Small Cap Value Report (Fri 18 Feb 2022) - PODP, CLIG, AEO, MWE
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Good morning! It's Jack and Roland here with Friday's SCVR. Many thanks to Roland for stepping in over the past couple of days, allowing Paul to take a well earned break. He's back on Monday.
Agenda
Jack's section:
Pod Point Group (LON:PODP) - recent IPO providing chargepoints and other services for electric vehicles in the UK. This is obviously a growth market, and Pod’s revenue is expanding at pace. The group has c£46m of cash on the balance sheet as it grabs market share, but losses continue. Some supply chain issues will hit margins in H1 22 too. I see the thematic opportunity, but at what point does the group become self-funding?
Aeorema Communications (LON:AEO) - extremely small micro cap, c£7.4m in size. The pandemic has prompted management to pivot to online conference events and it’s good to see that the group has not just survived Covid, but is now on course for record revenues as a result of actions taken. It could be that the addressable market has increased, and the valuation looks fairly modest, but the stock is extremely illiquid and so is probably not appropriate for a lot of investors out there. Very wide spread.
Roland's section:
City Of London Investment (LON:CLIG) (I hold) - Half-year results from this specialist asset manager. Limited net inflows and mixed market conditions mean that funds under management are broadly flat, but fee margins are stable and profit performance is quite strong. A special dividend looks likely to push the dividend yield to 9% this year. I remain happy to hold.
Mti Wireless Edge (LON:MWE) (I hold) - exchange rate movements mean that costs rose last year. 2021 profits are now expected to be lower than forecast. However, based on the evidence so far, I don’t think this really qualifies as a profit warning. The balance sheet remains strong and the outlook for 2022 is said to be positive. I remain happy to hold ahead of full-year results.
Explanatory notes -
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Jack’s section
Pod Point Group (LON:PODP)
Share price: 215.2p (+1.89%)
Shares in issue: 153,952,537
Market cap: £331m
This is a recent IPO which has fallen slightly since listing, having raised some £120m and gaining the Green Economy Mark at admission. It’s loss-making, but is on a ‘mission to put an electric vehicle chargepoint everywhere you park’. Clearly an area that will see growing demand in the years ahead.
Podpoint formed in 2009 and has since manufactured and sold over 102,000 charging points across the UK and Norway. A network of more than 5,200 EV charging bays has also been established at locations like Tesco and Lidl, with potential to accelerate recurring revenues. Finally, the group installs home charging points for customers of major automotive brands, company workers, and property developers.
I actually had my first experience in a rented electric car recently and had a pretty rough first 20 minutes or so which consisted of me driving around Marble Arch roundabout four or five times while a passenger frantically googled for nearby chargepoints. I wonder if that’s a common experience?
Preliminary results for the year to 31 December 2021
Strong financial and strategic performance with excellent momentum
Highlights:
- Revenue +86% to £61.4m,
- Gross profit +99% to £16.3m, gross margin up from 25% to 27%,
- Adjusted EBITDA of £58k but reported EBITDA loss of £8.1m,
- Loss before tax of -£14.3m, basic and diluted EPS of -13p,
- Closing cash up from £2.9m to £96.1m.
The revenue and gross profit growth is encouraging. Home revenue grew by 98% to £40.3m, Commercial was up 64% to £18m, and Other increased by 108% to £3.2m.
Part of the difference between adjusted and reported EBITDA is £5.7m of IPO and restructuring costs. That doesn’t explain the entire gap though. I’m really curious to see what the capex requirements are for a chargepoint company in growth mode like Podpoint. I assume it is currently quite capital intensive…
It’s certainly been busy this year. The total number of units installed and able to communicate at the year end increased to 137,420 (2020: 77,498) ‘providing an excellent base to expand recurring revenue products’.
Over 66,000 charge points installed and shipped (2020 full year: 35,763) while maintaining outstanding levels of customer service with a 4.3 out of 5 rating on Trust Pilot.
Key OEM contracts won or renewed include Fiat, Jaguar Land Rover, Mercedes and Nissan. There are now over 130 active fleet business accounts with the likes of Coca-Cola, DHL and Royal Mail. Commercial recruits include CBRE, Hermes, and Serco, as well as a contract renewal with Serco.
Owned asset sites increased to 453 with 984 charging points including 73 DC rapid units.
Market share in home charging increased to 18% (2020: 16%) driven by new commercial deals with car manufacturers and operators of business car fleets.
Current trading
Strong start to 2022 with ‘significant volume’ of Home and Commercial orders. Continuing market share growth with January registrations of new Plug in Vehicles increasing to 23,840 a year, up 89% year-on-year and now representing 20% of new vehicles registered.
2021 was a ‘watershed’ year for EV adoption in the UK.
Headline gross margin guidance for the full year is unchanged with some downward pressure expected in H1 on Home percentage margin as we navigate well-publicised component shortages prior to benefitting from unit manufacture cost savings from the on-boarding and production scaling of a second manufacturing partner during 2022.
Balance sheet - £107m of goodwill and intangibles make up the bulk of fixed assets and a notable proportion of the £248.5m of total assets. Total liabilities are small though, £48.6m, so net tangible asset value is £92.8m. Good current ratio, helped by the cash raise.
This could all change depending on how much cash the group burns through as it expands.
Cash flows - net cash from operations was -£2.2m, not as bad as the net loss on the income statement, but helped by some working capital changes. £57m was spent on investing activities though, namely a £50m of short-term investments. It’s quite a busy cash flow statement, with a lot of changes happening as the company floated.
Getting a handle on cash burn going forward will be important as the closing cash balance is £46m, some way below the headline £120m raised at IPO once all the other activity is factored in. Still a decent buffer for now.
