The financial performance of Vivid has been horrible and this has been reflected in the destruction of share holder value.
The company raised $3.8m of capital on 29 July 2016 at 7.5c
The company raised a furher $5.0m of capital on 9 June 2017 at 4.5c
The closing share price on friday was 3.8c.
Therefore investors who subscribed for shares in the last two raises are down c.49% and c.16% respectively.
The sales in FY17 were basically flat compared to FY 16.
However employee expenses went up from 3.1m to $4.0m an increase of almost 30%.
Note: employee expenses have continued to increase at an alarming rate by almost $1m per year since 2014 when employee expenses were c.$1.1m.
This is wholly unacceptable when revenue / sales growth has hardly increased during that time.
Over the last two years the company has incurred combined losses of over $10m.
Based on current gross margin (27%), assuming costs are flat year on year (which is an aggressive assumption given that costs have historically increased year over year), the company would have to do in excessive of 17m in sales to get to cash flow break even!!
Ask yourself how likely is this to happen when the company did $2.2m of sales in FY17! In the absence of an increase in sales of > 7x - the company will need to raise capital again to remain a going concern. Draw your own conclusion at what price this will occur at and how dilutionary this will be to existing holders.
You the shareholders need to send a strong signal to the board and management that their poor performance is not acceptable to you.
How can you do this?
I would strongly recommend that you consider voting NO to the following resolutions at the AGM
Resolution 1. Remuneration Report
The board and management need to be held account for the disappointing sales performance, they need to be more frugal with the way in which they spend shareholder funds. $4m of employee related expenses for a microcap company with a mkt cap of c.19m is ludicrous!!
Resolution 4. Approval of Previous Issue of Options
The underwriters were paid a handsome fee for their services, they don't need to be provided with free options in addition to the fee they received. The issue of options (if exercised) is dilutionary to shareholders.
Reindeer Investments?
Was the underwriter of the most recent capital raise a long term holder or did he get more stock than he bargained for?
It is interesting to note that according to a substantial shareholder notice on 12 July 2017 "Reindeer Investments" appears to own 25,685,278m shares.
Per the Annual report "Reindeer Investments" as at 10 October 2017 owns 23,040,833 - therefore it would appear that 'Reindeer' has been a net seller of around $2.6m shares. (Not an insignificant amount)
What is strange is that if Reindeer went below 23.785m shares he would have gone below 5.0% threshold and would have had to put in a change in substantial notice ....which as far as I can see has not been lodged? so i'm not not quite sure what is going on there???
