Member Info for Monty9

I bought at just over 100p and recently topped up at 29p. Reading the interims I got the impression they are making a successful change from retail to commercial services, which I believe will bring significant benefits in due course. One of these could be a bid from a larger bank - the sector they are competing in has been historically very easy money for the banks and they have allowed competition in being unable to make their prices more competitive.

Management appear to be investing in getting their acquisitions well sorted, which should provide a good platform for profitable growth going forward.

The continuing weakness seems to be on the back of lots of tiny sales, it could turn around equally quickly. The weakness may be exacerbated by the recent publication of the Wirecard debacle. Always a risk of course but on balance I remain a patient holder.

I am looking at making an initial investment - most factors look very positive, particularly after the recent sharp fall in share price. One thing stands out like a sore thumb for me, Debtors have increased by almost £7M to £14M since May 18 and by £4M since Nov 18. This is way more than inventory increases yet as far as I can see no explanation is offered. Does anyone have information about this?

I was surprised too. I can only think the recent panic over the coronavirus outbreak is seen as likely to push interest rate rise further into the future, reducing (or delaying) the number of insolvencies.

The recent RNS seemed to try to avoid communicating any hard points the market might not like. The problem is a lack of visibility of their business, and therefore concern it could turn quite sour at the next update without any warning signals. IMHO better to issue a crudely direct update and explain the reasons for the facts to which they expect the market will react badly. If their explanations turn out to be fair and accurate they will be given a much more sympathetic ear next time.

Holders thus invest in such operations with a fair element of faith, and right now the market is particularly distrustful of such operations. My position shows about a 50% loss. But don't forget this type of company can double quickly too, the rewards of success are significant.

I continue to hold and may buy more when the price settles for two reasons:
1. Perhaps 20% margin (assuming a forecast miss), revenue growth of 20% and cash positive.
2. Based on previous reports they claim to pay attention to integrating all systems properly and building them to support a larger operation. In this business it is hugely important to do so even though it has an adverse impact on the next one or two set of figures. It is how you avoid losing margin as you grow, indeed can increase it. It also means that if there is an opportunity to grow at 30% or even 40% in a year it can be done without damage to the business - it can keep on motoring from there. Of course I could have naively swallowed a crafty message (it can not be evidenced) and from the recent report we know they can lean on weasel words. But I tend to believe them and the skew to the corporate sector might well also be the result of quality operations.

And there is always the possibility of a trade sale, which has happened with other similar investments (e.g. Planet Payments)