£2.6m spend on purchase of tangible assets and £4.6m spend on purchase of intangibles. That’s generally capex. Is it reasonable to assume this is a normal level of spend for such a growing company? If so, that suggests a good few years’ of cash on the balance sheet. But then again, this enterprise might end up being more capital intensive, in which case cash burn and equity dilution would become more of a concern.
Conclusion
Podpoint is helped by structural tailwinds, government initiatives, and a stack of cash post-IPO. It stands to grow revenues quite strongly over the next few years, in my opinion. As for the ultimate profitability and general economics of chargepoints, that requires further investigation.
As does the competitive landscape. This could become a landgrab and well-funded competition might lead to a scenario where all players operate at a loss for longer than expected, for example.
There’s a lot of market data in the prelims. Some of it will be noise from an investment perspective and, ultimately, the company remains loss-making. For all the talk of a growing market opportunity, I would like more detail on the actual economics of the enterprise. I still don’t feel like this is clear to me. The 27% gross margin makes me pause, but perhaps this will improve as the company expands.
The IPO prospectus is more than 200 pages long - I’m sure there’s more detail on the nitty gritty here but I might not have time to find it, unfortunately.
I’m not too surprised to see that Podpoint remains unprofitable. It’s a good growth story, which means it can pitched well to prospective investors, but if anything that makes me slightly warier. For all the EV talk, I need to be comfortable that there is a path to profitability. The large cash balance does help, at least.
I’m reminded of Gfinity (LON:GFIN) , not in terms of business model at all, but more the fact that Gfinity is a serial loss-making company involved in an attractive growth market that has to continually spend a lot of cash in order to build everything up. It all sounds attractive, but the financial reality is consistent cash burn and equity dilution.
Podpoint’s low Quality and Value Ranks are there for a reason:
That would be my concern here, hence why I want to see more detail on the actual company economics rather than how well the EV market is doing. I do suspect profitability could change quite drastically as scale builds, and Podpoint does have net cash on the balance sheet. It's high risk, high reward.
If I was asked to model the company’s prospects right now I’d really struggle. Clearly, it’s in the right place at the right time in a nascent market. Revenue growth is very strong and I do think there’s a lot of potential upside. Will Podpoint be one of the winners? I’m not sure yet.
Aeorema Communications (LON:AEO)
Share price: 80p (+11.89%)
Shares in issue: 9,238,000
Market cap: £7.4m
This live events agency is so small you wonder why it is listed given the fees incurred. The share price has more than doubled over the past six months or so, so shareholders are doing well but there’s very little liquidity so chances are you’re strapped in for the ride.
The spread is 979bps according to Stocko, and the free float is just 30%. Major shareholders are mostly individuals.
Aeorema has benefited significantly from a strong performance from its US office, which opened in September 2020. New US clients wins complement the existing multi-national blue-chip client base.
The shift since 2020 into providing virtual online conferences and events has experienced high levels of demand. The provision of consultancy services has further enhanced performance.
Aeorema now expects to report revenues of no less than £4.9m for H1 2022 (H1 2021: £1.67m), exceeding the previously reported revenue expectation of £4.5m for the period as previously announced on 14 December 2021. As a result of this record performance, profits before tax of no less than £235,000 (H1 2021: Loss before tax of £287,676) are anticipated representing the first profitable H1 in a number of years.
The prospects for the second half of 2022 remain favourable and the company is confident that it will continue this trajectory into H2 2022.
Conclusion
The company’s doing well, exceeding expectations, and I’m happy to see management actions taken in 2020 are bearing fruit now. The pandemic must have been a highly stressful period for live events companies, so it really is heartening to see Aeoroma not just survive, but use it as a catalyst to generate record results.
I don’t think the group has ever generated this amount of revenue over a six-month period. Nearly as much as total annual revenue in prior years.
Shifting to virtual online conferences might have expanded the group’s addressable market. So perhaps there’s been a fundamental change in prospects, which could justify further research.
If Aeoroma is getting on for £10m of FY22 revenues with c£1m of net cash on the balance sheet, then the £7.4m market cap does start to look cheap. Directors own a lot of the stock.
It’s too small for the majority of investors, but it’s doing well.
Roland’s section
City Of London Investment (LON:CLIG)
Share price: 518p (pre-open)
Shares in issue: 50.7m
Market cap: £263m
Disclosure: Roland owns shares of CLIG
Special dividend promises 9% yield for FY21
This specialist asset manager doesn’t go in for snappy results headlines and broker coverage is limited. But City of London Investment Group is consistently one of the highest-yielding stocks on the market. It’s also delivered fairly satisfactory share price returns over time, for patient investors:
The company’s core investment strategy is focused on buying emerging market investment trusts at discounted valuations. However, efforts are underway to diversify internally. Recent expansion through a merger with US firm Karpus has also expanded CLIG’s product range into fixed income.
Today’s half-year results suggest to me that the attractions of the business remain intact, but that some challenges remain around growth.
Financial highlights: My reading of today’s results suggests the numbers show a familiar story for long-time CLIG investors. Profitability and cash generation remain strong, but growth is somewhat limited.
Today’s results cover the six months to 31 December 2021 (CLIG has a 30 June year end).
- Funds under Management (FuM) of $11.1bn (FY21: $11.4bn)
- Net fee income: £29.8m (H1 FY21: £22.6m)
- Pre-tax profit: £13.6m (H1 FY21: £8.8m)
- Interim dividend unchanged at 11p
- Special dividend of 13.5p per share
FuM: Funds under management fell by 2.6% to $11.1bn during the second half of calendar 2021. CLIG says this was due to “mixed conditions across the group’s products” but points out that FuM was still 2% ahead of the comparable figure at the end of 2020.
