Q: Hello 5i team,
In light of ANRG slowly going back up, I am curious what the underlying problems were with the company? Ultimately it always comes down to too much debt, but that is only a result. Was it bad management or simply a bad high capital idea (converting waste to fuel). Looking at the recent new money being put in (Marny/insider purchases) it seems people are still confident in this company.
Are there other companies in this space that have actually succeeded in doing this?
Thank You,
Andrew
In light of ANRG slowly going back up, I am curious what the underlying problems were with the company? Ultimately it always comes down to too much debt, but that is only a result. Was it bad management or simply a bad high capital idea (converting waste to fuel). Looking at the recent new money being put in (Marny/insider purchases) it seems people are still confident in this company.
Are there other companies in this space that have actually succeeded in doing this?
Thank You,
Andrew
5i Research Answer:
Debt causes both a fundamental issue (especially when rates rise as they did in 2022) but also a big customer issue. Customers are reluctant to sign deals with small companies that may or may not make it. We really liked the former CEO, as he was able to successfully grow and sell a water purification company (Zenon). But the sales cycle here is longer and expected growth did not materialize. Revenue fell last year and negative cash flow has been a big drag on fundamentals. There are some private companies in the business. PYR is likely the closest Canadian company. ANRG shares remain very tightly controlled. The former CEO still owns 20% and one fund owns 61%. There has been insider buying during the rise this year.