Blancco Technology Share Discussion Threads

[varies] 07/7/2017 08:40

I find most of the posts here really helpful and informative and that, taken together, they present a well-balanced appraisal of the investment merits of BLTG shares at the present price.
In spite of many misgivings I remain a buyer, having bought at 126p and 118p yesterday. I am relieved to see calmer conditions so far this morning.

Edison Investment Research produced a 16 page analysis on 15 March 2017 when the share price was 250p. This included a Discounted Cash Flow valuation at 340p. The figure would obviously be much lower now after subsequent disclosures.
It provides a thorough and informative explanation of the Erasure business and BLTG's dominant role. It makes no reference, however, to the quality of our receivables !
Edison (of whom BLTG is a research client) estimated that the total adjusted operating profit (TAOP) for the year to 30.06.2017 would be £7.9m. Their corresponding figures for 2017/18 & 2018/19 are £9.89m and £11.95m.
Assuming (and please correct me if I am wrong) that TAOP and EBIT have the same meaning, then Edison's figure for 2016/17 is very near BLTG's latest forecast allowing for the £2.2m charge on this doubtful receivable.
It is annoying that we shall have to wait until 3 October for the accounts but, as we all know, it does usually take about 3 months from the year-end for accounts to appear. IF these contain no further shocks and if BLTG enjoys the support of its bankers, then I believe today's price of 118p will look a great bargain.
Fingers crossed !

[its the oxman] 06/7/2017 22:57

Fall in price is almost the same as the cut to the valuation from the Equity Development note I got today. Be interesting to see if this holds above 100p before the next set of results. There will be a few fund managers with some difficult conversations if they don't at least cut their positions. Paul Scott has been proved correct on this one.

[chasbas] 06/7/2017 16:35

ilovefrogs thanks for your view. Conspiracy theories are unlikely to be true. The only thing that matters is whether there is a good business in there that will emerge. We will probably have to wait until well into 2018 to find out for sure. Management credibility may have been blown but at 118p IMHO value is there. Decent balance sheet. Profitable. Fast growing. Strong IP. Potential bid target. Only uninvestable for the fearful.
Good luck all.

[strange1] 06/7/2017 16:28

An announcement that a significant debt is not collectable so soon after a placing put in place to fix a cash hole is slightly worrying on a number of levels.The more worrying aspect here is how that debt was booked. It feels like they are applying judgement calls on the use by end users without full information or lack of audit and while they can take a more conservative approach moving forward, the nature of this means that wrong judgements will sit hidden in receivables. Slightly third hand but I was speaking with someone recently who mentioned that last year they had approached a CFO from one of the better tech stories on AIM.......apparently they took one look under the bonnet and walked away.

[ilovefrogs] 06/7/2017 16:10

That was May 2016, over a year ago, and was the old management selling out before leaving the Firm post the sale of the depot business. There was nothing fishy about that IMV, and indeed, the stock went to £3 after that.

[supernumerary] 06/7/2017 15:56

Sphere - yes, that was my initial thought when I saw the announcement - stuffing the channel to get the 240p gift away...

[aishah] 06/7/2017 13:34

I won't be surprised if a US suitor pops up here with a mkt cap now only 75m.

[ilovefrogs] 06/7/2017 13:25

Few things:
- I agree this is a legacy management issue, but they've all gone - seems odd to tarnish the new management with the same brush
- Seems like a one-off to me based on one large contract
- Software Company growing at 30%+ on P/sales of 2x not 'particularly cheap'? I disagree with that statement, whilst acknowledging the risks which the Company still face.

[masurenguy] 06/7/2017 13:01

Paul Scott today: "I don't like this company at all. Today is yet more bad news, from a very accident-prone company. The red flags have been obvious for some time, so it would have made a good short.

Previous management were dreadful in my opinion, so the hope was that new management would be better, but there's not much sign of that so far. I think problems are often left behind by outgoing poor management, not least in terms of company culture (e.g. aggressive accounting, etc). So it's usually best to wait for new management to kitchen sink the numbers. The company bolstered its balance sheet with a placing at 169p in May 2017, raising £9.45m after fees. With the share price now 27% down on that fundraising just 2 months ago, I imagine there must be some very miffed shareholders here. There could be grounds for legal action there, perhaps? (for possible misrepresentation).

I don't like this company at all. Today is yet more bad news, from a very accident-prone company. The red flags have been obvious for some time, so it would have made a good short. Previous management were dreadful in my opinion, so the hope was that new management would be better, but there's not much sign of that so far. I think problems are often left behind by outgoing poor management, not least in terms of company culture (e.g. aggressive accounting, etc). So it's usually best to wait for new management to kitchen sink the numbers. The company bolstered its balance sheet with a placing at 169p in May 2017, raising £9.45m after fees.

With the share price now 27% down on that fundraising just 2 months ago, I imagine there must be some very miffed shareholders here. There could be grounds for legal action there, perhaps? (for possible misrepresentation). It's possible that there might be a decent company here, struggling to get out. For me, with a long track record of dodgy accounting, and weak management, I can't see any reason to get involved here. Why take the risk? It doesn't even look particularly cheap, after the big share price falls."