Net client flows for the half year were negative at -$58.7m, although the company says the trend has improved over “the past several quarters”, with a net inflow of $112.5m during the second quarter (Oct-Dec).
The current situation continues a long run of flat FuM at CLIG, as this chart from today’s half-year report illustrates:
The step up in 2021 reflects the merger with US firm Karpus Investment Management (KIM).
Happily, CLIG continues to split out FuM into funds managed by City of London (CLIM) and those managed by KIM.
CLIM: Funds under management ended the half-year largely unchanged at $7.2bn. However, the company says this reflects opposing performances from its two main strategies:
- Emerging Markets: a 23% fall in Chinese equities caused EM FuM to fall by 11% to $4.8bn
- International: Continued strong inflows despite lacklustre markets saw International FuM climb 14.2% to $2.1bn
Both strategies are said to have recorded “robust outperformance against their respective benchmarks”.
Management are hopeful that as face-to-face meetings resume, CLIM will be able to secure new client inflows. As I’ll discuss below, efforts to diversify may also attract new inflows.
KIM: Funds under management (c60% fixed income) at this US business rose by 1% to $3.9bn over the half year. Interestingly, US SPACS are identified as a $54bn addition to KIM’s investable universe. According to the company, “SPACs can offer a fixed income return profile with lower risk and potential for upside”.
I have to admit that this is outside my understanding, but I’ll be interested to see if further mention of SPACs is made in future results.
Results: CLIG’s profits and fee income jumped higher during the period. Management’s preferred measure of underlying pre-tax profit rose by 38.4% to £15.5m. However, this gain falls to 7.8% when profits are adjusted to reflect the partial contribution by Karpus in the comparative period, when the merger was completed.
At a divisional level, profits from the CLIM business rose by 11% to £8.6m during the period, while KIM’s pre-tax profit was “marginally ahead of the previous period” at £6.9m. The US business has been investing in infrastructure upgrades – hopefully performance will keep pace with CLIM in future periods.
Fee margins: Asset managers’ fee margins have come under pressure in recent years. CLIG has not escaped this. However, the company says that the group’s blended net fee margin remained steady at an average of 0.74%.
Checking back to last year, I see that this figure was 0.74% in FY21 and 0.75% in FY20. So fee margins may have varied across the group’s various strategies, but overall performance seems stable.
Dividends: CLIG says that “the outlook for global equities is far from assured in 2022”, due to inflationary risks and the potential for tighter Central Bank policies. As a result, the company has opted to leave the interim dividend unchanged at 11p per share.
However, CLIG has also declared a special dividend of 13.5p per share, consistent with its policy of returning surplus capital to shareholders.
My sums suggest a total payout of 46.5p per share is likely for the full year, giving the stock an outstanding (and covered) dividend yield of 9%.
Profitability: A key attraction of this business for me is its consistent strong profitability.
My calculations suggest a trailing 12-month operating margin of 43% after today’s results, continuing this very attractive trend.
My view: As a shareholder, today’s results don’t change my view of CLIG. This group is highly profitable but has struggled to attract client inflows in recent years. One reason for this appears to be that some of the group’s core strategies are capacity constrained.
CEO Tom Griffith admits this in today’s report, saying that “capacity limitations in the CEF [closed-end fund] universe of available securities have constrained growth”.
To escape this constraint, CLIG has tried to diversify. The strong inflows reported for its International Equity strategy suggest to me that this approach may be delivering results. The merger with Karpus is another form of diversification, of course.
As a quality dividend investment, my opinion of CLIG remains favourable, a view that’s shared by Stockopedia’s algorithms:
In my opinion, CLIG shares look reasonably valued at current levels as well:
I’m happy to continue holding the stock and wouldn’t be averse to adding to my holding at this valuation, given the group’s strong profitability and history of shareholder returns.
Mti Wireless Edge (LON:MWE)
Share price: 59p (unch at 09.00)
Shares in issue: 88.5m
Market cap: £52m
Trading update (14/02/22)
Disclosure: Roland owns shares in Mti Wireless Edge (LON:MWE)
It’s a quiet day for news today so I’m circling back to this AIM technology stock, which issued a poorly received trading update on Monday.
“The MTI board expects to report marginally lower than anticipated net profit for the year”
MTI Wireless Edge is an Israeli firm. Its main products are radio antennae for defence clients, and water and irrigation systems for agricultural applications. The group also has a consulting business. Geographically, the company is active in markets including Russia and China, so it’s not without political risk.
If you’re new to the business, this Investor Meet Company presentation provides a good overview.
MTI’s share price has fallen by 15% this week. This suggests to me that investors saw Monday’s trading update as a profit warning. However, management says that the shortfall is due to exchange rate fluctuations, which doesn’t seem so alarming.
I think it’s worth unpicking the detail of this announcement to understand more.
Helpfully, Monday’s update steps through the details of the company’s expected financial performance for 2021, so we’re not left guessing too much. There’s also a brief but positive update on 2022 trading to date.
Introduction: MTI says that 2021 was a successful year, with sales growth and strong cash generation. However, the strength of the Israeli Shekel versus the US dollar during the year means that reported profits will be lower than expected.
Here’s a chart showing the exchange rate in question:
(Source: DailyFX)
This chart shows the ILS/USD rate since 2018. Last year does seem to have seen a sharp rise in the exchange rate.
Revenue: Broker forecasts on Stockopedia suggest that MTI’s revenue will rise by 6.1% to $43.4m in 2021. The company says that 2021 revenues are expected to be in line with market expectations of $43.2m.
