Blancco Technology Share Discussion Threads

[bones] 26/4/2017 08:00

For disclosure I didn't hold this share and still don't except for a long spreadbet opened at 168p yesterday anticipating a bounce given the upbeat trading. This is all about managing the balance sheet and the jury is certainly out there.I'll probably close the bet by next week up or down.

[bones] 26/4/2017 07:57

I assume Finncap gets well paid for forecasting a £5m funding gap which the company advised yesterday? Or is it the case that the company knew it was coming hence the RNS yesterday.Price targets are meaningless up or down. I don't see the point of them unless they give a timescale for being "achieved".

[glasshalfull] 26/4/2017 07:51

Brutal note out from finnCap this morning.
They initiate with a 100p price target

Titled "Firing blanks"

Couple of snippets,

"The technology transition from end-of-life (EoL) erasure to active and mobile erasure and, furthermore, diagnostics is unlikely to be as lucrative for Blancco as consensus implies – we believe that consensus is forecasting high growth in areas of more intensive competition compared with Blancco's traditional markets, and that the company's current product set, experience and strained balance sheet is not equipped to cope."

"Revenue growth not so alluring – adjusting for Xcaliber (minority ownership) and Tabernus (part period contribution), we estimate organic revenue growth was in fact just 9%, rather than the 28% reported, down from 22% in FY16, with softer trading in Japan (20% of sales) an area of concern. With HoH growth of 24% required in H2 to meet consensus, we believe risk is to the downside." 

"....expansion into new territories and target customers has negatively affected cash flow, with cash conversion deteriorating in each 6-month period for the past 18 months. We believe working capital will continue to strain cash resources and, in combination with earn- outs and a heavy capex programme, forecast negative FCF over the forecast horizon and identify a £5m funding gap, in addition to the £4m near-term short-fall already communicated. SOTP methodology derives a target price of £1."

---

Good luck to remaining holders.

Kind regards,
GHF

[brummy_git] 25/4/2017 13:43

New research out today from Equity development

hxxps://www.equitydevelopment.co.uk/edreader/?d=%3D%3DgM5IjM

[velod] 25/4/2017 12:51

Well at least one 'argument' can be put to bed once and for all and BURNT into long term memories for future similarities occurring elsewhere. And that is - being told the CFO has just upped and left via an RNS without a bye or leave nor a where or why mention as to the immediate reason for such a key decision IS a red flag profit warning, regardless of which side is to blame for the departure.

. . . Now how about profit warnings come in three's? Was the CFO leaving the first or is today's RNS the first?

[twistednik] 25/4/2017 12:43

Yes, I hope the slipping of contracts is not another veiled profit warning for lower earnings later this year.

It sounds like there is definitely a lack of trust around this share and the management team currently. Hopefully institutional shareholders can shake things up. Assuming there are tangible profits once all of the adjustments are cut-through, and a decent underlying business, there should be support from stakeholders.

Here's my reading of what's happened:

- March '17: CFO resigns; he has been in the business 6 months but clearly didn't have a proper grasp on cash-flow. By the time he realised what was going to happen (maybe he was relying on the Mexican debtor to pay the earn-out!?), his position became untenable. The Company has an internal drains up to try to quantify the shortfall.

- Today: As the cash-crunch is imminent and there isn't time to get Banks to put a short-term facility in place (i.e. there is a risk the Company literally runs out of cash!), they are forced to qualify in a market announcement. I assume they are working behind the scenes to get this cash and are confident of doing so (otherwise this would be a rights issue announcement).

My thesis is that the £4m is a one-off (having gone to the trouble of quantifying, you'd imagine they are now all over the current liability requirements for next 6 months) and that once sorted, the share will gradually start its positive moves.

There is a risk however of further profit warnings and delays of contracts. Again, this is where the trust in the management team seems to be lacking.

Worth a small punt at 158p imho, but not one for widows and orphans !

Only time will tell...Good luck all!

[supernumerary] 25/4/2017 11:08

I'd be interested to know what all this is about: 'the later arrival of a large government contract and the slipping of larger contract deals to later in this current quarter'. One late contract is an accident, 3 or more looks like a trend.

[masurenguy] 25/4/2017 11:00

"The FD had to go as this is a school boy error; being caught out by working cap and earn-outs, both of which can be planned for!"

The CFO Butcher departed after just under 6 months so he can hardly be accountable for this train crash. Perhaps he could and should have identified the problem a lot earlier if his finger was really on the pulse.

