Themutual.Net Share Discussion Threads

[dealercat] 29/12/2008 11:23

Does anyone have anymore information on the group banking facility? Affiliate Future haven't made payments yet this month which would highlight that the cashflow isn't good. Are we seeing problems with clients paying? or that as the Analyst mentioned the group isn't profitable. One would assume that the banking facility would have provided the stability, but it appears not.

[omlaysause] 24/12/2008 09:22

Well guys it's been a horrible year for all ex IBG and TMN holders.
Fingers crossed things are a bit brighter next year.

Happy Xmas and a prosperous New Year!!

Omlaysause.

[lord buffett] 19/12/2008 15:23

Hirsch, it would also be fair to point out that someone must have just bought 2% of the company, as the shares were traded at the current mid price - so it certainly wasn't/wouldn't have been the MMs that have taken them on.

[substp] 19/12/2008 11:34

Hello Jonah ...... :-)

[hirschnathan] 19/12/2008 11:29

somebody just offloaded 2% of the company

[the analyst] 16/12/2008 19:32

Glad you managed to get at least some value, Ken. Are you investing it, or sitting on the cash?

I too, very nearly sold out when IBG had the AGM (at 29p or so) as they appeared as if they no idea what to do with the company (the need for a strategic review). Unfortunately, the press reports of huge interest in buying IBG and a possible 'heated auction' for the sale made me sit tight (along with the valuations of buy.at and others)

Lesson learned...

[kenatbabken] 16/12/2008 19:06

"Then we have the debt. The fact they have net debt of £2m as of October and have decided they need to increase the banking facility to £4m is also a concern. Why do they need an extra £2m? Plus an extra £1m on top of that for acquisitions?"

Those were my thoughts TA and one of the reasons why I also sold out last week
as I think the figures are likely to be worse in the second half.I never really
felt comfortable holding TMN shares and was only holding to try and realise as
much value as possible and based on the Interims I don,t really see any.
I did offload quite a few when the MBO was mooted and only had 130,000.
Maz could sell a percentage in July of this year and did offload some when he
resigned and could sell them all after 31st.I bet he has some serious regrets
in hindsight, I do about not dumping mine when IBG was in the 30/35p range.
Good luck all those who hold or have held and have a great Christmas and Prosperous New Year (Well we can hope can,t we or are the Bears also shorting
hope)

[the analyst] 16/12/2008 18:35

Might as well post the reasoning behind my selling up...

(even if it is simply to justify it to myself)

The main thing that struck me when I went through the results was that there was absolutely nothing in them to indicate that the company are currently profitable or expect to be profitable over the coming period. I don't think that statement that "the group remains financially and operationally sound" means they are still in profit. I think if they were in profit, they would have said so. They also mentioned a sudden down-turn in September and October, so the results only included two months of that extra down-turn. The next results could include a full six months, unless things improve. Add to that concern, the recent track record of the Directors not telling investors when things were bad - they didn't issue profit warning, when imo, one was required

Then we have the debt. The fact they have net debt of £2m as of October and have decided they need to increase the banking facility to £4m is also a concern. Why do they need an extra £2m? Plus an extra £1m on top of that for acquisitions?

In total the new financing announced could take them up to £5m of debt, when most of us were expecting them to be debt free by 2009

Apart from that, I was also disappointed to read (on the A4u boards) of poor customer support, lack of ticketing system for affiliate support and problems with the new system at AF. When I asked the CEO about new big client wins at AF, I basically got told the same old lines about the fact that AF prefer to go for smaller merchants. How much was buy.at sold for? How much profit were they making? I know the issues of payment, but surely there must be a workaround that could be invented to attract big merchants? It wouldn't hurt to get some big merchants in!

The only positive I can see is the recent Director buy and the unknown of Danson. I guess the ultra-optimist could argue that the fact they actually managed to increase the banking facility as a positive sign. However, we really don't know anything about the terms and conditions attached to that debt facility, so hard to judge.

So, my worry is that they will report a loss in the second half and start using that increased banking facility, which will put the company into the sort of situation that IPH find themselves in. The demise of IPH from 200p down to 3p and a market cap of £1.5m has been quite incredible to watch.