Gross profit is expected to rise by 3% to $13.5m, “in line with current market expectations”.
Cash flow from operations for 2021 is expected to be “significantly ahead of current market expectations at approximately $6.5 million”. That’s an increase of 64% versus 2020. Unaudited year-end net cash is expected to be $12.5m (FY20: $9.4m).
This cash performance seems encouraging to me, but I can’t help wondering if this comparison includes some unusually large working capital movements. We’ve seen that across quite a lot of companies, due to the disruption caused by the pandemic.
Operating costs: Much of the group’s revenue is in US dollars, but MTI’s Israeli base means that many operating costs are paid in Israeli Shekel. Staffing costs are said to have risen in Israel, due to the strength of the Shekel against the dollar in 2021.
Operating profit: As a result of increased staffing costs (due to exchange rates), operating profit is expected to have risen by 9% compared to 2020 ($4.1m). This result would be “marginally below current market expectations”.
Pre-tax profit: Pre-tax profit is expected to be “below current market expectations although broadly in line with 2020 levels”. In addition to the higher operating costs mentioned above, MTI says that foreign currency fluctuations have also resulted into higher finance costs when translating cash into the group’s reporting currency of US dollars.
Net profit: After-tax profit is expected to be 6% above the 2020 figure of $3.5m. The higher costs listed above are expected to be partially offset by a lower tax rate.
Dividend: The dividend for the year is expected to be in line with current market expectations. According to Stockopedia, this suggests a payout of 2.8 US cents for 2021, giving a forecast yield of 3.5% at the current share price.
2022 outlook: It’s still early in the year, but CEO Moni Borovitz says that MTI’s orderbook and pipeline of opportunities are currently in line with internal forecasts. The ILS/USD exchange rate has also started to normalise and is said to be above the budgeted rate (in a good way).
My view: For me, there’s not enough here to justify a change of stance. Although the profit shortfall is a little disappointing, it’s not uncommon to see currency losses distort company results.
I’m encouraged by the apparent transparency shown by MTI’s management in Monday’s update. My impression is that this business has been performing well over the last few years. I think the shares probably got ahead of themselves at c.80p last year. But at current levels, I think MTI looks more reasonably valued.
I plan to continue holding my shares, ahead of the full-year results on 7 March. My view of this business remains broadly positive, although as I mentioned earlier, there are some geopolitical risks here in addition to normal investment risks.
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54 comments
Hi jack just an observation regarding podpoint . I see that the grant initiative which was available expires in March of this year and according to their website they do not have any installation slots available until after the grant expires. Will that have any effect , probably not but interesting that wonder whether the delays are Labour or supply issues .
tricky one this company ?
Anyone else a little concerned by recent developments at Team17 (TM17) ? ( I hold)
One of the gaming magazines (Eurogamer) on 11 Feb published a damning report into poor working conditions, staff morale and worrying behaviour by some staff including the largest shareholder and CEO. Together with ill-advised new product launches that quickly necessitated reversing.
Another recently appointed CEO (?!) was forced to address the workforce the following week promising to deal with these issues. At the same time he criticised the business’ policy of prioritising quantity over quality and said that Team17 was currently “struggling” , with high rates of staff attrition and too many projects.
All sounds a bit of a mess and something of a red flag to me. Not only from an ethical point of view but also a commercial one - there surely cant be many successful companies where there is a large schism between staff and management ? I would have thought that the necessary culture changes are pretty difficult to make, given that it is generally an issue coming from the top down, and not something fixable in the short term.
Its also ironic that exactly 3 years ago the company appointed as NED an HR expert who's day job was Executive People Director for a well known plc. It does make you wonder what on earth some NEDs actually contribute to their employer !!
Many thanks for any comments or advice with regard to my shareholding.
Looks like investors have realised that the growth in sales at Shield Therapeutics (LON:STX) is not going to be fast enough to avoid another fundraising. Shae price dropping 30% on large volume today.
Only £100k (2500 prescriptions) in the last FY. They are burning around £20M per annum and have £12M on hand at the end of 2021 so by my calculation they will need more cash this summer (when they were supposed to break even according to the last fundraising).
On the positive side it does appear that they have a product that will grow in usage and they have now gained payer approval from a large percentage of the market in the US. Question is how much more dilution will occur before sales reach break even?
Revs8, re: Shield Therapeutics, my wife is a pharmacist and she thought that the cost of the drug was very high considering that iron supplements were generally very cheap.
A lot of hype at launch about the product, but as you point out, a very poor performance with regard to the number of prescriptions. Maybe it is not perceived as such a revolutionary product that they claim it is?
Some great bargains appearing in the market in the last few weeks. Many good quality companies down around 50% from their peak, on what seems to be temporary issues (mainly supply chain related). This week taken the opportunity to open positions in Gear4music Holdings (LON:G4M) Volex (LON:VLX) and Luceco (LON:LUCE) I'm sure there are plenty more out there.
I see Northbridge Industrial Services (industrial services and rental company) Northbridge Industrial Services (LON:NBI) issued a mid-morning trading update today. Trading in line with management expectations, however there are some positive points:
Sounds as if the company might be on the up. Stocko has it on a price/free cashflow of 10 which doesn’t seem too bad for a company with virtually no debt and a growing order book – any thoughts or feedback welcome.
Jack: Great work on £PODP
This was something I had my eye on when it IPO'd but didn't get round to dedicating time to work through the prospectus. PODP operates in a market buoyed by strong growth tailwinds which are demonstrated by the 86% revenue growth, particularly in the home market where revenue grew 94%.
The average cost selling price of a home unit in 2021 was £732 (2020: £717) +2%.