[cerrito] 06/7/2017 12:42

Yes good that we get some clarification from ED which does suggest it would be a one off; it seems we will have to wait for the AGM to get more clarity hiven that as haroldthegreat has said we are not all that the wiser
Here are two excerpts from the interims which refer to this contract.
One
A large customer payment of £2.2 million delayed from H1 2017 to H2 2017 due to staging of contract delivery in the larger contract between IBM and the end user.
Two
Firstly, we are finding that large orders from sophisticated clients are on occasion coming with longer payment terms which may straddle the period end. In the period just ended, collection of a single debtor from a LATAM IBM Government contract before 31 December would have increased operating cash flow conversion from 22% to 81%. This particular piece of business is a good example of the types of opportunity Blancco is increasingly able to win, with Blancco subcontracting a multi-million dollar erasure service to a very large enterprise IT firm, which is in turn contracting to a government body, on a data security project with a duration of across our financial year and various payment stage gates. It is also in a developing market where customary payment terms are longer than in our US, European or Japanese businesses. While there is no doubt that this is good business for Blancco, it introduces more volatility into our cash flow profile.

[aishah] 06/7/2017 12:12

Risk reward looks attractive here and so I have added. Valuation benchmarks look good 2 years out. dyor

[haroldthegreat] 06/7/2017 12:05

Interesting that ed say we might get some of the money if the customer uses it more. does that mean the amount owed was based on the predicted amount of use from this customer rather than the actual use for which payment was due ? Too much for my little mind ! The assumed customer should be good for a payment of debt due .

[brummy_git] 06/7/2017 11:33

Research note out this morning from Equity Development

www.equitydevelopment.co.uk/company/?company=Blancco+Technology+Group&c=ygDO

[haroldthegreat] 06/7/2017 11:30

Would be interesting to know when they first realized they had a problem. There have been many departures in recent memory.

[cerrito] 06/7/2017 11:16

The world we live in
I have phoned both Peel Hunt and Tulchan ; noone available-no surprise- and I asked for their emails and they would not give them out.
My questions:is the receivables write down because the client went under or if they never existed and if they are in the volume or subscription business.

[ilovefrogs] 06/7/2017 10:57

varies - good post, you did well to escape recent falls! I'm also adding today. I agree completely with you that this Company should provide a tasty morsel for one of the bigger software players looking to get into the data erasure market.

[varies] 06/7/2017 10:31

Having been fortunate to make a modest profit here before selling my last shares in April at 172p, I am putting out a hand for this falling knife and have bought some back at 126p and intend to buy more at about 123p.
BLTG raised over £9 million in May at 169p after telling us a month earlier of its urgent need for £4 million. It gave itself, so I hope, something in hand which should cover this latest setback.
Finances are probably very tight and it may be that BLTG will need another injection of cash. I hope not and regard this risk as allowed for in the share price.
If BLTG achieves pre-tax profits of £5.5 million after providing for the write-off of £2.2 million on doubtful receivables, then it seems reasonable to hope that they will make over £9 million in 2017/18(£7.7m plus 20%)
The market cap. is now only about £76 million and I believe this company would make an attractive purchase for many software companies with cash in the bank to cover BLTG's shortage.

[chasbas] 06/7/2017 09:15

Panmure Gordon (joint brokers) had a 2018 forecast of EPS 11.8p after the May placing.
Assuming EPS of say 10p places the shares on 12.5x at current price of 125p.
Cheap for a technology stock?
Don't know anything anymore.

[chasbas] 06/7/2017 08:54

Cerrito, revenue growth in constant currencies was 48% in Q3 and 34% for 9 months.
So you are right, growth of approx 30% for year represents a small slowdown in Q4. Revenue growth for year should be at least £31m....almost the £32m consensus at H1 presentation.

IMO Revenue growth is just about on target and is a good reason to hold the shares. Is Blancco a growth stock or not? The new EU GDPR from May 2018, the right for individuals to have their personalised data erased, remains a big reason to hold the shares.

Maybe last financial year was Blancco's annus horribilis and just a blip? Let's hope the IIs think so.

[pj 1] 06/7/2017 07:48

''CFO'' singular?

X2 CFO and X2 Chairman gone in under a year.

Is this the Frog you have fallen in Love with?

[cerrito] 06/7/2017 07:46

I see that over the year revenues up 30% in constant currency whereas for the first nine months up 48% so on a comparable basis to the prior year Q4 seems to have been weak.
I am assuming the £2.2m receivables charge is not due to their clients going under but rather that they should not have been booked as receivables in the first place-given comment on income recognition-but would have been good if they had been more explicit.
I guess if indeed these receivables should never have been booked as receivables there will be an adjustment to revenue; That said given their commentary in the Interims of Impact of Revenue Recognition I am rather surprised at the numbers being quoted. Also the figures seem big in the context of the Total Receivables figure of £12.3m at 12.16.
How do you folk understand this?
PS Turned on the Radio this morning and heard a report on the rising incidence of dementia…given the challenges in understanding the opaqueness of what is going on here no chance of BLTG followers getting dementia.

[ilovefrogs] 06/7/2017 07:39

Meant CFO in post above, not CEO.

[ilovefrogs] 06/7/2017 07:38

Wait a minute though - surely this is still related to having poor procedures overseen by the poor previous CEO. This is a one-off hit with new procedures put in place going forwards. Meanwhile, they're growing at 40%, and unlike most aim stocks, are actually making a profit. I agree risks remain high, but I believe this represents a further good buying opportunity.