Comments on Abcam Results Webinar and Fonix Mobile

It’s nine months since I last commented on Abcam (ABC) but I still hold some of the shares so I watched the results webinar today. This covered the results for both the 12 and 18 month periods ending December 2021 as they moved the company’s year end – for no good reason that I could see.

The reported profit was up at 7.1m in the 12 month period which is a substantial improvement and revenue was up by 17% but the company preferred to talk about adjusted profits which were given as 60.4m “adjusted operating profit”. Adjustments comprise everything the company wants to ignore and even extends to “systems and process improvement costs” and “integration and reorganisation costs”.

In summary the results were not brilliant in essence for what is supposed to be a growth company in a hot sector (biotech).

I have commented negatively in the past about the slow and expensive implementation of a new ERP system and on this it is stated that “roll-out of the final states of the ERP renewal programme continued”. In other words, it’s still on-going.

The webinar comments from the CEO effectively said the company had been building for the future in the last couple of years. I hope that is the case. The strategy in many regards makes sense but a lot of costs are being incurred which have been capitalised. The share price has not moved far in the last three years but the company has been impacted by the Covid epidemic.

One question put by an analyst was for more explanation of the comment in the announcement that “The Board continues to review options to increase share liquidity and intends to consult with shareholders on these options in due course. Is this an indication of a placing particularly to attract more US shareholders? I suggest it might be. But the analyst did not get an answer to his question.

Another company that reported results this morning was Fonix Mobile (FNX). There was a good profile of this business published in Small Company Sharewatch last week. I can do no better than repeat some of the comments by Paul Scott of Stockopedia on the results:

“I’m impressed with these numbers. Fonix floated on AIM in Oct 2020, and amazingly for a fairly recent float, it has not collapsed after a profit warning, nor run out of money!

I remember having a video call with the CEO around the time it floated, and thinking what an impressive business this is – dominating a niche of payments/votes for reality and charity TV shows (e.g. X-Factor, Children In Need), Fonix has the infrastructure for taking those payments/votes, and the customers tend to be very sticky, coming back year after year – on the basis of if it ain’t broke, don’t fix it.

That results in a cash generative business, with high margins, which is able to pay out decent divis, with a yield of c.4%”.

It is a relatively small business but looked reasonable value to me although the costs of the AIM flotation were high and directors were selling as part of it but I did read the prospectus so did purchase a few shares. The interim results are excellent.

This is the kind of business I like – good return on capital, high recurring revenue and positive cash flow. The prospects look good.

But like any e-payment business its accounts can be difficult to follow and there is a regulatory risk for the business if the FCA decided to tighten its rules.

Roger Lawson (Twitter:  )

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