Interestingly, PODP receive annual revenue from each unit installed (£57 in 2021, up from £50). These relate to fees charges from the use of Pod Point's software and the information generated from the management information system. This will increase as more units are installed and there are minimal costs involved. This could lift gross margins up, but the amounts received are relatively small amounts. I'm not sure who pays this recurring revenue (maybe the info is contained in the prospectus)
I have 2 main concerns: the level of gross margin currently achieved of 27%. This is a relatively new and growing area and I was expecting this to be higher. However, it indicates there is already a level of competition in the market. Is this level likely to be maintained going forward in the medium to long term? Therefore, investing in something like Volex (LON:VLX) may be better: it provides charging grid plugs in the EV space but also operates in other industries thereby diversifying risks.
The other concern is the level of share based payments at £2.4m which represents 3% of turnover and c.7% dilution. Personally, I found this quite high for a company that has only had one year as a listed company but is not making a profit yet.
£PODP Pod point is one of many EV home charge point sellers; it is in quite a crowded market place. We’ve recently installed a home charger - we have solar panels so went for a system that allows us to utilise our solar PV for car charging and water heating (Myenergi Zappi and Eddi). As ours was a used BEV there was no incentive, other than the government £350 grant, to select any particular brand. If you are going down the new car route, there may well be incentives to use a particular brand such as podpoint.
We have only rarely used podpoint to charge on journeys as they are mainly in supermarket car parks - Tesco currently allow you to charge free whilst shopping. For charging on a journey our go to chargers are InstaVolt, Gridserve (circa 40p) and BP (cheaper per kWh but subscription). We have only once diverted to a supermarket car park (Lidl) and found a Podpoint - I suppose it’s a little like getting off the motorway to buy petrol at a supermarket rather than at the motorway expensive services.
Charging EVs with a cable is probably going to be a temporary solution, the future is likely to be wireless inductive charging.
That picture was taken in 2015. You’d have thought BMW would have had a production ready solution by now!
Did anyone go to the Batm Advanced Communications (LON:BVC) meeting yesterday?
If so - what did the boss say?
Pod Point Group (LON:PODP) and EV charging market in general.
I am struggling to get my head round how this will all pan out and would appreciate someone with better knowledge on the subject commenting.
I don't think there is any doubt that EV vehicles will replace ICE as our mode of private transport, although in what timeframe I am not sure. What i don't understand is how fuelling/charging these vehicles will work. If you have your own drive, you will install a charging point, if not what happens? Talk of charging points in street lights or any other shared streetside contraption seems unworkable to me, so how do people with no access to a private point charge their vehicle and who profits from that and how. Historically we have used petrol/diesel stations and more recently supermarkets, oils companies either owned or franchised these and used them to sell their products, while i am not sure how the supermarkets side worked, presumably just buying the fuel where ever it was cheaper. Over time will oil companies still find it profitable to run filling stations, as there will still be some ICE motors left on the road there will still be some demand, but can oil co's make a profit from installing EV charging points to complement a reduced number of petrol and diesel pumps and make a turn on the electricity used? Similarly I expect larger OOT supermarkets will increase the number of charging points available and see this as probably the most obvious solution or maybe supermarkets will take over many of the oil co filling stations and replace the pumps with charging points and brand the shops with their own logo. I have a friend who works for Nissan who assures me that in time (no idea how much though) you will be able to fill up with electricity in not much more time than it takes to fill up with petrol. Or will oil co run stations disappear to be replaced by electric versions that will be ran by EV manufacturers or maybe by an electricity supplier?
Also where and from whom will whoever runs these chargers buy the electricity from?
Apart from £NG. £SSE and Scottish Power who can produce and store electricity in the UK?
Any help welcome.
Richard
Electricity sector in the United Kingdom - Wikipedia
From the little I understand, your confusion aligns with mine.
Petrol / Diesel is energy dense. If you put 50l in a big bowl, wait for a bit of evaporation, then apply a match, there will be a big explosion, and your survival chances are low (I have no intention of testing what 'low' is).
To charge a battery in the same time as it takes to refuel a car will involve a _lot_ of electricity. Storing that energy in a battery involves making a chemical change to the battery and that creates a lot of waste heat.
The current electricity grid works ok, but if you want to run cars off it _and_ convert gas boilers to electric as well, I am pretty sure it will need significant expansion.
And a load of new power stations that can keep the grid + cars + gas boilers going when it is a cold dark (and not windy) day in Feb.
None of this is happening (*)
There is a fairly constant pattern of behaviour in the political world (on all sides, but as the cons have been in power for > 10y they bear most of the blame) where an outcome is mandated in law, but the means to achieve the end and the foreseeable costs and negative side-effects are largely ignored.
At some point it will be undeniable and then we will see.
(*) You may say technology and advances in local scale power generation / grid management and RR (and LMT) developing nukes that fit in a portacabin.
I think the effective banning of non-electric private cars from city centres (where most people live) by 'congestion / pollution charges' and a big expansion of mass transport (electric buses) is more likely.
I agree about electric supply, although we don't even produce enough energy now, we are importing around 10% of our electric. Even on windy days we are still burning coal. If we did get a long spell of still cloudy weather then we would be in trouble in the future, as you say we are switching from oil to electric and gas heating to electric, only around 25% of our electric comes from renewables. Batteries will help but are very expensive and many use lithium, limited supply and pollution issues, even Tesla say they are too expensive and are looking to move to cheaper ones. Small nuclear stations maybe the answer but even these will take many years to build. I think more solar on houses will also help, especially if they have an EV.