[chasbas] 25/4/2017 10:59

175,000 gone through at 165p. Looks like a purchase.
twistednik I agree with you

[twistednik] 25/4/2017 10:41

Watching this one for a while. Great opportunity to get in at a discount price! According to Peel Hunt, the new PE for FY17 is c.16-17x which is a good entry price for a very fast growing business.

Top line continues to grow strongly which bodes well for future EPS growth and the PEG multiple is now reasonable. I still buy into their strong "moat" in data erasure and market backdrop is very positive.

I'm not saying that these may not drift lower first, but on a medium / long-term hold, I'm looking for 100%+ return.

Whilst cash is king, looking at the profitability of the business and EBITDA expected of c.£9m for FY17, I expect they'll easily be able to raise a short term working capital line to cover the £4m (no prizes for guessing which industry I work in!) with no dilution for existing shareholders.

The FD had to go as this is a school boy error; being caught out by working cap and earn-outs, both of which can be planned for! I'm hoping that the announcement today is the full extent of their cash-flow issues (a drains up would have been completed by management once they realised the cash shortage) and once sorted, it will be back to business as usual.

I've seen another business caught out by 'earn-outs' before the downturn and following a change in the FD, it's performing very well. In a sense, it is a positive drain on cashflow (i.e. increased earn-out is due because the business acquired is outperforming), albeit this creates a short-term cash-crunch.

dyor etc but I think shrewd investors can capitalise in situations like these. IMHO, take a small stake and top up if they drift lower.

[darrenp746] 25/4/2017 09:56

Looks a great entry point, business is doing well

[aishah] 25/4/2017 09:49

Gosh, it's been painful here. Glad I cleared out when the Dutch Auction was conducted a while ago. SCSW didn't even mention the CFO departure in their latest coverage! Techinvest hasn't fared any better either. I'll put it on my watchlist again to see how things pan out as Data Erasure is a terrific area to be involved in. dyor

[supernumerary] 25/4/2017 09:48

Seems like only yesterday they were giving away £50M in cash - absolutely no need for this situation ever to have occurred...

[varies] 25/4/2017 09:13

I have been lucky here. I was thinking yesterday of increasing my holding but was too busy to do so !
We are obviously in for some worries here although this seems a very promising business.
£4 million does not sound much for a company of this size but bankers are usually reluctant to advance money if it is urgently needed. A quick placing might be a better solution even below 150p.
"Sell in May and go away" may prove a sound adage this year as the stock market does look rather over-heated.

[velod] 25/4/2017 09:03

Thought 210p would be an incredibly strong support area and had mentally pencilled-in that area as a potential re-entry buying point. But this gap-down is simply shocking in its depth of breaking past that level.

. . . The market's opinion is given in all its brutality.

. . . Cash on hand was a third of the previous year at end of last year's accounts and still dividends were paid at an increasing rate. And there's still a dividend due from this share to go XD in May! And that's an increased interim on the comparable divi of the previous interim! Perhaps the CFO walked when he saw cash dwindling yet the board intent on doleing out increasing dividends which he felt the company couldn't even afford, and was the last straw for him?

. . . The share was technically way oversold before today, but it's lying at basket case level now such has been the rapid steep fall this morning.

[chasbas] 25/4/2017 08:37

Borrowing facility available is £11.5m which expires Oct 2019.
Net assets £44m at Dec 2016: OK just goodwill etc but this is a technology company.
Net debt at Dec 2016 was £5.9m. Projected to be around £5.5m at 30 June 2017.
Sentiment is horrible but 3Q trading performance was strong.
IMHO raising £4m should be achievable by more borrowing or equity funding.
I don't think I care as long as company continues to trade profitably.
Maybe a full takeover could be triggered?

[nw99] 25/4/2017 08:04

CFO departing after 6 months was a red flag £4m cash shortfall

[robow] 25/4/2017 07:44

i think it probably does

[tournesol] 25/4/2017 07:17

Have to wonder if today's RNS explains why the CFO left so suddenly? Seems bizarre to me that the co is so skint.

[chasbas] 05/4/2017 16:03

Just added at 222p.

Peel Hunt TP 340p (buy)
Panmure Gordon 326p (buy)
Cantor Fitzgerald 270p (hold)

I don't even think I'm being brave.

[hannahh] 22/3/2017 10:28

A recording of the recent results webinar is now avaiable to view at: