Foresight Share Discussion Threads

[dealit] 16/9/2010 15:57

This share IMHO is going to make a lot of money for share holder the only thing holding them back at present is the Brokerage. I have held many shares in my time I line these up with the best I have held, great product in a sector which is bouncing back on a daily basis.

[b1ggles] 11/8/2010 08:30

True, Dude. No idea how the hell I got the wrong cutting. Just surprised it took six weeks before someone spotted it!

[nicedude1976] 10/8/2010 10:50

smartFocus is NOT Focus Solutions.

[b1ggles] 28/6/2010 11:16

AGM STATEMENT
smartFOCUS Group plc (the "Company", AIM: STF), a leading international
marketing software group, will today hold its Annual General Meeting at 10.00am
at which Chris Gater, its non-executive Chairman, will make the following
statement on current trading and the outlook for the remainder of 2010.
"I am pleased to announce that trading in the first six months of 2010 has been
very positive building on the Company's performance last year. We are continuing
to experience a strong demand for smartFOCUS' solutions as organisations invest
more in marketing to retain and grow customer value and improve business
results.
Consequently, the Company expects that its results for the first half of the
year will be ahead of the Board's expectations with increased top line growth
and expected profitability. This positive performance provides us with
increased confidence and visibility for the remainder of this year.
This increased confidence has allowed the Company to begin to examine the
options that enable it to be in a position to pay a dividend to shareholders. We
expect to be able to report to shareholders further in due course."

[aishah] 28/6/2010 10:54

Just being re-rated or some corporate activity soon?

[kruger2004] 10/6/2010 17:36

they didn't miss expectations- they were within the accepted margin of 10% plus/ minus for both sales revenues and PBT

[shanklin] 10/6/2010 10:22

I still don't understand why the company issued a trading statement that confirmed they would meet expectations for the FY, and then missed by quite a wide margin. Thoughts welcome.

[davidosh] 10/6/2010 10:00

The contract with Mastek is probably the £2.5m figure as they will only have received the first payment in the year to March 2010. From the contract RNS....

The contract, which is worth a minimum of £2.75 million over five years, and will allow Mastek to re-sell focus:360°, the Group's market leading multi-channel distribution platform, across North America, Europe (excluding the UK) and Asia Pacific.Starting in March 2010, the contract comprises a five year term licence for focus:360°, worth £500,000 per annum, together with an additional £50,000 per annum of support services.



When I questioned the company about how it is structured I was told that it would be paid quarterly and is guaranteed (whether product sold or not) so that leaves around that figure still to come. There are significant add ons for commission payments if sales actually follow from Mastek marketing the product under the licence which could be very significant.

[dsmith4] 10/6/2010 09:26

The big impact on cash flow is due to the recievables. Cash tied up in recievables has increased by £3.5m during the year and at the year end £6.5m was owed in total receivables. This looks weird, of the £10m sales they haven't had payment for £6.5m of them, and £2.5m are due for payment after 1 April 2011. Looks like they need to negotiate better payment plans with customers so they are more in line with work done. Anyone got an explanation for this?

[boadicea] 09/6/2010 18:21

It's fair enough to adjust last year's figures to remove the deferred tax recognition in order to give a proper comparison with current year, or else to compare only the pre-tax figures.
However, one still has to remember that the sub-normal tax charge will end in due course, so I always adjust my expectations on that basis and that doesn't make it look quite as cheap as at first sight.

The previous comments about cash flow are also relevant.
The most promising feature, imho, is the substantial increase from 18% to 53% in the proportion of licence and support revenue.

[glasshalfull] 09/6/2010 16:59

Seem to be bumping into you on a variety of threads Jeff.
Interested in any others in which you see value.

Wanted to pass on my thanks to Des for a couple of informative posts.
I had tried to buy a few just above mid at the end of May but mm's wouldn't entertain.They then shot up and have retraced so I'll be giving them a good look with your thoughts to the fore.

Kind regards,
GHF

[jeff h] 09/6/2010 14:54

Des - not familiar with SUN though I expect its done well for you. I know a bit about DTG and KLR.

Think your general point is pay as much attention to the cashflow statement as to the P&L which I agree with.

I hold ASY for its cash producing abilities...though very illiquid.

Getting a little off topic here so apologies to FSG only readers.

[davidosh] 09/6/2010 14:45

The house broker seems to go with £3m for this year too but have only upgraded eps to 7.3p. They expect revenues to increase by 30% to £12.8m which is quite a bullish growth expectation and will certainly move the share price if all those are met.

Does anyone have the FinnCap note ?

[aishah] 09/6/2010 14:01

HB Markets:

Focus Solutions (FSG, 41p, £12.15m) Finals saw revenues up to £9.85m (£9.60m) with underlying PBT of £2.38m (£1.88m), EPS 6.88p (6.03p) and net cash down to £2.4m (£4m) following £1.73m purchase of intangible assets. Apart from a number o notable contracts the key events included gaining a US patent which protects the group's entry into that market and the relationship with Mastek which will see the group's focus:360 across North America, Europe and Asia Pacific regions. The group will address smaller firms with a Software as a Service (SaaS) version. Encouragingly the group applied to restructure its balance sheet, clearing the way from the group to join the dividend list. Given the shape of the recovery in the financial market is difficult to forecast we see PBT around £3m with 7.5p EPS – a prospective PER of 5.4p. We increase our target price to 54p and repeat our BUY.

[deswalker] 09/6/2010 13:01

You are welcome Jeff.

One example where I did give a widget maker the benefit of the doubt was Surgical Innovations (SUN). In that case the development of completely new surgical instruments seemed sufficiently disconnected from the sales of their existing range that I viewed this R&D spend as discretionary and even attractive as it was clearly linked to generating new Turnover. I don't hold the shares anymore as they reached my target price.

I have no clue whether I could ever take the same view about a software company.

As an aside it is similar logic that keeps me away from companies such as DTG and KLR. Both have looked cheap at the P&L level for years (ignoring KLR's recent profits warning) but their free cashflow has been lousy due to non-discretionary spend on replacing worn out planes and diggers that they need purely to keep trading as a going concern. It seems like running in order to stand still to me.

[envirovision] 09/6/2010 11:53

The lack of track record and fact majority revenue is coming from few is probably the largest worry.

[jeff h] 09/6/2010 11:50

A very interesting couple of posts DesWalker.

I'm put off investing in Bond (BDI) for similar reasons you mention...high accounting profits but low cashflow.

[deswalker] 09/6/2010 11:39

It's standard practice with this type of company. They even flag the increased R&D spend as a percentage of Turnover as an achievement.

However, remember that they get some of this Intangible Asset back as Cash via Amortization if the new products start selling and indeed they may end up getting all the R&D spend back or even much more, but it shows just how important it is to look beyond the P&L to the Cashflow Statement before making an investment decision.

The thing about software companies is the lack of transparency in just how likely a certain section of enhanced and efficient code will be in generating extra sales. If you're a widget developer then at least you have a new widget to try and flog at the end of the development. If you're a software developer then some of the R&D spend will be on new products but some will be on improving the existing code and this is very difficult to convert to sales. Customers don't notice if Applications such as these are marginally faster or more efficient or offer slightly enhanced functioanlity which many won't use, but the developers do and often like to spend their time on such naval-gazing, and it's obviously very difficult to stop the R&D spend by laying a large swathe of staff off.

[envirovision] 09/6/2010 11:08

Thanks, I'm just staggered, what are they doing, giving the whole R&D team a free Porche and flying them to Whistler Heli skiing once a month or something?

[deswalker] 09/6/2010 10:53

It's gone on R&D spend capitalized through the cashflow statement. A classic example of a share where EBITDA is not a good proxy for cash generation. A shame because it is cheap on an EBITDA/EV basis but that's only because certain costs which could not easily be removed from the business are not accounted for in the P&L. This is a common occurrence with software companies and is often the reason why they always look cheap. Many employee salaries are capitalized instead of expensed as they should be IMO, even if they are genuinely developing new products and not just selling existing ones. Funnily enough I usually give widget developers and manufacturers the benefit of the doubt in situations like this but I'm less inclined to do so for software companies.

HTH

[envirovision] 09/6/2010 08:25

What an earth happened to the cash 1.6 Million has vanished where?

[welsheagle] 31/5/2010 19:44

From May's 'Company Refs', when price was 42.5p:-
a/ Prospective PE ratio of 7.48 (based on one broker forecast, recommending 'buy').
b/ Positive cash flow of 14.8p per share.
c/ Turnover up from £5.43m to £9.60m in last five years.
d/ Net cash per share of 13.6p.
e/ One Director buying recently.
f/ Net asset value per share of 27.1p.

[matt] 25/5/2010 10:28

Thanks munch. Good read. Look interesting