Broker Charges, Proven VCT Performance Fee and LoopUp Seminar

The Share Centre are the latest stockbroker to increase their fees. Monthly fee for an ISA account is going up by 4.2% to £5.00 per month with increases on ordinary share accounts and SIPPs also. This is the latest of a number of fee increases among stockbrokers and retail investor platforms. The Share Centre blame the required investment in technology development and “an increasing burden of financial regulation”. The latter is undoubtedly the result of such regulations as MIFID II imposed by the EU which has proven to be of minimal benefit to investors. As I was explaining to my sister over the weekend, this is one reason why I voted to leave the EU – their financial regulations are often misconceived and often aimed at solving problems we never had in the UK.

I received the Annual Report of Proven VCT (PVN) this morning – a Venture Capital Trust. Total return to shareholders was 10.3% last year, but the fund manager did even better. Of the overall profits of the company of £18.6 million, they received £7.7 million in management fees (i.e. they received 41% of the profits this year). That includes £5.6 million in performance fees.

Studying the management fee (base 2.0%) and the performance fee, I find the latter particularly incomprehensible. I will therefore be attending the AGM on the 3rd July to ask some pointed questions and I would encourage other shareholders to do the same. I am likely to vote against all the directors at this company.

I also received an Annual Report for Proven Growth & Income VCT (PGOO) and note that of the 4 directors, 2 have served more than 9 years and one is employed by the fund manager. So that’s three out of four that cannot be considered “independent” so I have voted against them. I would attend their AGM on the same day but the time is 9.30 which is not a good choice and would waste a whole day.

Yesterday I attended the “Capital Markets Day” of LoopUp (LOOP). This is an AIM listed company whose primary product is an audio conference call service. It’s just a “better mousetrap” to quote Ralph Waldo Emerson as 68% of the world are still using simple dial-in services rather than more sophisticated software products such as Zoom and WebEx. There are lots of other competitors in this field including Microsoft’s Skype which I find an appallingly bad product from past experience. Reliability and simplicity of use is key and LoopUp claimed to have solved this with no learning required, no software downloads or other complexities and high-quality calls aimed at the corporate market.

I have seen the company present before and do hold a few shares. This event was again a very professional sales pitch for the company and its product with no financial information provided. Yesterday they also covered the addition of video to their basic conference call service which was announced on the day, plus a new service for managed events/meetings. Video addition is probably an essential competitive advantage that was previously missing. They covered how their service is differentiated from the main competitors which was good to understand.

Last year they acquired a company called MeetingZone which has increased their customer base and revenue substantially and are transitioning the customers to the LoopUp product. Revenue doubled last year and is forecast to rise by about 50% in the current year. Needless to say the company is rated highly on conventional financial metrics and return on capital has been depressed by the cost of the acquisition. But one reason I like this company is that it’s very easy to understand what they do and what the “USP” is that they are promoting, plus their competitive position (many company presentations omit any discussion of competitors).

They also have an exceedingly good sales operation based on groups of people organised in “pods” which was covered in depth in the presentation. These only have team bonuses and the key apparently is to recruit “empathetic” people rather than “individualists”. Perhaps that is one reason 60% of them are female. As I said to their joint CEO, I wish I had seen their presentation some 30 or more years ago when I had some responsibility for a software sales function.

The latter part of this 3-hour event was an explanation of how the software/service is used by major international law firm Clifford Chance with some glowing comments on the company from one of their managers. Customer references always help to sell services.

In conclusion a useful meeting, but lack of financial information was an omission although “Capital Market” days are sometimes like that. But the positive was that they had both institutional investors and private investors whereas some companies deliberately discourage the latter from attending such events which I find most objectionable.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson )

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AB Dynamics Placing, and Metro Bank Troubles

AB Dynamics (ABDP) announced a placing to raise £5 million this morning. The money will be used to finance potential acquisitions, add production capacity and meet working capital requirements. This company provides vehicle testing systems and has been rapidly expanding recently. The share price has also been rising like a rocket in the last few weeks and on fundamentals the company is now very highly rated – prospective p/e for the current year is 47. So perhaps the company just saw this as a good opportunity to raise some money.

