Mediasurface Share Discussion Threads

[papalpower] 02/10/2007 08:20

Nasty drop - no holding myself but its been on my watchlist for a long time, think it will now be removed.

[bloodhound] 02/10/2007 07:37

Mediasurface plc, the AIM listed Content Management Software Author and Vendor
expects to report results below market expectations for the year ended 30
September 2007.

During this period, revenue on a pre-acquisition basis increased by 5 per cent.
and the Company expects to report revenues of no less than £11.3 million (2006:
£9.67 million) which would result in an estimated EBITDA loss in the region of
£1.3 million (2006: £1.0 million EBITDA profit).

Despite these disappointing results, the Board believes that the underlying
business remains strong.

Immediacy

Following the acquisition of Immediacy in July 2007, the operation achieved
revenues of £1.1 million for the three-month period in line with market
expectations. The cost base at Immediacy has been carefully controlled and is
slightly below budget helping generate a modest EBITDA improvement versus
expectations. Immediacy achieved 24 new business wins in the period, its best
performance to date, and the prospects for the operation remain positive with no
signs of a slow-down. For FY08, the operation also is expected to benefit from
a £0.35 million reduction in costs following the planned departure of the two
major shareholders.

Pepperio

During FY07, the focus for Pepperio has been on pursuing the market opportunity
for a hosted content management system for smaller businesses and on building a
partner channel. Whilst this approach has established 75 channel partners
generating over 100 end-user accounts, the anticipated growth in end-user
accounts has not materialised. Moving forward, the investment of £1.1 million in
the financial year ended 30 September 2007 will be reduced significantly for
FY08. This action will enable greater investment in other proven business
streams.

Morello

Morello experienced a difficult second half as a result of two factors mainly
outside our control, both of which contributed significantly to sales slippage.
Firstly, Microsoft Office Sharepoint Server 2007 (MOSS) was launched. MOSS is
essentially a document management and collaboration tool that complements rather
than competes with Morello, but the hype generated around the launch confused
the market and resulted in a number of Morello sales opportunities being
postponed whilst they conducted a review of MOSS. However, industry analysts
and the market overall are now starting to better understand its positioning, we
have not lost a single deal to MOSS and following the recent launch of the
Morello MOSS Connector, we believe there are substantial opportunities to
position Morello as the web content management technology of choice to support
MOSS.

The second contributing factor is a result of an extremely challenging market in
the financial services sector, one of the key verticals for Morello. The recent
uncertainty in this market has resulted in a number of deals being delayed and
it remains difficult to predict when this circumstance will improve.

Combined, we estimate these two factors have resulted in at least £2.25 million
prospective Morello licence deals not closing in the second half. The
underlying pipeline for Morello however remains strong and newer geographies
including the Nordics and the US are starting to deliver incremental Morello
related growth.

Outlook

The Board feel that the current results, whilst disappointing, are not a result
of underlying problems in either the business or the overall market and believe
that the outlook for FY08 is positive given the prospects for strong revenue
growth in the Immediacy operation and an encouraging sales pipeline for Morello.
The effect of changes to the cost base and growing recurring revenues currently
valued at £4.5 million per annum is expected to help return the group to
profitability.

[yump] 01/10/2007 16:42

Yes, a pain isn't it - all that careful deliberation about when to buy at the end of last year and the idea that we could be at the start of a reasonable re-rating, only to find the price pretty close to my average, despite the progress that the business has obviously made. Something just have to put up with I suppose in the small cap market.

[bloodhound] 01/10/2007 13:28

Another caning today then... :-(

[yump] 27/9/2007 14:18

If buying up the main competitor on what looked like reasonable terms and then following that with getting the AstraZeneca global site contract isn't enough to get the share price going, then we really have got poor sentiment in the market by the bucketful.

Have seen mutterings about 'forced sellers' on various stocks, but not sure I believe that as an explanation. It can just be sentiment surely and a few people keeping cash.

[yump] 27/9/2007 14:13

Its a really unpleasant market for small stocks - quite a few seem to be near yearly lows, but they're obviously not all going to issue warnings, so have learnt from the past to stay put. When confidence gets dented in the market the small stocks are more dependent on pi confidence than most - same as they get pumped up irrationally by pi's when everyone's happy. AIM's been getting bad press as well.

In retrospect of course it would have looked great to have sold them all near the top earlier in the year, but that wasn't possible because they looked as if they would carry on up or level. Certainly not going to be selling near what might by next year be seen as a low, unless a stock appears overpriced, which most of them aren't now.

Has the company changed - no. Just sentiment. share price was higher before the flow of positive announcements, which is bizarre really - it didn't exactly get blown up to great heights.

[bloodhound] 27/9/2007 12:35

Down 5% - I'm really not happy with this kind of performance....!!! Where's the orders they were banging on about?

[yump] 26/9/2007 14:23

bb4
Thanks for clarifying.
Actually quite nice to see someone not being cagey about their business !

Be interesting to see what comes in statements - whether some of those issues are dealt with.

[bb4] 26/9/2007 13:16

Its an article by Micheal Jackson. I assume its a regular column of his in this magazine. He mentioned MSR as an aside in his discussion relating to the title of the piece.

[yump] 26/9/2007 11:56

bb4

Is it possible to also post who is saying what in that article, because there's a 'we' and its also written as if a journalist did it. Is it an interview ?

Re the need for new licence sales - I think 50% beats the pants off selling one-off boxes in PC World and a lot of businesses would kill for repeat after-sales revenue.

Not actually got any data, but I wonder what the maximum service revenue % is for any software business ? (versus % of new sales).

