it's a problem either. But historically the market hasn't been kind to LPE and those numbers will kill the SP in the short term.

One predicts a hot summer will be the ultimate panacea for this company, so that's when I'm looking for a re-entry

 

[Klogg]

I don't think it's a problem either. But historically the market hasn't been kind to LPE and those numbers will kill the SP in the short term.

One predicts a hot summer will be the ultimate panacea for this company, so that's when I'm looking for a re-entry

Getting anywhere near the forecast customer numbers should do the job.

 

[galumay]

You are more optimistic than I, Klogg. Mind you I still hold plenty, but I should probably cut my losses and run given how little conviction I have in management. I am much more concerned than you by the escalating cash outflows, that will send them deeply cash fllow negative, and thats OCF too. I also hate the loan facility, 10% plus fees for share price growth. Anyway, I guess I better stop my grumbling and either sell or shut up!

 

[galumay]

Another year of consistent underperformance by LPE, losses up by 100%, cash flow still very negative, funny how they had no commentary on the abject failure to meet any of the targets in their guidance. I continue to be a reluctant holder, low conviction, suspicion around management competence.

 

[Klogg]

Another year of consistent underperformance by LPE, losses up by 100%, cash flow still very negative, funny how they had no commentary on the abject failure to meet any of the targets in their guidance. I continue to be a reluctant holder, low conviction, suspicion around management competence.

They didn't mention the 32m cash guidance, I agree on that.
But the rest is not a failure. They didn't indicate being cash flow positive in fy19(from what I remember).

Look at the last 4c. If they have 850k in receivables that weren't received due to change in billing period (as they mention), they're already cash flow positive.
Add that half the work force is sales, not operations, and the existing operation is well and truly cash flow positive.

Margin compression (this time around) is the result of accounting rule changes (AASB 15). No change in cash flows from this.

The business is actually progressing well, they're just too bullish on their forecasts. I don't expect they'll hit an extra 20000 customers, but even 15000 means the current market value is undercooked.

 

[galumay]

Thanks Klogg, you are not the only one more bullish than I, Tony Hansen obviously has confidence too. I have long ago made the decision to stick it out, but I simply dont have the level of conviction I would like. I think having a vent each time they release results allows me to then have the patience to continue to hold!

 

[Klogg]

Thanks Klogg, you are not the only one more bullish than I, Tony Hansen obviously has confidence too. I have long ago made the decision to stick it out, but I simply dont have the level of conviction I would like. I think having a vent each time they release results allows me to then have the patience to continue to hold!

Tony and I chat a lot about this holding. Mostly because we both speak to Damien fairly frequently, so there's a bit to pass to and from.

If management actually laid out the investment case properly (outlined the cash flows), this would be trading at a much higher valuation.

 

[galumay]

Yes, I also had a dialogue with Damien, it didnt inspire any more confidence in management for me!

I am hoping that they slowly execute and I slowly gain conviction at the same time!

 

[Klogg]

One for you @galumay



Interesting response to the question at 24m 5s...

 

[galumay]

I will believe it when I see it!!

 

[PZ99]

Pretty vague response there if you ask me.

I noticed prior to that they were saying Victoria has less sunshine for solar panels than QLD.

Not in summer fellas : And that's when power usage peaks...

Now how many strata plans has Melbourne got again ?

 

[PZ99]

Things looking rather crook here. Two directors leaving and a guidance review...

Down 17% in two days and a nearly empty list of buyers.

It's probably a buy if there's nothing wrong with the company.

 

[galumay]

If you think thats bad, wait till you see the 4C! They will miss their ridiculously high guidance on revenue by a large amount. Take up on solar has apparently been much slower than they boasted.

The good news is the resignations, but 2 is probably not enough, management is structurally dysfunctional.

I reckon you will be able to pick them up much cheaper soon, the turnaround if it comes, is years away.

Its my hair shirt.

 

[rcm617]

Has been bouncing around in the low 20's for most of the year after falling from 70c. The last few days has been rising steadily on high volume. Customer numbers have been rising steadily all year, maybe 2021 will finally be the year that their optimistic predictions come true.

 

[galumay]

maybe 2021 will finally be the year that their optimistic predictions come true.

LOL! I wish.

 

[djones]

LOL! I wish.

Tough to argue with their customer and cashflow growth.

Unless they are selling the energy and equipment at a loss there has to be a point they become cashflow positive..the next quarterly will be telling.

As a longterm, underwater shareholder though “next quarter” has been said a few too many times!

I will continue to hold whilst the impressive revenue growth continues.