Amino Technologies Share Discussion Threads

[simon gordon] 27/10/2015 14:17

Dow Jones newswire - 27/10/15: Canaccord Genuity cuts its target price on Amino Technologies to 180p from 210p after the company reported a second half shortfall in revenue from its core Amino business. The brokerage lowers its forecasts for revenue by 19% to GBP41.4M and adjusted pretax profit by 23% to GPB4.3M for fiscal 2015. It also cuts estimates for 2016 revenue by 14% to GBP68.0M and adjusted pretax profit by 19% to GBP7.8M.

[rcturner2] 27/10/2015 14:14

Thanks Masurenguy, it concerns me that out of the blue the original business could suddenly halve! Once you factor in the increase in shares, the effect on eps is going to be pretty painful. 7p could easily become 5p and then a PE ratio of 15 takes you to 75p.

[masurenguy] 27/10/2015 14:04

H2 sales last year were circa £20m. We don't know what they will be this year or what contributions to revenue from the two new acquisitions will be. However, if we take your guesstimate of £10m then this would be a very disappointing result in the context of prior trends but I think the description of "horrendous" is over exaggerated in broader terms especially when new contract business can often be quite lumpy. This does not mean that the shortfall in H2 is a precursor to sales having entered into a serial decline.

Given that there are several unknowns here, the positives that I take from todays announcement are that "revenue and cost synergies arising from its recent acquisitions of Entone Inc. and Booxmedia Oy are tracking ahead of plan and both the teams and product lines of each acquired company are integrating well" and also that "the Board reconfirms its commitment to the Company's progressive dividend policy". I don't think that they would be inclined to maintain that policy if the sales issues involved were serious. It is also worth remembering that four directors participated on a modest level (circa £165k) in the July placing just 3 months ago.

Whilst the trading update was both unexpected and disappointing I think that the two new acquisitions provide significant opportunities for growth and so incidentally does Kestral, who took up all of their rights in the placing and are now the largest shareholder with an 18.2% holding. We will have a better idea of their overall situation when a year end trading update is issued in about 5 weeks time.

In the meantime I view events as being a short term setback with the consequent fall in price as an opportunity to add, which I did late this morning. I have a comfortable "paper profit" at the current price and am happy to increase my dividend income while they resolve their short term problems and wait for the next leg up after the integration of the two new acquisitions. You are obviously more pessimistic and have now sold but that's is what makes a market !

[rcturner2] 27/10/2015 12:43

Masurenguy, do you agree with my sums that this implies a £10m shortfall in H2 for the Amino business? If so, I consider that to be horrendous.

[mg1982] 27/10/2015 12:20

Paul has also provided an update on AMO at his usual place:

[masurenguy] 27/10/2015 12:18

RCT2, I originally invested here primarily for the yield and I think that this mornings reaction could be rather overdone. The price seems to have stabilised just above the 111p low so I decided to add a few this morning. I note that my Buy was shown as a Sell.

"Meanwhile, today’s profit warning from Amino Technologies (LSE: AMO) has caused its share price to sink by around 27%. That’s because the in-home digital entertainment solutions provider now expects to report a second-half shortfall in revenue versus expectations, which means that pretax profit is likely to be below market forecasts. The company has identified that its sales execution efforts have been unsatisfactory and, as such, it has implemented targeted actions across its business. And, with the revenue and cost synergies associated with its recent M&A activity being ahead of schedule, Amino Technologies’ performance over the medium term could realistically pick up. Therefore, while in the short run its shares may come under further pressure, its 4.8% yield has appeal and could prove to be the catalyst to push its shares 20% higher in 2016 and beyond."

[imranawan] 27/10/2015 11:38

Volume also picked up according to L2, with 923k going through as of 11.38am.

[rcturner2] 27/10/2015 10:00

There could easily be large sells not yet reported.

[tiswas] 27/10/2015 09:56

Maurenguy

With all due respect I think you know as well as I do that the institutions would struggle to get out in volume at the best of times, no chance on a morning like this.

I agree with much of what you say but one advantage that us punters have is we can dump 10k pretty easily. They will talk to management first and sell only when they find another insti taking the opposite view.

Cheers

Tis

[shanklin] 27/10/2015 09:56

I think the lack of detail is pretty disgraceful. The difficulty with the newly acquired business apparently exceeding targets is that the legacy business must be performing even worse. Its a shame they did not state just how much money its been losing and give more details on the actions they are taking to improve matters.

[rcturner2] 27/10/2015 09:56

I have sold out completely.

If you dig into the figures, it is actually pretty serious.

Entone had revenue of $43m for the last 12 months, so if we assume that they are providing 4 months of that into the full year figures (Aug Sep Oct Nov) then they will be providing $14m or roughly £10m.

This implies a £10m shortfall in Amino revenue in H2 alone, this is more than half the revenue disappeared! WTF?

Anyone disagree?

[nehpets81] 27/10/2015 09:52

It certainly seems to be a bit of a minefield at the moment. This was one of my more confident holdings too.

