I attended the Bango (BGO) webinar on their full year results this morning. One of my long-standing and smaller speculative AIM holdings. Total revenue was up by 62% to $46 million but I asked the following question: “Revenue growth looks OK but capitalised development costs rose to 17.6 million. Please explain why this is so high and what is being obtained from this high investment?”.
The answer given was not totally clear but it was suggested that this arose from further investment in the Digital Vending Machine (DVM) product. I am very sceptical that this is a full explanation. It’s simply too much for improving an existing product. This company does continue to grow revenue well but costs are not under control.
Compare that company with Intercede (IGP) who published a full-year trading update this morning. Revenue was up 65%, i.e. similar to Bango. The full year financials are not yet available but the half-year results show a very different picture to Bango. Minimal capitalisation of software development and positive overall cash flows. Intercede said: “Tight cost control continues to be a focus for the Group in conjunction with considered project expenditure and new hires to support revenue growth”.
I remain to be convinced that Bango is on the right track.
Roger Lawson (Twitter: https://twitter.com/RogerWLawson )
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