Member Info for Brassneck

1GW, Do you think R1 would be a bit too much of a stretch for TAP? Assume around £225m, c£3 a share, needed to take R1 out now of which they have about £50m cash and R1 is likely to have c$40-50m cash that would mean debt of around £120-140m or a share placing. When TAP was £3 a share and £250m market cap that would be easier but now at £120m market cap that's a big placing.

Equally if R1 had a track record of profits that may make it easier but I guess the R1 value would be higher if that was the case.

I think TAP are looking at a smaller target though that is why I increased my holding in R1 over recent months as I do think R1 is vulnerable to a predator at the moment.

Tardis, I put the TAP weakness down to the announcement re acquisition and potentially value destroying vs a buy back. This is partly why I don't want to see any more acquisitions from R1 for a while.

Biffa, I had a call with Mark Bonney at the end of July as I missed the AGM. Nothing then until an email exchange before and after the H1 release which I posted the initial content on here. Mark’s view after H1 was the focus is wholly on delivering the numbers this year to build confidence and the share price then follow. I see no chance of a profit warning as that would already be out by now if they were more than 5% off concensus profit. Still a question over what revenues will look like this year (I’m at 375m) and for next year which would be a clean comparison for once. Signs of organic growth and the share price should fly.

Just for info, the 3 trades for 5066 shares this morning around 9.30 were buys not sells. I suspect the other two trades for 5073 shares were buys too but they weren’t mine so assumption rather than fact. Added 65k shares since yesterday lunchtime now. Hold too many really but am hopeful trading will have been good in Q3 and that they will confirm details of the buy back and kick it off straight after the TU. Haven’t ruled out a low bid coming in either (I certainly hope we don’t acquire!). Still think a £3 low ball offer could come in if trading and cash is strong so will hold up to that level but will probably sell down some once we trip that level.

Been low this week, expected a bit more buying action ahead of TU and Buy back

Would be good to see some buys go through this week

I don’t think it will start now until after the Q3 TU as they are in a close period until then. They will issue an RNS giving the specific details of how it will run such as whether shares bought will be cancelled or held in treasury and any limits around the price they can pay eg no more than 5% above last 5 day average.

Tardis, it shouldn't take long to get it started given they have shareholder approval and had been intimating for ages it would be second half. I can only assume the decision to formally commit was made in the day or so before results announcement so they couldn't be clearer on the exact mechanics. I believe they will need to RNS exactly what will happen (ie if shares cancelled or in treasury, timescale) before they start it. Taptica put a buy back RNS out only last week so take a look at that one to see the sort of detail I would expect R1 to publish.

I see the WH note is out, only just seen it come up on Research Tree.

They have revenue at $400m and adj EBITDA at $55m.

Retain their 770p target price.

1GW, have been through my forecast and for second half have left the margin same as H1 (though they may eek out a small improvement) on a second half revenue forecast of $200m. Ops expenses pre exceptionals I've reduced by $4m on H1 to $72m. This on the basis that there will be annualisation of H1 savings and I expect them to make more savings as H2 progresses.

Allowing $3m exceptionals in H2 and the same finance/tax impact of $1.3m that would give a real Profit for the year of $12m. Full year Adj EBITDA would be c$55m.

Given most of the areas will be fixed then for every $10m extra revenue $4.5m would drop to the bottom line.

Cash bridge is more difficult as they keep changing the bridge info. latest one didn't start from year end closing cash of $27m so shooting in the dark a bit. Assuming working capital $10m unwinds and the above profit then I'd be about $60m before buy back or acquisition.

Overall H1 was better than I forecast running in to H2. Assuming revenues come in above $375m for the year it should give plenty of room for further buy backs or small bolt on acquisitions. I really do hope they don't do any larger acquisitions this year.

I am surprised the share price hasn't moved further. With the $31m current cash comment in the webcast it must be getting more difficult to find the negatives in this story.

