Mello – Nov ’22 Preview

Physical Mello is by far the leading conference for serious private investors. As well as keynote speakers and panel discussions, around 30-40 companies present at each event.

For November’s event I have once again researched every public company appearing and written them up. I have also produced a miniguide here.

Adept Technology (ADT)

Presenter: TBD, Thursday

Adept have been on a journey from a supplier fixed-line business telecoms services, which including taking a cut of per-minute call charges, to a managed services provider encompassing IT, networking and unified communications. Much of this transition has been achieved via acquisitions and by increasing exposure to the public sector.

They last appeared at Mello in November 2018 on the back of recent earnings upgrades and boasting a share price of 350p despite the (then) “value” PE of 11x. Share price progress was subsequently held back some minor EPS downgrades and share issuance in early 2020. Although their staff were designated “key workers” during covid, high margin per-minute call revenue was hit by customers staying away from their offices and projects were put on hold.

Such was the uncertainty that forecasts were suspended until a month before their March 2021 year end, but despite revenues recovering to pre-covid levels and returning to growth, net margins and profits have never properly recovered nor are currently forecast to do so. The move away from higher-margin fixed-line telecoms seems to have been accelerated by covid and the acquisitions have so far proven to be lower margin than earlier forecasts suggested. Additionally, they are currently experiencing supply chain difficulties for certain types of hardware.

As their outlook weakened so did the share price which is currently trading at lows well below March 2020 and two thirds down from their last Mello appearance. While debt levels have peaked and no further acquisitions are planned, borrowings now look high relative to their reduced market capitalisation, and net debt / EBITDA was 2.5x in the last accounts. This level of debt puts covenants at risk from any further trading downturn, increases interest costs and heightens rollover risk.

Inevitably then, the company now looks very cheap on some measures with a forecast forward PE of just 3.8x. Forecast cashflow is good, supporting both a forecast yield of 5.5% and fairly debt repayment.

H1 results will almost certainly be released in the days leading up to their presentation.

Artisanal Spirits / SMWS (ART)

Presenter: TBD, Wednesday

Trading as The Scotch Malt Whisky Society (SMWS), Artisanal was a June 2021 IPO which raised £15m for the company, principally to fund stock for sale, investment in maturation and for customer recruitment marketing. Most pre-existing shareholders sold a quarter of their holdings, totalling £11m. Given market conditions since, the one person that didn’t reduce probably regrets it, although Artisanal have fared better than many IPOs of that vintage.

SMWS adds value by buying unbranded distilled whisky, maturing, grading, bottling and then selling it as a premium product. They also earn money from membership fees and (at least in revenue terms) from whisky tasting events.

They operate a subscription model, perhaps analogous to Naked Wines, which I will call Whisky as a Service, or WaaS. As you might imagine, WaaS businesses have their own special set of metrics to learn, including Notional Retail Value of Cask Inventory (NRVoCI) and Aggregate Life Time Value (ALTV) of their customers, as well as a more straightforward count of members. However, it is vital to appreciate that:

  • Of the £556 annual revenue per member, just £63 is from membership / renewal fees, the rest being totally discretionary.
  • Memberships are for just a year at a time, and the average length of membership is both short and volatile.
  • Comparisons between LTV / revenue and retention rate suggests that spending falls rapidly after the first year.
  • The claimed lifetime value per member of over £1700 is highly sensitive to modelling assumptions. For example, they have significantly improved membership retention rates recently but the behaviour of those additionally retained members is yet to be seen.
  • The “Notional Retail Value of Cask Inventory” of £455m is entirely subjective. As a point of reference, if you tried to sell that value of Glenfiddich at retail over the course of 12 months then you would have to take a severe haircut as total annual sales are just £1.4bn. But SMWS’s whisky is unbranded and so its value depends solely on demand from their own members (currently £20m a year). This in turn depends on recruitment / retention, perceived quality of product and varying fashion.

Still, this is the kind of business where the financial accounts cannot tell the whole story as they do not immediately recognise returns from marketing spend on lifetime customer value, nor increasing value of inventory as it is aged, nor even the effect of inflation on such inventories.

Regarding progress to date, they have certainly been successful in using the cash raised and the publicity surrounding the float to reinvigorate membership growth, particularly in the UK which grew 31% in the 12 months since IPO having previously been moribund.

Aside from the extreme difficulty in valuing the company, the main identifiable risks appears to be that they could overstretch themselves financially in a bid for growth, and around the renewal of the borrowings due January 2024.


Presenter: TBD, Thursday

I wrote up ATOME for their appearance in May here, praising the green ammonia side where there is an established market for fertilisers and credible prospects to power shipping in the near future. They have since made some limited and speculative progress towards creating a market for hydrogen to power heavy goods and passenger road vehicles in Paraguay.

Bango (BGO)

Presenter: TBD, Thursday

Bango has long been a popular stock in the portfolios of private investors enjoying the more speculative end of the market, but they have never visited Mello before. They are a Direct Carrier Billing provider allowing their customers to take payments directly from users’ mobile phone credit, in the same way as larger competitor Boku. Significant profitability always seems to be a couple of years away due to a constant stream of downgrades, but some of this has been deliberate as they invest for growth and they have successfully grown revenues for many years.

Belvoir (BLV)

Presenter: TBD, Wednesday

I wrote up Estate Agency and Financial Services franchiser Belvoir for their appearance at Mello in May here. Since then sentiment has been badly hit by impact on the property market from increasing interest rates, in particular the jump in fixed rates triggered by the abortive Truss / Kwarteng budget.

Billington Holdings (BILN)

Presenter: TBD, Wednesday

This structural steel company last presented at Mello in November 2019 when I summarised it as follows:

A structural “steel” at the current price? Billington have shown sure but steady progress over the years, continually increasing operating margins and return on equity as well as revenues. Four years ago investors got over-excited pushing them to a PE of over 14, but today the PE is 8 on a similar share price.

The following month profits were upgraded due to the successful completion of a number of projects and the share price rallied by over 30%. We will never know whether this was a one-off caused by a coincidence of project timings or was more fundamental as the company was brought low by covid and has never fully recovered. Naturally they are currently suffering from supply side inflation which they cannot fully pass on, but the worst may have passed putting them back on a forward PE of 8 and this time with a discount to tangible net assets.


Presenter: TBD, Wednesday

I would imagine that if a cybersecurity company founded in 2000 had grown in line with the market then it would have a turnover approaching the GDP of Nigeria by now. Not only does ECSC not, but average revenue growth over the last five years has been just 6.4%. Nor can they be accused of putting profit ahead of the top line, having reported losses in every one of those years. And this isn’t an asset play either with a negative book value.

Although they have a recent external CEO, the founder has stuck around as the Executive Chair until a replacement can be found, and the CFO has held similar positions in the group for nearly 12 years. So the question has to be why would performance suddenly improve now, and indeed, how much longer can they continue given the weakening balance sheet?

Eight Capital Partners (ECP)

Presenter: TBD, Thursday

With a market capitalisation of £400k, most attendees at Mello could probably afford to buy this company outright, however they’d quickly find themselves diluted as the current plan is to convert much of the £17.6m in borrowings to equity and then carry out an additional placing. The company was founded as an investment company but recently switched to an operating company taking commission on financial transactions involving various types of tech companies, making investments on the side.

Although their H2 has got off to a good start it is entirely unclear why the balance of power between the fee earners and the shareholders would make for a profitable investment.

Hydrogen Utopia International (HUI)

Presenter: TBD, Thursday

The company are working to create a project pipeline of waste plastic to syngas and hydrogen plants on the European Continent. Impressively they raised £2.6m (net) to come to the AQSE market in January, despite their name which was presumably borne out of a linguistic misunderstanding by the Polish founder that it would inspire something other than ridicule. To add comedy to farce, their Polish subsidiary is called “Hydropolis United”.

In the same way that ATOME Energy (ATOM) are sourcing technology bought from Clean Power Hydrogen (CPH2), HUI use that provided by Powerhouse Energy (PHE). Like ATOM they seem to be highly dependent on “dumb” but erratic money from the public sector. Like ATOM they came to market at the tail end of an interest in hydrogen as a fuel (or even a store of energy), but also have more viable prospects, in this case such as the production of syngas and electricity.

One issue is that authorities that have banned incineration (waste to energy) plants and/or are tied to the recycling agenda are having difficulty seeing the advantages of pyrolysis of plastic followed by burning of the gas, and perhaps this is the reason for the apparently spurious hydrogen angle.

With £3.2m in the bank and build costs estimated at no less than €10m for a single Polish plant, the company has been busy expanding its network of consultants and is currently pursuing at least five projects in four different countries. They have apparently written off payments of €450k to PHE for rights in Poland, Greece and Hungry, but have agreed to effectively sell 50% of the Ireland JV to PHE for €400,000 plus loan funding of €600,000, and half of the Konin development for €500,000. Ireland is subject to the purchase of the land, a process which has been ongoing since July. Konin is subject (inter alia) to HUI assuaging local concerns over the environmental impact. There are apparently no plastic supply or gas offtake agreements in place for any site, provisional or otherwise.

Is the founder a fantasist? What kind of personality does it take to sell something like this to investors? The best way to find out is to get your Mello ticket and attend the presentation.

i(x) Net Zero (IX.)

Presenter: TBD, Wednesday

Again, presumably if this were a serious company it would have a serious name? Investors won’t be laughing however as they have lost 75% of their cash since they inexplicably stumped up £10.7m for this February IPO. This is an investment company focused on Energy Transition and Sustainability in the Built Environment. So, presumably they have been doing things like funding insulation and solar panels which currently give a sub 3-year paybacks?

No, apparently that’s too simple:

The Company uses a multi-strategy investment approach, providing the companies in which it invests with the expertise and catalytic capital to help them grow. To date, i(x) has invested in biofuels, direct air carbon capture, renewable energy, sustainable workforce housing and sustainable energy efficient apartment buildings for the urban core.

Admissions Document

On 30th June 2022 in results they didn’t manage to issue until 29th September, the company claimed NAV/share of $0.98, which is currently 82p, including cash of 14p, after making new investments of well under 1p / share. Disclosed future commitments are also low.

Their biggest investment is in WasteFuel Global, a organic waste to ethanol, or perhaps it is methanol, they don’t seem to be quite sure. Unfortunately the source isn’t organic waste at all, but landfill / biogas which is already has a high value for example for injection into the gas grid. Or perhaps they are confused again – it is impossible to verify as WasteFuel’s website doesn’t say what they do. Indeed, as far as I can tell they don’t do anything – only claiming to have developed “innovative technology pathways” rather than actual technology and not yet having recruited a CTO.

Researching this made be genuinely excited about the prospects for Hydrogen Utopia International.

Inspiration Healthcare (IHC)

Presenter: TBD, Both Days

I wrote up this medical devices company ahead of their last Mello appearance in May.

They finally issued their annual report in June, two months after the preliminary results. This can be a warning sign over the audit, but I have scanned this and found it to be clean. The other matter I wished to investigate was the jump in receivables which can be an indication of upcoming bad debts or even contract disputes.

Receivables were up from 41 days of H2 turnover last year to 84 days, compared to reported 30-45 day terms, minimal overdue invoices or non-trade receivables. This suggests that either sales came late in the period (which may indicate poor revenue visibility and a risk of missing future forecasts), or the details of the terms are not current. Receivables jumped further to 90 days at H1. This is a serious red flag especially given that the issue was only mentioned in passing at the full year and not at-all at H1.

The resulting poor cashflow was exacerbated in H1 by inventory build in the expectation of an H2 weighting and capital expenditure. Fortunately they have a debt facility in place otherwise the situation would be starting to look uncomfortable.

Following integration of a 2020 acquisition into new premises, growth is currently expected to resume and profitability to recover, albeit with cash following more slowly.