I'd be interested to know what Maz intends to do with his holding. I seem to remember from the take-over document that he can sell most of his shares after 31st December.

[the analyst] 16/12/2008 17:05

To be fair, that prediction was tongue in cheek to claim the top spot on the list, but I think someone else went on to out-trump me on that 'prediction' list afterwards !

I did think they should have gone on to 60p, given both the outstanding growth they had demonstrated and the predicted growth of the industry at the time. 60p was my target.

Hadn't anticipated the coming of the second great depression, either !

So yes, I guess it could be a little sickening, but I'm not money obsessed, more important things in life. I do wonder how different my life would be if they had fulfilled their potential? Maybe it would be worse? I'm starting a new venture now, which is quite exciting and I'm sure I wouldn't have had the motivation to be doing it if I had got my 60p target

[stemis] 16/12/2008 16:51

Sorry to see you go TA. It wasn't that long ago that the IBG price was 35p, which equates to 132p in TMN monopoly money! A certain person was even predicting 120p (= 452p in TMN money) on the date of IBG 2008 prelim announcement, so taking 1.6p in that £ must be pretty sickening. Personally I think I'll hang on. It feels a bit like the bottom, but then I've been so spectacularly wrong on this for the last 18 months WTFDIK!!

[the analyst] 16/12/2008 16:33

Well, I sold out. Someone bought 100k, which enabled me to dump my entire holding. SING and WINS wouldn't take more than nms off me, but SCAP, who were on 7p took them after getting the 100k buy order.

Originally, when I first saw the results, I was going to hold on to the shares, but after sitting down at the weekend and going through the results in more detail, I came to the conclusion that I had to sell.

I asked myself would I buy the share if I had spare cash? The answer was that right now I wouldn't invest put any more of my money in TMN at ANY price. So, I'll put the money in a company on a lower PE, still growing, expected to grow this year and paying a dividend. Plus, with Directors that I trust.

It's a sad farewell to the IBG story, things could (should) have been very different. Hard to part with them, given that not long ago we were under offer by the Directors for 70p and today all I could get was 7p :(

Luckily, I sold some IBG at 17p and then some TMN at 55p, 30p, then 12p, so it could have been a lot worse...

[scr00ge] 12/12/2008 10:44

Hi Baheid

Good points well argued, I admit this all sounds impressive on the product development front. The problem is that it is that all these new products are in saturated markets. There is no decisive killer app there that will bring a 40X increase in revenues. Thus why invest, they dont pay a dividend, the price looks fair to me at ~10p.

Old Boy - You clearly have a better understanding of the financial accounts than I - please let us know if you hear anything back from the CSI London.

Humbug

[old boy returns] 11/12/2008 18:28

I have been so angry about since reading that interim announcement that I have been unable to post here. It is completely impossible to reconcile the previous statements from the company and brokers forecasts with what has been announced in the interims. Further the commentary in the interims is complete and utter rubbish which I am sure would get a FAIL as an answer in any professional financial reporting exam. Take the following statement for example:

"Adjusted operating profit, excluding the impact of the non cash items; share-based payment charges of £11,000 (2007: £15,000) and the amortisation of acquisition related intangible assets of £1.1m (2007: £182,000), was £0.6m
(2007: £1.4m).). The lower operating profit is due to the dilutive effect of the lower margin affiliate marketing business, higher headcount costs and higher charges for depreciation and amortisation reflecting investment in infrastructure, internal development and databases."

The bit which claims "the lower operating profit is due to the dilutive effect of the lower margin affiliate marketing business" is a completely FALSE explanation and whoever wrote it should be sacked on the spot for clearly having no understanding of finance, business or accounting. For it to be true Affiliate Future would have had to have made an operating loss in the period. As AF was not owned in the same period last year if it AF made an operating profit in this reporting period then it contributed incremental operating profit compared to the same period last year and so cannot be a reason for "lower operating profit". The real reason for the fall in operating profit looks to be a large fall in the revenues of the original TMN e-mail marketing business which have probably led to an operating loss in that divison. Yet this explanation is not even mentioned.

This sort of thing on top of the missing £1M of asset value between the final IBG reported balance sheet at acquisition and the pre fair value adjustment reported IBG balance sheet taken on by TMN makes me wonder what on earth is going on.