The new shares are being placed at 2200p though which is a discount of 13% to the share price last Friday. However although this is being done via a placing to institutional investors there is also an “open offer” for those such as private shareholders who cannot participate in the placing. This is the way to do such things and as a holder of the shares I will probably take up the open offer just so as to avoid dilution, although I don’t consider the price as particularly attractive. The share price dipped first thing this morning on the news but has subsequently recovered most of that fall.

Metro Bank (MTRO) has been in trouble since the start of the year when it disclosed it had wrongly risk-weighted some of its loans which meant its capital ratio was wrong. Metro is one of the so-called “challenger banks” that aim to tackle the dominance of the big high-street banks in the UK. The company did a placing to raise another £350 million last week to shore up its balance sheet.

But depositors have been spooked by the news and apparently there were queues of customers withdrawing money from branches in West London recently. Is this another run on a bank, as happened at Northern Rock? Where a falling share price and collapsing confidence in the bank caused depositors to panic? The FT ran an editorial saying it was not similar but it looks very much so to me. Although the Financial Services Compensation Scheme (FSCS) now protects deposits up to £85,000 that will not help many retail customers and the delays in obtaining compensation will encourage depositors to move all of part of their funds elsewhere and promptly. Corporate clients have no such protection anyway. When confidence in a bank is lost, even if it is technically solvent, depositors don’t hang around.

Here’s a good quote from eminent Victorian author Walter Bagehot: “Every banker knows that if he has to prove he is worthy of credit…in fact his credit has gone” (in another letter in the FT today).

From my experience of trying to open an account with Metro Bank recently, I have doubts about the quality of this business anyway. I gave up in the end. Needless to say I don’t hold shares in Metro. But all banks are becoming exceedingly difficult to deal with. My long-standing (over 50 years) bank recently made me visit a branch to prove who I was. There was a letter complaining about the service from banks in the FT on the 15th May. It suggested that “something has gone badly wrong” with frontline bank service. I had similar problems with a business account at HSBC who proved impossible to talk to other than by visiting one of their branches – and even then they were unable to resolve difficulties. It is extremely annoying that banks are becoming paranoid about KYC and security checks so that they won’t even talk to you on the telephone about simple queries.

If any readers can recommend a bank who acts more reasonably and sensibly, let me know.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson )

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Wey Education News

Wey Education (WEY) published a very positive half-year report his morning. This small AIM-listed company operates in the on-line education field and I have written about it several times in the past (you can search the blog for previous posts). Under its former Executive Chairman, David Massie, who sadly died, it launched an ambitious expansion programme including overseas ventures in Kenya, Nigeria and China. They have written off those and closed down operations in London (total cost £881k) and will be concentrating on their UK InterHigh and Academy 21 businesses in future.

The good news is that turnover is up 55% and adjusted profits on continuing operations is both positive and very substantially up. The share price is up over 50% today at the time of writing. Possibly helped by share commentator Paul Scott saying he had bought some recently.

There is a great need for the alternative education to conventional schools that Wey provides so let us hope they are now heading in the right direction, albeit that there is some competition in this sector.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson )

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Trump Tariffs, 4Imprint AGM and Purplebricks Apologies

US President Donald Trump has created some havoc in world stock markets by threatening in a tweet to impose 25% tariffs on a wider range of Chinese goods from Friday. He is apparently getting impatient with the progress on trade talks between the USA and China, but is pursuing international diplomacy via tweets a good idea?

One company that might be affected by higher tariffs on Chinese products is 4Imprint (FOUR) whose AGM I attended this morning. 4Imprint is an AIM-listed retailer of promotional products (sold via catalogues and the internet). Most of its business arises in the USA with only a relatively smaller operation in the UK, and it imports a considerable proportion of the merchandise from China. I asked the Chairman after the AGM whether this was a concern. He said they discussed tariffs at every board meeting but as their competitors would be in the same position the impact might not be high.

There was a trading statement from the company this morning before the AGM. Revenue up 16% in the first four months and the board is confident that the Group will deliver full year results in line with market expectations.

This is the kind of company I like. Revenue growing, no debt, profits turn into cash and return on equity was 82% last year. Like a lot of retailers, they sell the products and collect the cash from customers before they have to pay the suppliers. In essence a simple business and the AGM in the City was a quite brief affair – duration about 15 minutes.

Only I asked any questions in the formal part of the meeting and one was: what is their market share in the USA? About 4% was the answer, and it’s still increasing. The competition is also fragmented so there is room for growth. You can see the kind of products they sell here: https://www.4imprint.co.uk/ . Having used the company in the past I can recommend them.

I also asked whether there were any substantial numbers of proxy votes against any of the resolutions (this is a question to ask when the Chairman says proxy votes will be disclosed at the end of the meeting as happened here!). Yes there was one. Remuneration Committee Chairman Charles Brady only got 93% support. I later asked him why. He said one institutional investor voted against him because the company does not have an LTIP.

I actually voted for the Remuneration Report because they have a simple remuneration scheme and pay of the executive directors is not unreasonable bearing in mind they are based in the USA. This is the kind of pay scheme that should be applauded, not voted against.

Another AIM company of a very different nature that made an announcement this morning is Purplebricks (PURP). A trading statement gave a financial update but included several very negative points. The Australian operation is being closed down, the US operations are now the subject of a “strategic review” with bad news being hinted at, and founder/CEO Michael Bruce is “stepping down with immediate effect”. That usually means the person named has been fired.

The board acknowledges that performance has been disappointing over the last 12 months and “we sincerely apologise to shareholders for that”. The company blames too rapid geographic expansion and poor operational execution.

The company is still losing money and the share price graph is one of those downward facing ski-slopes that investors hate. The share price is down another 7% today at the time of writing. Still an unproven business model in my view. I do not hold shares in the company for that reason.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson )

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Horizon Discovery – Defective Accounting Discovered

Horizon Discovery Group (HZD) announced their full year results this morning. Horizon is a biotechnology company focused on cell engineering and CRISPR screening. Revenue was up by 68% to £58.7 million helped by an acquisition. But the “reported loss” increased to £35.8 million due to the exceptional write-off of past investment in “In Vivo”. Although this is a non-cash impairment it suggests that there was past over-optimism in the viability of that business unit and excessive capitalisation of development expenditure. This follows from a strategic review of the company last year by new CEO Terry Pizzie.

They also have a new CFO. There has been a review of revenue recognition policies that has led them to restate 2017 revenue down from £36.5 million to £35.0 million. This is what the company has to say about that: “In 2019, the Group became aware of potential revenue recognition matters in connection with certain license revenue contracts. As a result, the Group undertook a detailed review of all such contracts and determined that the terms and conditions in some of those contracts had been misinterpreted and as a consequence, the accounting periods in which the revenue is recognised have been reassessed, due to license revenues being recognised before they were committed”. Who were their auditors you may ask? Answer: Deloitte. This looks like yet another case of a basic accounting failure that the auditors failed to pick up.

At the last AGM of the company, which I attended as a small shareholder, I questioned why the company was losing money on services. Surely if services were unprofitable, they don’t need to be provided to customers? Good to see that in the latest announcement they are withdrawing from “investment” in parts of the services portfolio. Another interesting comment in the announcement is this: “Our ‘Investing for Growth’ strategy will see the business shift from a scientifically-led life sciences company to a fully commercial tools company, which will mean that Horizon is increasingly well placed to capitalise on its market-leading position to drive sustained top-line growth”.

Apart from the above issues, the company does seem to be moving in the right direction and the comments about future prospects from the CEO are positive. The share price was unmoved at the time of writing.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson )

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All Change at Superdry and Intercede – Perhaps

Readers are probably aware that founder Julian Dunkerton managed to win the votes yesterday at the EGM that he requisitioned at Superdry (SDRY). The votes to appoint him and Peter Williams were won by the narrowest of margins despite proxy advisors such as ISS recommending opposition. My previous comments on events at Superdry are here: https://roliscon.blog/2019/03/12/superdry-does-it-need-a-revolution/ . It did not seem clear cut to me how shareholders should vote, but I did suggest there was a need for change.

There will certainly be that because the incumbent directors (including the CEO and CFO although that does not necessarily mean they have quit their executive positions) have all resigned from the board although some of the non-executive directors are serving out their notice. Dunkerton has been appointed interim CEO.

Perhaps the most apposite comment on the outcome was by Paul Scott in his Stockopedia blog. He said “To my mind, the suits have made a mess of running this company, so bringing back the founder seems eminently sensible to me”. However, I suggest there is still some uncertainty as to whether the Superdry fashion brand can be revived – perhaps the world has moved on and it has gone out of fashion. But Dunkerton should be able to fix some of the operational problems at least. Retailing is still a difficult sector at present so I won’t personally be rushing in to buy the stock.

Another momentous change took place at Intercede (IGP) yesterday. This company provides secure digital identities and has some very interesting technology. But for many years it has failed to turn that into profits and revenue has been also remained flat. But yesterday the company announced a large US Government order and hence they expect a “return to profitability”. This certainly surprised the market as another loss was forecast. The share price jumped 60% yesterday after it had been in long decline for several years.

I have held a small holding in the stock since 2010 (very small prior to yesterday) but I was never convinced that the company knew how to sell its technology – a common failing in UK IT companies. The former CEO and founder Richard Parris who was there for 26 years was surely part of the problem but he departed in 2018. Has the company actually learned how to make money under the new management? Perhaps, but one deal does not totally convince. One swallow does not make a spring as the old saying goes.

Even after the jump yesterday, the market cap is still not much more than one times revenue which is a lowly valuation for such a company. But investors need to be aware that the company has £4.6 million of convertible loan notes which would substantially dilute shareholders if they were converted. A company to keep an eye on I suggest, to see if it has really changed its spots.

Another surprising change yesterday was the abrupt departure of Richard Kellett-Clarke from the boards of both DotDigital (DOTD) and IDOX (IDOX) “due to private matters in his other directorships” according to the announcement from DOTD. DOTD is looking for a new Chairman. I wonder what that is about? We may find out in due course.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson )

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Renalytix AI Presentation

Yesterday I attended a presentation by Renalytix AI (RENX), a company which listed on AIM last November. They are focused on revolutionizing the diagnosis of kidney disease. This is an area I know something about having suffered from renal disease for at least 35 years, if not longer (a lot of renal disease goes unrecognised and undiagnosed for years).

The cost of renal disease is enormous and is estimated to be $90 billion per annum in the USA alone. The reason is because treatment options (dialysis or transplant) once End Stage Renal Disease (ESRD) is reached are very expensive. A lot of renal disease, although there are several types, is caused by diabetes which we know is a rapidly escalating problem in the world. The company aims to develop better diagnosis so as to separate out those people who are likely to escalate into ESRD and who could be treated to prevent the need for dialysis or transplant and hence save most of the costs incurred by Medicare and others (the company is very focused on the US market).

When the company listed it was effectively a start-up but they did acquire some technology from EKF Diagnostics. Namely some tests for biomarkers in blood that are predictive to some degree. The company aims to combine this with other patient data to provide an accurate diagnostic. They have partnered with Mount Sinai, a very large US healthcare provider who have a large database of patient records and a biobank of blood samples. They also have other similar partners. They hope to sell the diagnostic test and analysis for less than $1000. Clearly the key is whether the test and analysis they are developing is validated by actual studies of predictability which they hope to have this year in the second quarter, and whether reimbursement for the cost is approved.

When asked how many diagnostic tests they might sell in future periods, the CEO said they were unable to forecast that at this time. It was also said they hope to breakeven by the end of the year, but clearly financial forecasts are somewhat uncertain.

They have also licensed some technology from Mount Sinai (FractalDX) for the monitoring of kidney transplants and medication thereof which is key to achieving low rejection and long-term survival rates. This provides a second product line. There is potential competition in that area but not apparently a strong one.

The company raised $27 million in the IPO and have spent $11 million on IP licenses plus $1.4 million on software/AI development and clinical assay development leaving them with $13.1 million in cash at the end of December. They don’t expect to run out of cash this year, but there is a clear risk that they will need more funding in due course. Current market cap is £76 million.

Why did they list on AIM rather than the USA? Not totally clear but probably because it is easier to raise capital for a new venture in a public listing on AIM than in US markets.

The company has an impressive board led by CEO James McCullough so one does not doubt that they have the required expertise and ability to achieve their ambition. But it’s still an unproven product in an unproven business model.

I questioned whether improved early-stage diagnosis would help when in the past treatments for kidney disease have been few. But this is apparently changing with products such as SGL2 inhibitors now available. It’s certainly an area where a lot of research to develop new drug treatments is taking place.

