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Seems a heady valuation considering still loss making and reliant on increased contracts just to break the placings addiction. Better to watch and wait
Only lost £200k and have £3 million in the bank. They have recurring revenue and looks like they will be in profit next year problem is not enough shares in freefloat. So guess as you say watch and wait to see if it will go lower. Not sure it will though.
graham-wales: I seriously hope you've done your due diligence properly! This company lost far more than £200k last year, you are quoting EBITDA... "30 November 2015, raising £3.3 million (before expenses)" The cash position previously was £310k so even they broke even there should have been £3.61m in the kitty. If they had lost £200k as reported then you would expect a cash position nearer to £3.4m but instead it is £3m What the company reported which you chose not to mention is that " Losses before tax were reduced to £0.73m" £730k begins to tell a more accurate picture of the previous trading period. Worse still - "In FY 2016, the investment of the proceeds of the fundraising in expanding sales, marketing and production (detailed further in the section below) are expected to lead to EBITDA losses increasing in the short-term, reflecting investment in the Group's operational expansion"
Perhaps you need to do due diligence. £2.97million not £3.3 million net. Like I said though one to watch for the future. The Directors intend that the net proceeds of the Placing receivable by the Company (being approximately £2.97 million net of the expenses of the Placing payable by the Company) will be used to expand the UK and US sales force, increase investment in marketing and PR and expand production capacity. The balance of the net proceeds will be used to increase investment in working capital and capital expenditure.
You posted a loss of £200k so I was highlighting the true picture here, that losses were heavier hence the cashflow breakdown. Like I said " If they had lost £200k as reported then you would expect a cash position nearer to £3.4m but instead it is £3m" So the placing costs and a little extra account for the missing asset value which reinforces the point that losses were significantly more than £200k In other words, that the company only received net £2.97m of the £3.3m raised from the share placing is therefore already factored into the £0.73m loss. Cash burn is a killer, there is no hiding it here
Net asset position vs company added value confirms this also. Current £10m valuation after heavy placing of shares. Net assets have only risen by £2.66m despite a placing of £3.3m gross which came straight out of shareholder equity value. The cash sitting on the balance sheet now won't increase from here. The company have stated "The additional funds will enable us to accelerate our growth in UK, Europe and North America and also allows us to further improve our productive capacity and further invest in our unique Freestyle Merchandising technology platform". I'm not suggesting further placings. But I am suggesting a reducing cash position in the coming year and possibly a reducing net asset position as the company spends cash on expensive platform improvements to scale up. Why would people buy into a loss-making outfit that will see reducing net asset value in the coming year. Expenditure is forecast to rise. Markets are shaky. The global economy more so. Outlook weak in my view.
"The Directors believe that, in order to deliver on the exciting potential of its target markets, significant investment would be required to develop the Company's sales teams in the UK and in North America, with additional investment required to expand the required production capacity to support its potential growth prospects. Although such an investment will represent a major expansion of the Company's sales force; the Board consider this necessary in order to properly capitalise on the opportunities presented to the Group and accelerate growth." SIGNIFICANT INVESTMENT into the sales force likely means increased annual costs also. Every startup needs capital to boost sales and capacity but that doesn't represent investor value return in the short term.