As for fuel stations, I see these being replaced by EV charging stations, this is already happening at some. Supermarkets will have charging points, if quick charge then can charge up when shopping.
Apologies in advance Rusty, but I've never read such under-researched twaddle on this board.
I agree about electric supply, although we don't even produce enough energy now, we are importing around 10% of our electric.
Not true. The UK sensibly has a reserve margin i.e. generation capacity exceeds demand. The UK uses three inter-connects with Europe to both export & import electricity.
Even on windy days we are still burning coal.
Not even close to reality. There have been months when zero coal was burnt in the UK.
https://www.bbc.com/news/scien...
If we did get a long spell of still cloudy weather then we would be in trouble in the future, as you say we are switching from oil to electric and gas heating to electric, only around 25% of our electric comes from renewables.
Where do you get this tripe from?! Even in 2020 more than 40% of electricity generated came from renewables.
https://www.theguardian.com/en...
It's up to you how best to proceed, but maybe googling for 10 seconds before posting would be to the benefit of readers of this forum?
Sorry but your information is wrong. I'm looking at National Grid live, we are burning coal today and importing electric, yours is twaddle: https://grid.iamkate.com/
At the moment we importing 12% electric. We are burning 1.6% coal today, 2.9% this month.
In the last year renewables only produced 24.6% and that was excluding imports. Gas was about 40%.
Yours is old news, I'm looking at what is happening now and over the last year, I suggest you get up to date before accusing people. Yours is based on 2 months in the summer of 2020, for coal.
, we are burning coal today and importing electric
Epsilon didnt say we dont burn coal and didn't say we don't import electric.
We are supposed to be reducing fossil fuels.
Yep we are doing a pretty good job in that regard compared to most countries - the trend is clear and that and that will become easier over the next 15 years as batteries improve and other backup power becomes cost effective - in the scheme of things using more gas over the next 10 years is an obvious simple solution - that will probably only upset a small % of the population. Anything that works is my point though so better if we can get more renewables online,
He said "Even on windy days we are still burning coal.
Not even close to reality. There have been months when zero coal was burnt in the UK."
We are burning coal today and have been for months. He was saying that my statement was incorrect.
"Where do you get this tripe from?!"
I get this tripe from the National Grid, who I think should know where it comes from, not some leftie rag.
If you want the actual numbers in near real time then
https://www.energydashboard.co... is a useful site
great site, thanks
.
If we did get a long spell of still cloudy weather then we would be in trouble in the future, as you say we are switching from oil to electric and gas heating to electric, only around 25% of our electric comes from renewables.
It would appear today at 3om that the MAJORITY of UK electricity is being generated by renewables. Time to update your NatGrid tables Rusty!
Look at the averages, it’s not always this windy is it? Can you see we are still burning coal even today. NG figures are updated .
Actually at 3.30pm it is only 41% renewables and we are importing 16%, coal even today is around 4%. Average for the last year is still under 25% for renewals.
The current electricity grid works ok, but if you want to run cars off it _and_ convert gas boilers to electric as well, I am pretty sure it will need significant expansion.
Whats then problem with creating capacity ? if we build a new town we add the capacity without thinking - as as small % of teh grid upgrading as approrpiate is no biggie - electric car charging is perfect for smoothing the generated capacity - specifically charge cars at night when the power is cheap as chips as the current capacity at present has not to sell to at that time. You can probably make crap excuses why you wouldnt want to sort but its pretty simple stuff.
Storing that energy in a battery involves making a chemical change to the battery and that creates a lot of waste heat.
Greenpeace website says the following - obviously they are slightly biased.
Despite more than 100 years of refinements, the internal combustion engine used in cars just isn’t that good at converting fuel into movement. Even in the most efficient petrol engines, only around 12-30 percent of the energy in the fuel ever makes it to the wheels or other useful functions. The rest is wasted as noise and heat.
Electric motors, by contrast, are more like 77 percent efficient
The point is how are you going to increase capacity when we need to reduce fossil fuels, at the moment gas produces 40% of our electric, what are you going to replace that with? Wind is ok if it's windy but on still days produces next to nothing, same with solar on cloudy days. We import 10% of electric already. Wind last year only produced around 17% of our power.
The obvious thing is to build gas power stations to fill the gap and similar (connect to norway and build the infrastrucure there if needs be) - the fact that we have p poor planning and no joined up thinking in this regard doesnt alter the fact there are plenty of solutions to the problem. Hopefully battery tech and clever storage over the next 15 years will be massively improved and help us continue to go green . I simply doesnt understand the same tired line of "we dont have enough electric for charging cars" when we simply "manage" to get enough electric for everything else without moaning - whats so special about cars electric use compared to everything else. Reality is with capacity its probably always going to appear just in time - facts are we have a bl oody great level of reliability whne it comes to producing and providing electric - compare us to the us for amount of powercuts.
We are supposed to be reducing fossil fuels. We are already connected to Norway. We are still burning coal. Building large power stations takes many years and also takes years to get planning permission. EVs will increase demand for electric considerably. Switching from gas heating to electric will do also.
I think you are right and the UK has an advantage in that most of our renewable energy is generated by wind power i.e. not sunshine which is only available during the day (believe it or not!). Overnight is when it makes sense for the majority of electric car recharging to occur when demand is otherwise low.
And plentiful wind in winter balances out the lack of sun in winter (believe it or not!). There are two factors (1) smart energy systems which charge the cars when the cost of electricity is low i.e. at night (low demand) when it is windy (high supply) and (2) cost effective battery storage.
Lithium batteries are very 'energy dense', but have a limited life and will get more expensive as there is limited resources for its constituent parts (much of which China has cornered). However, vanadium flow batteries, for example, while less energy dense (so not mobile) and less responsive to surges in need, are much cheaper with a much longer life. Hybrid battery storage schemes are already starting to appear.