In conclusion, I was impressed by the management, although in such presentations by AIM companies you usually hear a persuasive “story”. But I was not totally convinced that they have a revolutionary product, at least one proven, or one that will justify the cost over other cheaper ways of picking up renal disease at an early stage and monitoring its progression. Simple checks such as for high blood pressure and blood in urine (which can be picked up by a dipstick) and blood tests for creatinine and other measures are readily available. They will need to prove that their biomarker tests and AI analysis of other patient parameters provide significant benefit. If they do the market potential is enormous. If not it might prove a disappointing investment.

A company to keep an eye on I suggest rather than plunge into at this stage unless you like high-risk propositions.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson )

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Another Accounting Scandal – Goals Soccer Centres

Yet another problem in accounting has been revealed at Goals Soccer Centres (GOAL). This morning they disclosed in a trading update the discovery of “certain accounting errors” and are reviewing their accounting practices. As a result, the board now expects full year results to be below expectations and publication of the 2018 results has been delayed.

The even worse news is that they have breached their banking covenants so are having to have one of those difficult conversations with their bankers. The share price has fallen 30% this morning (at the time of writing).

Goals is an operator of soccer pitches which listed on AIM as long ago as 2004. Revenue has been flat for the last few years and profits variable. Net debt approximates to revenue which is never a good sign. The company changed auditors from KPMG to BDO in June 2018 and in July 2018 the CFO resigned from the board “with immediate effect” to join his family business but continued in his role as CFO. A new “interim” CFO was not appointed until the 15th January 2019.

After this “own goal”, the company suggests it “will take a more prudent approach” in future. But it reinforces the need to reform the accounting and auditing professions because we are very likely to be told that this issue extends back for more than one year.

Note: I have never held shares in this company despite the fact there was some enthusiasm for it among investors at one time. The share price peaked at 425p in late 2007 but it’s been steadily downhill since. It’s now 38p. I was always doubtful whether there was any real money to be made enabling amateurs to play soccer.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson )

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Gooch & Housego and Sectors to Avoid

Today Gooch & Housego (GHH), a photonic components manufacturer, held its Annual General Meeting in Ilminster, Somerset. I would have attended as a shareholder except the time of 11.00 am would have meant a very early start. As it was, the trading update issued in the morning prompted me to sell my holding anyway.

The key negative in the announcement was this: “Looking forward, we believe timing and mix will result in a FY 2019 group trading performance showing low single digit growth compared to last year”. That compares to analyst’s prior forecasts of revenue growth of 14% and adjusted earnings growth of 48%. The share price promptly fell by 20% to about 1100p in the morning and it had already been falling in the last few weeks from a peak of over 1800p in October 2018.

Apart from the well-known problems in China of the manufacturing sector, the cause of the problem is assigned in the announcement to the cyclical nature of the microelectronics sector and the recent impact of the US/China tariff wars. It also comments on the “excess inventory” in the Chinese market taking longer than expected to normalise. However, the company does expect a “multi-year growth phase” in the hi-reliability fibre couplers market which may become apparent in the second half of the year.

But my experience tells me that electronic component manufacturers are notoriously vulnerable to wide swings in volumes and profits. If they are not selling in cyclical markets, or are vulnerable to stock holding changes, they are vulnerable to rapid product obsolescence and leapfrogging by competitors. This is normally a sector I avoid for those reasons. GHH seemed to be operating in a very specialised part of the market which I thought might make them less prone to these problems, but it seems not.

This is a case where my prejudices against a certain market sector are reinforced. Such companies need to be very cheap but Gooch & Housego has not been recently, being perceived as a high-growth tech stock with big ambitions.

The other concern is that the share price decline from October last year was not based on any published news from the company, although the fact that the CFO was declared as leaving in November might have been perceived as such. But in October 2018 the company said: “Overall G&H has a robust order book combined with greater diversification. The Board remains confident that the Group is well positioned to continue to deliver further progress in FY2019 and beyond”.

It would seem that some folks knew about possible problems at the company before me which always makes for tricky investment. With a relatively small shareholding which I had only held for a short time, it’s an example of when it’s best to sell and take a loss. The business might recover but such an experience tells me that it’s always likely to be vulnerable to such shocks.