Poolbeg Pharma (POLB)

Presenter: TBD, Thursday

This “clinical-stage infectious disease” pharmaceutical company was carved out of Open Orphan, now known as hVIVO (HVO). Poolbeg came to the market in July last year with £25m raised from investors, a potential treatment for severe influenza ready for phase II trials, some capability to use AI to identify new uses for existing drugs using HVO’s data, and a pipeline of potential acquisition targets.

A year later they started phase Ib trials of the flu drug and more recently they have had initial success in identifying drugs to treat Respiratory Syncytial Virus, one of the lessor known causes of the common cold, but which like influenza and covid-19 can progress to serious disease.

Lower capital requirements should reduce the risk of dilution compared to other drug development companies, but their process still requires some degree of luck and the monetary value of any drug treatments can be difficult to determine.

Rainbow Rare Earths (RBW)

Presenter: TBD, Thursday

As Wikipedia says, despite their name, rare-earth elements are relatively plentiful in the Earth’s crust, but they are well dispersed making economic mining difficult. Rainbow Rare Earths may not have set out to prove this latter point, but they are certainly doing a good job. Naturally the highlights in their recent full year results focus on demand rather than production of which there is none after having their proven mine in Western Burundi shut down by a government that Transparency International rates as 169th out of 180 countries.

Other projects appear speculative, early stage and in need of partners to develop.

In other words, this is a typical junior resource company.

React (REAT)

Presenter: TBD, Thursday

I wrote up this cleaning company ahead of their last Mello appearance in May. Their October update was rather strange, repeatedly saying how strong trading was, but concluding with guidance of a 25% EBITDA miss. Net cash is now down to zero, with them relying on a term loan at 5.25% over base and an invoice discounting facility. Deferred and contingent considerations from acquisitions may drain cash further over the next 18 months.

SDI Group (SDI)

Presenter: TBD, Wednesday

It feels like private investor favourite SDI simply must have visited Mello before, but I can find no record of them having done so. SDI are an buy and build group specialising in the manufacture of scientific digital imaging products as well as sensors and control equipment. So far they have managed to consistently buy businesses at modest valuations and grow them further. As the company has increased in scale, cashflow and debt facilities are now sufficient to cover most potential targets making them less depending on the rating of their own shares to grow further.

Digital cameras for PCR machines have been the star performer and this organic growth has continued longer than expected post-covid, but will presumably be harder from here. On the other hand the regular EPS upgrades for both the current and next year have continued and the P/E is near the lows of the recent range.

Skillcast (SKL)

Another IPO that launched near the height of the market and whose share price has done badly since. They provide those incredibly annoying and occasionally frustrating online courses that (I imagine) HR departments make their staff do so they have a better defence when an employee bribes somebody or sells personal data to the highest bidder. Skillcast offer both off-the-shelf and bespoke courses.

Interim results looked good, with 20% revenue growth and the confidence to push up prices 10% across the board. They have spent much of the IPO money on new staff, though they don’t say how many stuck with them through the mandatory training. I would see scale as a potential advantage here as they are able to sell the same training to more people and provide a more comprehensive range than smaller operators trying to undercut them.

Leo is thinking of investing in Skillcast. What should he do? Select all that don’t not apply and then Submit:

A. He should always not buy Skillcast
B. He shouldn’t never sell Skillcast
C. Impossible to say as staff should always never not research companies in advance and/or afterwards
D. The Investment Act 2006, section 5.3.2, subsection ø, paragraph 4 doesn’t apply
E. He should ask his manager if in doubt
F. All of the above.

SmartSpace (SMRT)

Since I wrote ahead of their appearance in May they issued some positive news on cash with burn virtually eliminated while recognised revenue and recurring revenue growth continued, which is very positive.

Springfield Properties (SPR)

This long established housebuilder has suffered recently, not because of antisocial residents in Evergreen Terrace, but along with the rest of the market as the mini-budget finished what the help-to-buy scheme started in making houses hopelessly unaffordable to normal people. Other headwinds are from increased building costs, or where fixed prices had been negotiated, the failure of subcontractors. Still, operating in Scotland should leave them more resilient to those in more overheated parts of the UK. Unfortunately their higher exposure to affordable housing projects paid for by housing associations does not give them the edge you might expect as inflation has left current pricing is uneconomic.