You can strike a match and poke it into a pan of diesel since it is an oil and gives off little vapour but petrol produces Hi-Flam vapour with your expected result. As in investing, volatility matters. Sorry to be so pedantic.
Read some interesting stuff about ammonia being a possible energy source, as it is quite energy dense apparently. Don't have any specific links regarding this. The problem is that of course it has to be manufactured.
Ammonia is produced by combining Nitrogen & Hydrogen using the Haber Bosch process.
If the Hydrogen is produced in a 'green' way eg electrolysis powered by wind or solar, then the whole process is carbon dioxide free.
By contrast ammonia production currently accounts for nearly 2% of global carbon dioxide emissions given that Hydrogen is sourced from natural gas (so called grey hydrogen).
As you say, ammonia is an easily transportable source of energy, as well as being a fertilizer.
Ammonia isn't really an energy source, it's an alternative way of transporting hydrogen which is difficult to transport as the pure gas. If made by renewable energy sources somewhere sunny like Morocco or Australia, ammonia could be shipped much like LPG is today, but without using any carbon.
The fuel cells that use the ammonia to produce electricity strip out the nitrogen, then consume the hydrogen. So you just get nitrogen and water produced as exhaust.
What i don't understand is how fuelling/charging these vehicles will work. If you have your own drive, you will install a charging point, if not what happens?
Very simple no reason for every residential street not to have charging points at period intervals - wouldnt be much different to the bollards that exist now. If you want to get fancy they can self erect on command and hide underground when not being used. Pretty simple stuff.
This is the bit that i really think cannot work, cables all over the pavement would be a H & S nightmare and how can payment be regulated or policed? I don't know how these chargers work but what is to stop me plugging my car into someone else's charger when it is on ?
what is to stop me plugging my car into someone else's charger when it is on ?
Ideally, the charger isn’t draining your neighbour’s private electricity supply, it’s a gateway to the grid and, when you plug in your car, its unique id will ensure that it’s you that will get the bill.
In a more selfish world, your neighbour would simply lock the charger to all vehicles without his/her/their unique id
BnB,
OK, shows how little I know about these things, that makes sense.
Thank you.
On-road Electric Vehicle charging point cables will be laid under the road/pavement, by the way.
I am sure they will be but the cable linking car to charger wont be.
I just cant see this being acceptable for all sorts of reasons. How could a visually challenged person walk the streets?
It wouldnt take much of a redisign to ensure the cable comes out of the kerb , if that was the case and the rules where such that the car needed to be parked ovelapping the bay and the person needs to ensure there is no dangly bits away from the car- seems easy enough to make it so that its unlikely to be a big issue? I would have thught with the charges like thos shown in the picture impaired people are unlikely to be trying to walk between the charger and the cars. In theory you could have the cable coming up out of the road and move the chargers to underneath the car perhaps ? certainly not an insurmountable problem IMHO.
In fact, there is already cableless EV charging, just as there is for phones. It will be years before this will be viable for mass produced cars if it ever does (except maybefor taxis on fixed ranks?) but I doubt it will need to be. The real point you highlight is that good, practical solutions are likely to be found once the market need is there and many routes are being explored. What they will be, who knows.
I think there are many challenges ... but, at a cost, I also think they can probably be met.
I don't think the roadside bollard solution has any viable future. The risks associated with trailing cables are just too great and would affect far too many people ... not just those who are visually challenged. This should be a non-starter, although it does seem to have started. It's not a solution that has any potential to last, however. Far too many practical and safety drawbacks.
A connection coming up out of the road would seem to have far fewer H&S drawbacks ... although, perhaps, would not be favoured by cats. It will be more expensive and will require more sophisticated computerised control mechanisms and associated comon standards. It's a much more complex engineering challenge but, I believe, not beyond the wit of man.
The tangential possibility, focused as much on commercial as technological innovation, would be development of switchable battery packs ... each one another 'full tank'.
Well if you live in leafy Surrey where there's plenty of room on your road, then it may work, but most roads around Gloucester and probably every other city I have visited, especially new estate, theres not enough road for the cars, let alone putting in charging points which you will never ever be able to get near enough to charge your car.
No Driveway? You Can Still Have an Electric Car | Pod Point (pod-point.com)
Having read this from PodPoint I am even more convinced that it is a long way off.
Something like 2/3rds of people have access to a private driveway or car parking space and so can have a neat home charger (once 20Mn HH have invested in them and electrical work to support them - so big job in total but conceptually easy.
The balance will require public chargers (or increasingly will use taxis as these become cheap and automated). These could be at places of work (offices, schools, hospitals) but Shell/BP are already building these on the street like petrol stations.
Rapid charging is also coming and a fill up in <1hour will I think be possible and become standard in a few years whilst 10mins charging will get you home/avoid running out at an inopportune time. MOst new EVs have a range of >200miles and its increasing rapidly. (Poor planners already run out of petrol but ever increasing automation will not allow that to happen on EVs as human driving input is minimised.