I have to agree with Masurenguy that there should be more detail in the statement. If they were confident of hitting targets two months into the period, then the last four months must have been pretty dire actually which is a concern - how much longer will this poor momentum in sales continue? I suppose they have taken their eye off the ball following the acquisition. With the cash pile now gone, a considerable safety net has been taken away here and I'm afraid I'm one of those jumpy small private investors and have sold out but will re-assess the position when there is more clarity over exactly what the problem is and how long it will persist.

[shanklin] 27/10/2015 09:49

Yes, they might as well have just RNS'd that their management have not managed the core business for the last six months... ...oh, that's what they did say.

[masurenguy] 27/10/2015 09:49

Caradog - we both know that there is absolutely no basis for comparison between Amino and Globo. Any PI's who think that there could be are better off selling now and putting their money into their local building society!

[rarther] 27/10/2015 09:43

It's not the worst profit warning, but the shares have been trading at a value added premium with good momentum for the last year and this has suddenly evaporated today with this warning that everything is not so great, and lack of clarity as to how bad fortunes have changed. Disappointing.

[caradog] 27/10/2015 09:26

Small PIs will be particularly jumpy in view of Globo's recent implosion. No relation between the companies, of course, other than they are both tech businesses quoted on AIM. But both have been recommended by Simon Thompson in the IC and there may be quite a few who have holdings in both. I'm hoping for a rebound in the short term, but long term? Not sure.

[masurenguy] 27/10/2015 09:09

tiswas - we must all make our individual judgement calls but the 26% fall in the shareprice so far is based upon a volume of just 333k shares, which is 0.45% of the shares in issue. Of course the selling could continue - and the price could fall further - but so far this is not indicative of any institutional disposals. What we have seen so far are lots of small PI sales going through. If Miton or Schroder, who hold circa 22% of the shares, or Mark Slater was to sell, then I'd review my position here too but for the moment I will continue to hold.

[masurenguy] 27/10/2015 08:52

Very disappointing and unexpected trading update. At the interims - reported just 3 months ago - sales were ahead of last year by 9% at £17.9m with eps at 5.4p - up over 60% - compared to last year plus cash of £17.4m. Since then they have raised circa £20m in a placing and acquired Entone for circa £41m in cash. It is difficult to therefore extrapolate this years figures in comparison to last year due to this significant change in their structure and operation.

At the interims they also stated that "Revenue and profit growth experienced during the second half of 2014 continued in this first half of the year, alongside good cash generation and margin improvement. In turn, shareholder returns have again been enhanced in line with our stated progressive policy of no less than 10% dividend increase a year." They were already 2 months into H2 when the interims were released so how come that just 3 months later they are unexpectedly stating that "The Company has identified that its sales execution efforts in the second half have not been satisfactory..........sales execution is the primary factor for the shortfall in revenue". This raises more questions which are not clearly explained by this comment on sales. What exactly does this mean - are contracts underperforming in revenue terms or have they lost some existing business and/or failed to gain further anticipated business?

They have also stated that "the Company expects profit before tax, before exceptional items, to be below expectations, but in line with that achieved in the previous financial year.........the Board reconfirms its commitment to the Company's progressive dividend policy and expects net cash balances at the period end to remain in line with current expectations." With the intervention of both the placing and the acquisition I have no idea what "current expectations" for year end cash balances might be. The only positive comment in this context is their commitment to maintain their progressive dividend policy (to increase by 10% pa) so I interpret this to mean that the final dividend payment will be 4.23p making 5.5p for the year (5p last year).

I think that furtherr clarity was required within this unexpected update and the lack of it probably accounts for a current fall of 26% in the shareprice so far this morning, which seems to be much greater than I would have otherwise expected. I think that those who participated in the placing @130p just 3 months ago will not be happy with this very sudden and unexpected turn of events. I fortunately didn't add at that time and my average cost here is below 100p so this just takes a big chunk of the paper capital gain. I will continue to hold, especially with the longer term prospects provided by the two acquisitions earlier this year but would like some greater clarity on the existing "sales problem" before potentially being interested to add further at a lower price.

[tiswas] 27/10/2015 08:43

By my reckoning the cash is down to zero. I know Entone was only completed 12/8 but it did not come cheap so where are the profits? The original business must have been hit quite hard in the second half assuming Entone and Booxmedia contributing something.

Sold out at 120, too risky.

[shanklin] 27/10/2015 08:36

I do wonder how long they have known about this. Last year they issued a positive update on 13-Oct. This year they wait another 2 weeks to issue bad news.

To be fair, the share price had drifted down before today but not by a significant amount, so not very leaky.

[tiswas] 27/10/2015 08:16

Anyone any idea what the expected cash position is? I assume cash has gone after acquisitions and if profit is going to be similar to last year then eps will be down because of share issue. Where are the earnings from the acquisitions? And they were so confident at the half way stage.

Another darling in my portfolio that has let me down.

[rcturner2] 27/10/2015 07:54

So numbers will be the same as last year, improvement in H1 has given way to a poorer H2.

[a1pappadingdong] 27/10/2015 07:52

There is our early trading statement. And it's not the good kind this year.

[rcturner2] 26/10/2015 08:52

Globo, fraud uncovered, CEO and CFO resigned and fled the country. Nice one J777J.