I think churn shouldn't be much of a problem here. A whole website where your staff have all got used to using it isn't very easy just to change to another CMS.

Think we've seen the p&l hit already as the first half and the full year forecasts were reduced. Still forecast to grow very nicely though.

[bb4] 26/9/2007 11:11

xl business

[bloodhound] 26/9/2007 11:09

bb4

Where this article come from?

[bb4] 25/9/2007 17:25

Sustainability or growth? Dec 06/Jan 07 issue

The sustainability/growth argument is particularly true in the software market. The 'software as service' business model where you rent your product on a monthly basis, most probably by downloading applications to your desktop from a remote server, is now a reality. For example, the phenomenal success of Salesforce.com in the sales force automation market, shows there is a real market for renting rather than buying software. This business model also allows people to get up and running very quickly and without the long term commitment when you buy a software product outright.
Here you could argue that we have an example of high growth and sustainability, although the excitement of this has to be tempered by the fact that Salesforce.com raised some $200 million in equity to increase sales. And rather ironically, Salesforce.com has had problems with high churn rates. So, like Charles Dunstone's offering, I believe the Jury is still out!

Software riddles
Now to one of my software companies, Mediasurface. It provides web content management software for big companies – its average order size is over £100,000 and it often receives orders of £500,000. Now we have got critical mass it's properly profitable, but here's the rub – it's still 50 per cent dependent on new licence sales. If there are no new sales to new customers, the company's value plummets. It's reached a degree of sustainability by dint of its existing reference base – but this is not as rock solid or dependable as we would like.

Recently, Mediasurface launched a new low-end rental product. This will bring sustainable income if we reach critical mass (which we believe we will!) but once again we'll have the problem that it will adversely affect our P&L in the next year as we spend to build. As an AIM company, we are at the mercy of a fickle City, broker's forecasts and shareholders. What do we do? Well, there's no easy answer, so I'll keep you posted.

This article is pre Immediacy and contract announcements - astra, but gives some insight into the chairmans future intentions

[wjccghcc] 25/9/2007 15:30

Trading statement 3rd week of october last year. Should think there will be the same this year.

[bloodhound] 25/9/2007 15:28

Definately about time we had some news don't you think.......?

[yump] 08/9/2007 10:18

...So assuming that everyone will look at next year's p/e on results day and forget about this years, the p/e will suddenly drop from 17.2 to around 10.

But using an fldper (fluid linear discounted p/e ratio) half way through this year:

Difference in eps is 0.75p (2p next year - 1.25p this year)
Halve it = 0.3525p (since half way through year)
Add it onto 1.25p = 1.6p

Giving an fdper at a share price of 22p of about 14 at the moment !

[yump] 07/9/2007 09:54

Just as an afterthought, but one could of course discount the current rating linearly by a factor, depending on how close to year end you are. Although the year ends on one day, in reality the business itself does not really grow by next years forecast overnight on results day.

[yump] 07/9/2007 09:50

It was a general point. Perhaps I should have said 'around' as I adjust a bit for the likely growth in the next year and paying a bit more if I think the business is worth it, and considering where you are in the current year and considering whether the market is booming or worried.

For me, with at least 60% growth forecast next year, even allowing for somewhat less, then a p/e of 17.2 is 15ish.

For me its business first and then see if the numbers are thereabouts.
Particularly if the business is visible.

[tuckswood8] 07/9/2007 09:43

Hi everyone, also came over for a look yesterday and have had a small dabble this morning (will probably show as other).
Have grown weary (wary?) of Chinese companies recently.

[stemis] 07/9/2007 09:29

However, for true growth stocks I think its worth paying anything up to a p/e of 15ish on current year

Isn't MSR on a forecast 2007 P/E of 17.2?

[yump] 07/9/2007 09:17

There seems to be a general hunt and interest in low p/e stocks at the moment, although whether that is a growth stock strategy or not is open to debate.

They always have me in a puzzle because imo stocks on p/e's of 10 and under are probably recovery stocks, because there is something in their past which has given them that low p/e. Whether its debt levels, hiccups in growth, placings or just a mundane business. Always ask myself - if someone gave me a pot of money to start that business, would I bother ? - from the point of view of whether its an attractive business or not. If the answer is no or don't know, then certainly won't do it the other way around and part with my money to fund them.

There is always the hope of a sudden gain with those stocks I think, if they surprise on the upside. However, the other problem is that if they've dropped off from a spike because of a hiccup, then there's a lot of previous investors to interrupt any smooth share price movement upwards.

However, for true growth stocks I think its worth paying anything up to a p/e of 15ish on current year, as long as there's at least 25% growth forecast for the next year.

If they've grown in the last few years and the share price chart reflects that, then you are still paying cheaply for the growth imo.

Some might say a higher rating gives more chance of a fall, but one of the original Slater points about good growth companies is that everything fits together - they are good growth companies because they are good businesses, with good management, good planning, good investor information etc. etc.

That's why there aren't many of them imo.
Have high hopes for MSR - ticks all the boxes and no hype.

[wjccghcc] 06/9/2007 21:38

Yup, I'd be happy to see 2p EPS next year and a PE of 15 is certainly justified.

[yump] 06/9/2007 19:17

If it goes to current plan/forecasts then, would expect an easy 50% upside after this year end, assuming it just sits on a p/e around 15 (which it has done historically), which would be modest if its growing very quickly - so plenty of upside.

[wjccghcc] 06/9/2007 16:39

Full Year forecast for year-ending september is 1.25p. 2007/8 forecast is 2.58p though personally I'd expect that to be revised down somewhat like this year's given the investments they're making in sales and marketing.