Finally, although I still have a petrol car, I am clearly an EV supporter. Nevertheless, I absolutely agree ayour point about the cables across the pavement. Expect all the holes dug to put in fibre-optic internet cabling to be dug again to relay a street level electrical grid.....
there’s a lot of significant issues with EVs that are being overlooked by buyers/car industry at present. The advertised ranges and are rarely achievable in real use. Ranges drop significantly in cold weather, hilly terrain or if heaters are used. In addition battery degradation will mean that the range will fall around 5% per year. The lithium battery can account for 30-50% of the cost of the car and commodity price inflation in battery metals could make the cars laughably expensive with volatile prices. Used prices are not likely to hold up unless replacement batteries become cost effective (unlikely given supply constraints of the metals required). The smart money in the industry (e.g. Toyota, Honda) have largely stayed away from battery EVs, presumably waiting for improvements in battery tech & sustainability. Also in the UK the days of unsustainably low electricity prices are over due to unprofitable energy suppliers being wiped out as well as rising global energy prices. Given that an EV is still £10-20k more expensive than a ICE equivalent, with road usage pricing looming, seems an unattractive prospect to me.
I think water and electricity are not good neighbours and can foresee some nasty incidents happening out there in the streets. Insurance companies will be on call.
R
Hi Richard
I could probably bore you for hours about the electricity industry and in particular renewable energy, storage, power response / flexibility and the whole transformation of the electricity industry. I've been in this business for 30 years.
There is a huge amount of activity in the storage arena and it is not the large utility companies that are active. It is a whole range of companies, many relatively new dynamic privately owned companies, also fund managers like Gresham, Foresight, Gore street etc. Have a look at the program / agenda for next weeks Energy Storage Summit at Victoria Plaza (23rd and 24th Feb) to give you an idea of the players. A lot of this is focused on Li on batteries but there are many other technologies in development, Vanadium flow batteries (Invinity on Aim), gravity storage (Gravitricity), Liquid Air Energy Storage (Highview Power), I could go on for ages with this list.
EV's will play a big part in storage in balancing the grid and energy storage. We have 20m vehicles on the road. 1m of these plugged in at the same time could meet peak winter grid demand. The potential for cars to balance the grid supply is huge, lots of new companies are looking at these sort of things.
Sadly very few of the companies at the forefront of these changes to the electricity are on the stock market. Pod has a fighting chance to be a player. Smart Metering Systems (SMS) is also in there but I believe there will be many more industry outsiders wont have heard off. SSE is very big in renewables but in general the utilities are not at the exciting cutting edge of what is a 'once in a hundred year' transformation of the electricity industry. I am sure there will be big winners but they wont be the names we know.
Andy
Thank you Andy.
Richard
I'm basically with Andrew. It would take hours to go through just the layers of work being done by many companies on infrastructure and power solutions. I was involved 30 years ago to and thought that maybe, on retirement from the conventional world, I would spend some money on some idea of my own. Then I researched it and realised how many £bns were now being put in around the world.
Basically we are only just starting up the incline of the S-curve of the technology (see https://www.rethinkx.com/trans...). But to add an easy snippet or two:
BYD is about to launch an EV in China and Australia almost at parity with petrol versions of the same type of car.
The Chinese are coming. Observe what they did to the solar panel industry. There is no reason why they won't do it to cars. Yes, it might be the death of some legacy European/US auto companies, but I've seen it happen before (Kodak thinking digital cameras wouldn't catch on).
We have a 4-year old Nissan Leaf. Battery state >98%. Repeat that. Fast battery degradation is only for those boy-racers from what I hear. And I know of house storage businesses aren't meeting their own growth hopes, because there AREN'T ENOUGH OLD CAR BATTERIES. So that's the "what do you do with the batteries?" argument weakened.
And we had an early PodPoint courtesy of Nissan, but moved house unexpectedly. Yes, we have the luxury of a garage. No, we don't have a fast charger. Unnecessary. Plug into 13A wall socket on return, get 10 mph charge overnight. So it's not as hard as people are worried about.
Terraced house/apartment is harder, but more offices/supermarket/retail parks are putting them in (Tesco/Waitrose already committing). People going to the cinema will increasingly charge their cars up to full while watching a film.
And BP Retail for one perfectly OK about the profitability of the transition. https://www.reuters.com/busine...
Hope this helps
Thanks for proposing to cover City Of London Investment (LON:CLIG) today Roland. I have really liked this share but become more nervous of late about client net outflows especially since the merger and in the emerging market fund. It is encouraging today that they note they saw $112m net client inflows for the City of London part of the portfolio saying 'resulted from increased CLIM marketing efforts in calendar year 2021 that began to turn the tide of flows positive in the second quarter of this financial year with US$112.5 million of net inflows. Re-opening our INTL strategy to new investors contributed significantly to net inflows after being closed to new investors for the year to December 2020 following a period of strong growth. Currently, we are projecting this positive trend of net inflows to continue through the remainder of the financial year.’ That's a bit more encouraging although I note they were silent in commentary about client in/outflows for the Karpus part of the business.
The 9% dividend (bumped up by a special this year) is very tempting though...
On what's likely to be a quiet day for company reports, has anyone a view on Orchard Bond Finance PLC's 6.25% Bonds due 2027 that are open for subscription until 23rd Feb next week?
Orchard Funding (LON:ORCH) was covered in the Stockslam at 54p on 21 May 2021 - see video here.
Been up and down since then but now at 60.45p and appears to make low-risk loans in areas not covered by others. Slightly worrying that only 10% of funding the guaranteed by Orchard funding Group PLC but perhaps that's reflected by the coupon.
Would it be better to buy the shares in the company that'll have more funds on which to make a return and shown as yielding 5+% rather than the bonds at 6.25% or does that depend on your attitude to risk and the view of the outlook for interest rates and the economy?
You will have no doubt already read through the prospectus? It is interesting as a steady income and could be useful as a stable part of a portfolio. I note that only 10% of the bond value is guaranteed.
This table from the prospectus gives for idea of their plans
On the other hand there are probably some shares which are of growing companies with decent long term prospects that will pay similar returns with the prospect of growth?
(I have never bought bonds so don't listen to me...)