The electronic hardware sector will therefore continue to be on my blacklist of sectors to avoid which includes oil/gas exploration and production companies, mining exploration, banks and other financial sector companies, insurers, gaming companies, fashion retailers, drug developers, etc, etc. You might call me opinionated but experience tells me that some sectors are just too tricky to invest in unless you have very specialised knowledge. I’ll probably be giving my reasons in detail for avoiding some sectors in a book I am working on as it will take longer to explain than can be covered in a short blog article.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson )

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Accesso and Executive Chairmen

Yesterday the share price of Accesso Technology Group (ASCO) dropped over 35% after the company issued a trading update and also announced that Executive Chairman Tom Burnet was moving to become a non-executive director. This company has been one of the great growth stories on AIM after Tom took charge as CEO in 2010. Revenue has grown more than 6 times since then but profits and cash flow have been more variable. But Tom is a very persuasive speaker and the share price multiplied by more than 25 times to reach a peak of 2800p in September 2018 – it’s now 930p.

I first purchased the shares in 2012 when the business was selling a solution for theme park queuing and most of their revenue came from one customer. They have now developed the technology to have wider applications and have a wider customers base of “visitor attractions”. Acquisitions have also been made to broaden the product offering and the strategic plan of the business was to become a “consolidator” in the ticketing and other IT solutions to this sector.

Tom Burnet was made Executive Chairman in May 2016. That concerned me somewhat because he is clearly a very forceful person and I generally do not like Executive Chairmen unless there is a very good reason to have that kind of sole dictatorship such as the company being in dire difficulties – there did not seem to be such a justification here, and it is of course contrary to Corporate Governance guidelines for good reasons.

I sold most of my shares over 2016, 2017 and 2018 after the share price continued to ramp up driven by momentum and some investors apparently feeling that Tom could do no wrong. He seemed to think likewise when I prefer more humble personalities as CEOs. Institutional investors also piled in. But the financial numbers were not all that impressive – indeed I queried the poor return on capital and large increase in administrative expenses at last year’s AGM. Other commentators queried the revenue recognition, poor cash flow and high levels of software development capitalisation. Director share sales by Tom and others in 2018 were also a negative.

That’s the history, so what about the current valuation? The last published financial results were the interims for the 6 months to end June 2018 when I made a note that the prospective normalised p/e was 47! But Accesso’s interim results are usually very untypical of the full year figures as it’s a very seasonal business – not many people visit theme parks in the winter. But they did mention the impact of IFRS15 on revenue recognition where they had previously been recognizing the full value of tickets, not just their commission income. This is probably why current analysts’ forecasts show a fall in revenue for the 2018 year versus 2017, with a resumption of growth thereafter.

The latest announcement suggested the full year results will be “broadly” in line with market expectations – which is a bit tendentious bearing in mind we are now well past the financial year end already. It also mentions a one-off cost exceptional cost of $1.7 million on an acquisition which was aborted in October 2018. Why was there no announcement of this at the time as surely it was price-sensitive information?

Actually figuring out what the likely earnings will be for 2018, particularly as the new board might wish to take a bath and clean out any questionable capitalisations is almost impossible without more information.

My fall-back valuation method in such circumstances is to look at the market cap revenue multiple. Revenue forecast for 2019 is $138m which equates to £106m when the current market capitalisation is £254m. So the multiple is 2.4 which is relatively low for a high growth business, with good IP (protected by patents), high recurring revenue figures from existing customers and some profits rather than losses. The business might look very attractive to trade buyers who could strip out a lot of the overhead costs (which is why revenue multiples are important in valuing such companies).

There may be more bad news to come of course, but at least they now have a conventional board structure with a new non-executive Chairman (Bill Russell) who seems to have a very relevant background.

The dangers or having a dominant and forceful Executive Chairman have of course been reinforced by events at Patisserie (CAKE) where Luke Johnson had that role. Having a more conventional board structure might not have prevented the fraud there altogether, but it might have enabled the non-executive directors to more easily question the way the company operated, the internal controls and the information being provided to them. Indeed it might have ensured more questioning non-executive directors were appointed to the board in the first place. A separate Chairman might also have questioned whether Luke Johnson was spreading himself too thinly across his numerous business interests.

The corporate governance principle of having a non-executive Chairman is not something investors should ignore.

Postscript: I corrected the revenue growth figure and the market cap sales multiple figure a few hours after the above was first published after I identified some sloppy research, but the conclusions were unchanged.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson )

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