Current forecasts date from before the Truss / Kwarteng mini budget and were for strongly increasing EPS despite the challenges in affordable housing.


You might not know what the name means, but you’ve probably already guessed that only a green technology company could come up with this kind of nonsense, and you’ve certainly guessed what the share price chart looks like. This is by far the longest lived such companies presenting at Mello this time, having come to the market in January 2021.

Their lead product is SulNOxECO, petrol and diesel additives that claim to “heavily” reduce emissions. Unfortunately the only published test data available is to support a guarantee that it won’t actively void your engine warranty. Judging by Amazon reviews consumer sales are miniscule, although they do have similar review scores to established “one off” additives.

Their last annual report to 30th March included a material uncertainty over whether the company could continue as a going concern. In their H1 update to 30th September makes them look like a candidate on Dragon’s Den: Revenue remained negligible at £0.075m, albeit showing a consistent growth pattern with a good start to H2. Gross margin only became positive for the first time. By running down inventory and pay levels cash burn was reduced such that they had nearly three months left. The £15m market capitalisation seems entirely inexplicable.

Practically speaking extra funding will be required within the next couple of weeks which is probably unprecedented for a company appearing at Mello. Perhaps some of the management will lend it some money?

ThruVision (THRU)

Since I wrote ahead of their appearance in May the outlook for the year to 31st March 2023 was looking rather subdued due to the weakening outlook for retailers, but a major order from US Customs quickly turned things around. There’s a possibility that the H1 results will come ahead of their presentation, but if not they will be limited in what they can say.

Time Finance (TIME)

This well established company provide finance to UK SMEs. Dividends were stopped during covid and have yet restarted. Banks and bank-like companies can be extremely complex and unfortunately I don’t have the expertise to comment further

Tracsis (TRCS)

“Tracsis’ purpose is to develop innovative technology-driven solutions that solve complex problems which maximise efficiency in regulated industries.” This appears to mean they sell GIS software to transport companies.

Van Elle (VANL)

Van Elle claim to be the UK’s largest ground engineering contractor. That would put them at the opposite end of the construction process from TClarke (CTO) who do interior fit out. As they are involved at an earlier stage this potentially gives them less warning of deteriorating market conditions, and the 35% of their business that comes from infrastructure work may also be exposed to public spending cuts. However the current outlook is good with a strong order book.

Vianet (VNET)

This provider of beer flow monitoring equipment and vending machines has been very coy about cash levels recently, offering only variations on “it is prudent to preserve cash”. Margins and cashflow are currently being hit by supply chain difficulties, but they expect sales to recover to pre-pandemic levels during FY 2023, which is perhaps quite impressive given the pressure pubs are under.

Next results are due on 6th December so they are in a close period which will limit what they can say.

Zamaz (ZAMZ)

The name seems to be a play on Amazon, the retailer who they are appear to be entirely dependent on. They develop and buy brands that sell principally on Amazon taking advantage of their expertise of Amazon platform marketing. Their USP appears to be that brands are environmentally friendly. The IPOed on the main market in September, an impressive feat in the current market, raising £2m after £1.6m costs. Inexplicably the company is valued at £71m despite revenue of just £0.8m in the naturally stronger half of the year to 28th February 2022, down from £1.2m the year before.

Zoo Digital (ZOO)

Zoo provide dubbing and subtitle services to the likes of Netflix. H1 results issued recently were strong with revenues and EBITDA approximately doubling. They also reported their first and not insignificant H1 profit with significant cash generation.

Anybody who subscribes to Netflix from English-speaking countries will have seen an increase in fairly high quality foreign original language content and Zoo seem to be benefitting from this as well as localising English language programming for non-English markets.

Zoo claims this is currently a supply-constrained market and also that its technology gives it a competitive advantage. In the short term that should allow them to gain market share from the current base of just 4%, especially as they will already be on the panel of major streaming providers. However, their particular dependence on Netflix and the number of competitors vying for work may present future risks.

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