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All this is of course disclosed in the 2022 Annual Report. The contingent consideration now paid for the Cortex acquisition is less than the maximum provided, which was $14.5m cash and the issue of 2,683,000 additional shares, so clearly not all criteria were met.
In FY22 ERD issued 15,125,447 shares via an equity placement at $5.54 in August 2021 and 13,317,000 shares as part consideration for the Cortex acquisition in November 2021 at $6.00. These were tremendous capital raises (so long as you didn't participate) given today's closing price on-market is $0.95.
Even with the minor share issue now announced there are only around 112m ERD shares in aggregate, so valuing the enterprise at just over $100m. So it's now wait and see how FY23 pans out before rushing to judgment.
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Following on to the post above I note that the consideration for the Cortex acquisition in late 2021 was $NZ157m to which must be added the further $NZ19.5m contingency now announced. Of course, in both cases a substantial portion of that consideration was via issue of ERD shares at $6, so the cash component outlaid was far less.
Given Cortex was about 50% the scale of the old/pre-merger ERD then with the combined enterprise value on-market now assessed at just over $NZ100m it could be argued that there is potential value not currently recognised. I realise that this is not a metric used to value a Company, but perhaps the effect of exiting the NZX50 index this month has been overblown and resulted in an opportunity?
This is an entity which has already positioned itself currently with footholds in the NZ, AU and US marketplaces, not easily achieved by local businesses wishing to expand. FY23 is clearly going to be a year of consolidation, but afterwards there may be growth/profits to be had?
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The Earn Out of$30.6m was based on retaining 60% of North American and Australian customers over 12 months and getting 5,000 more units used by customers over 12 months ( 64,000 units). Was $14.2m for the retention bit and $16.4m for the new units bit.
Obviously not all that happened
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Coretex ‘acquired’ at 4.0 times historical sales and 3.7 times forecast F22 sales
ERoad guidance is about $160m sales for F23 …so currently trading at 0.66 sales
Shows you what the market thinks of them at the moment, even allowing for overall decline in market multiples
Forecasting to keep on losing money doesn’t help sentiment
Suppose one day they will be forgiven
Go on ronaldson shout yourself a bundle of ERD shares for Christmas …you’d think they couldn’t get any cheaper eh
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I took a small first time holding (post #407) which is what has piqued my interest to comment. I'm not great on Financial Statements but the acquisition completed on 1 December 2021 so it was necessary subsequently to estimate what needed to be provided as at 31 March 2022 for the so-called contingent consideration liability yet to be paid.
As I read it the figure adopted by the Board then for inclusion in the accounts as a liability was $18.5m and this was identified as a key audit matter but accepted unchanged in the audited statements.
The actual final earn out has been assessed at $19.5m, the majority paid by issue of new shares at $6 (a price beneficial to other shareholders) but the point is that the criteria achievement didn't fall away post 31 March from the estimate at that time. So despite the headwinds mentioned at the half year reporting the Cortex component of the business isn't deteriorating and it's reasonable to assume benefits will follow after FY23?
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winner69 - I did as you suggested but the bundle was relatively small and at 92c which reduced my average entry price to under 95cps, and now 0.61% of my portfolio.
The Bid/Ask pricing recently has been quite fascinating as the market struggles to set a level following the flurry resulting from the exit from the NZX 50 index last month. My opinion is that the potential for upside exceeds the downside risk currently and that any "good news" announcement from ERD could move the market sharply.
But it will be a waiting game for some time now to see if the company can derive real benefit from the merger.
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whats going on guys? the sp isnt coming back down to the 52 week low is it?
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Rawz - It seems the Bid side has, at least temporarily, won the struggle referenced above (#416) whilst we await further news.
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Looks like the bollinger bands are tightening which indicates lower volatility? Lol never thought i would post dribble like that, gosh ive come a long way. (Probably got it wrong as well)
On a revenue multiple this is super cheap. probably worth a punt!
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Hmmm - Close price today $1.06, up 17c. It will require sellers to hold their collective nerve next week if this pricing is to survive but it may be a sign of good things to come after all as we move past the level achieved concurrently with exit from the NZX 50 Index, which was always likely to be artificially low.