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Hi guys, just back from a round of golf. Glad I didn’t check my email beforehand!
My first read of the financials
“Gfinity expects to report H1 revenue of circa £3.5 million, which is lower than the same period last year (H1 2019: £4.4m) primarily due to the transition away from low margin Elite Series revenues, as explained below..... OK 0.9M YOY LOSS...... Significant growth in higher margin revenue streams during H1 are expected to deliver a circa 300% increase in gross profit to £2.1 million (H1 2019: £0.5 million) .....ITS NOT CLEAR IF THIS IS H1 NET GAIN OR WE SEE THE 300% IN H2 ELSE THEYD HAVE BANKED IT, CONFUSING.......whilst continued cost discipline is expected to further reduce adjusted operating loss* for the period to £2.4 million (H1 2019: £4.4 million)”.....MY CONCERN HERE IS THAT THE COST SAVINGS ARE BASED ON WHAT THEY HAVE GIVEN UP IN H1 AND THE STRATEGY SHIFT IS NOT QUANTIFIABLE IN TERMS OF COSTS. THERE IS NO WAY I CAN GUAGE HOW IT NETS OUT.
I built a position here around the finals as I could see a clear path to profit. They have now changed that model again focusing on
“The Group continues to improve its revenue mix and margin as it shifts the profile of its work towards own community revenues, strategic programme consulting and higher margin content creation, which supplement the end-to-end esports programmes the Group continues to deliver for its major partners“
Yes sure there is money to be made there but it’s more labour intensive than say realsports101 (which didn’t even get a mention) and is not going to tap the billions of human beings like on line tournaments or a WhatsApp model. For all the hard hitters I can’t believe they haven’t delivered a partnership deal yet. A partner like MicroSoft or whoever would release potential in the business and provide the finance and governance that they clearly need. I have been for a while hoping that the website would be updated, I don’t play games but I am reasonably IT literate and it just doesn’t cry out spend your money here, look at the winners, prizes, role models etc.
I don’t think these results are lipstick on a pig, they just can’t decide what pig yet! This co may well go on to great things but it’s going to be a traders train set for a while so I’m gonna sit out, not for the first time but this time I may stay out unless I see a partner come on or some serious director buying, but I do appreciate that the pay is well tempered and not all execs have hundreds of K to burn. Still not a write off just some serious labour pains and gonna take a lot for me to think third time lucky.
GLA
Trek
I've said this in the past, you can't believe anything that comes out of gfinity. These pie in the sky revenue forecasts of £14.4m (2020) & £26.59m (2021) are a joke!! No wonder there wasn't a buy up of shares by management and the majority shareholder at the last funding round. Clearly they knew that H1 wasn't going to be great and that reaching the 2020 forecast was unachievable. Yet, management repeatedly reiterated these forecasts and EBITDA break even for 2021. Watch this share dip to 1p this year and maybe never recover. Understand it is a new sector but really does feel like maybe the exaggerations have been too over the top.
Personally, I'm sick of hearing about the market size, 2.2bln gamers blah blah blah. Every RNS, every interview....play another tune management!!
Trek where are? Be nice to hear your thoughts on this my friend.
Alpaca
They burn through so much money and have to do fund raises....hence the SP has gone down since 2017 ...
It has always looked way over priced to me with the cash burn and loss levels, even £11m MCAPtoday isnt that cheap...
They are still finding their way, and as always finding your way in a newly created sector is...expensive !!
The elephant in the room is the admin costs....huge !!
In Sept 2017, this share was above 30p. Might have been even higher at 35p intraday.
Not a single RNS since has been about how shareholder value has been destroyed. No comment on how to turn it around (they don't even consider a turnaround is needed), no comment on undervalue or confidence by executives with almost no significant number of shares being bought up, continued hiring of industry heavy weights (do these guys even play games?), the ever constant reminder at the end of each RNS over the 2bn+ global games and esports revenues, yet the share price is the elephant in the room.
Company strategy is all over the place.
Drop in revenue as expected because the Elite Series is no longer there - company claimed it was low margin? Pfff. It was making a loss, would have been high margin if they got it right.
"Over the past year, Gfinity's leadership team has refocused the business on a Strategic Client Management model". The company wants to move away from this! It's in their most recent Nov presentation to build on own IP and content, ...er, like the Elite Series, but a less loss making version, expansion into US blah blah
"strategic programme consulting", as per the Nov presentation, this is supposed to replace the loss revenues from the Elite Series. A non-scalable proposition.
" To facilitate this, the Board has taken the decision not to progress a material opportunity for a new contract with a customer for whom it has recently completed a major project. " - can Gfinity be any more vague?! I guess this was CoD?
" means that the Group still expects to deliver on current market expectations for full year adjusted operating loss." -> this means another funding round