I can see why the institutional investors were increasing their holdings.

Thanks for the link Graham

I probably should trade this share a bit but haven’t. Hopefully this time the share buy back will support the price a bit and break the rise / fall back trend.

Graham, when do you think the next trading update will be released?

Any one seen any updates from brokers following the results?

Agree 1GW. Net loss as expected at $2m. I'm surprised exceptionals are so low too. Assuming no material change here and they hit c$200m in H2 then on this we should have a proper profit of c$8-9m at year end.

Ops costs are below my $80m forecast which made up for a slightly lower margin then I had forecast.

They should be on track for $45-48m Adj EBITDA for full year.

Hopefully they will have a nice cash bridge in the results deck as the working capital unwind is key to understanding this as I had them in for $27-30m cash at H1 so they are below this - but that could be all working capital vs my forecast.

Pleased to see the buy back. I did send the Taptica RNS yesterday to Mark Bonney just in case he was going to miss it preparing for today!

Well we'll soon have the H1 release so below is an email I sent to Mark Bonney the day before the results date RNS:

'I trust that you are making good progress on the transformation plans for Rhythmone. Given the share price weakness throughout 2018 I hope that isn’t an indication of what is to come and that the regular statements the Board have made over creating shareholder value can be evidenced.

From my perspective there are 4 critical areas the Board should be focussed on when presenting the results and related commentary to shareholders:

1. Revenues: Whilst the rushed out September trading update spoke of revenues increasing 50% the clear view outside the company is that revenues on a like for like basis are declining materially. A bridge that showed the Companies view of revenues could clear this up. If we have either closed down certain non-profitable areas or deliberately reduced low margin activity the scale of this should be articulated. If there is organic growth then demonstrate this in a clear way.

2. Acquisitions: Rule out any acquisitions until the Board have demonstrated they can absorb businesses, generate real profit and grow the existing business. Revenues in FY19 will be below the standalone revenues of Yume, Radiumone, Perk and Rhythmone. We need to see the shareholder value created from the acquisitions. The current market cap is less than the amount paid for YUME alone. The markets are scared that Rhythmone will make a value destroying acquisition in the near term.

3. Share Buy Back: Assuming cash is being generated and working capital unwinds in Q3 then announce a material share buy-back to start in January 2019. This is the most tangible action to create shareholder value. Assuming acquisitions are in the longer term plan then a much stronger share price will make executing those acquisitions much easier.

4. Future Guidance: Provide clear unambiguous guidance for FY19,with actual revenue and profit numbers. Semantics around ‘market expectations’ in various RNS releases does nothing for clarity or shareholder value. It just undermines the company given it’s track record. By the time you release H1 results we will be most of the way through Q3 so you should be able to provide clear numbers based guidance on at least that.

As you will be more than aware the valuation of Rhythmone seems wholly disconnected with its peers and profit projections. I believe the four areas above are critical ones behind this. If you want to create real shareholder value then please focus on answering those and communicate it in a clear, unambiguous way. Of course, once we’re out of a closed period some Director buying would also boost confidence too.

I’m sure none of this is new to you and I’m not expecting any form of detailed response (as you are in a closed period) but did want to at least provide the views of one shareholder at this current time.'

For H1 numbers I haven't changed my view since the TU in September gi

I see Taptica is having some excitement this morning. Apart from CEO resigning due to legal issues the trading statement is an interesting read and very similar to R1 trading update re EBITDA growth and revenue decline due to forgoing low margin revenue. Just hope we don’t get the same share price reaction after results next week!!

But why would they need to raise money via a placing?

Graham, let’s pretend you have any interest in R1, why do you think there would be a placing? Making idiotic comments on this board just makes you look stupid and undermine any contributions you make elsewhere. I don’t think the apparent rivalry between R1 and TLY boards adds anything to either board, it just wastes space.

That should have been algos not our Nigerian friends shuffling the latest prince’s wealth or oil money scam