When I calm down I feel forensic communications are going to be shooting out in all directions (regulatory, advisers and directors) to make sure someone feels some heat over this debacle of incompetence.

[baheid101] 11/12/2008 18:21

I would be very happy to attend an investor meeting in London if one were arranged

[baheid101] 11/12/2008 18:18

Not happy with their communication, but your problems with the company Scr00ge are WAY OFF

No innovation? What about Pure Lead, the proprietary value-added lead generation tool that enabled EDR, TMN's agency, to win the Best Prospect Data Provision Award at the Data Strategy Awards in 2008 for their work with Lovefilm? What about the launch of the Survey Central website that will source the raw lead data that clients can then pass on to their sales people to convert into customers, having cleaned up and improved the data quality (removed prospects previously targeted, email/post/mobile phone records validated etc) through using Pure Lead. TMN is set to capture a large slice of the available profit pool in lead generating by developing an integrated suite of products. They provide lead generation campaign planning and buying consultancy through the EDR agency, they provide at least some of the prospect data from their own websites such as Survey Central, Mutual Points and Plum Offers rather than paying 3rd party data providers, and they also enable clients to maximise the conversion of the prospect data into customers by improving data quality and de-duplicating prospects using the Pure Lead software (it pools all data into a single place and enables the client to apply a wide range of techniques to clean up the data so that only genuine new prospects are then targeted by the clients sales people, thus maximising the impact of the campaign). What about Affiliate Future's multitude of new product innovations (Veracitag, Project Xenon, the new voucher code API, the syndicated holiday search API etc etc) that differentiate it from competitors.

Affiliate Future is definitely on the front foot amongst its affiliate network peers in the UK - mentioning OMG is laughable Scr00ge - that network has been falling over for a long time and Tradedoubler have been going backwards in the UK for years while AF has been growing fast. Buy.at is a good business for sure, but certainly isn't notably ahead of AF.

'They have huge numbers of staff and thus are burning cash'

- they are stripping out £1m from their cost base in response to the email marketing downturn, and Affiliate Marketing HAS to have lots of staff because it requires proactive management of relationships between merchants and affiliates to drive business. Saying that, all of the new tools they are developing are based around automating advertising content to drive sales growth i.e. are not people intensitve so the innovation and investment is explicitly targeting improving efficiency and profitability.

I do however agree that their investor relations is dreadful, which is so annoying because I thought that after meeting them at the last results they were much more commercially astute/aware than the IBG guys.

[stemis] 11/12/2008 17:58

Chairman Harkness has bought 150,000 at 8.5p a share.

[ashleighp] 11/12/2008 16:38

David

Subject to being available I am happy to attend a meeting with the directors. Please don't arrange it for 9am though ;-)

I have not set aside time to read the results in full detail yet, though I got the message on the first read. Definitely communication issues here, and some poor choices of wording.

Being the eternal optimist I like to think that the downturn in performance is linked to the wider economy and not the management of the business specifically. At least they are still making profits when you take depreciation out of the figures and debt has been paid down a bit.

I'm not happy with the fact they have obtained a new debt facility - in my view they should be paying down debt and forgetting about acquisitions. They should be battening down the hatches, looking at costs and focussing on organic growth in these tough times - so they come out the other side leaner and well placed to take advantage of an improvement in the economy.

I have some sympathy for the board in that their market is tough, but do think they've misjudged their communication - both at the AGM and in the results write up.

It would be interesting to see them again and hopefully have a freer discussion about the direction the business is going in.

[scr00ge] 11/12/2008 16:19

Hi Chiva

You are bang on with this one, I have been bearish of TMN for a while. The sector has suffered with DLG & IPT both going bust/recievership over the last 3 months. These results were expected. The main problem I see with this company are 3 fold:

1) They do not inovate - they have no new products - they have bought out a few companies and made millionaires of the owners. They have an affiliate business which they are trying to become technical leaders but are in an extreemly competitive market and are already on the back foot. Tradedoubler, OMG, Buy.at are all way ahead.

2) They have huge numbers of staff and thus are burning cash, as a technology company you would have throught they take the Google adwords route and try to automate the system to improve margins.

3) Their investor relations is terribe. They frankly try to pull the wool over the eyes of the investor whenever the news is bad.

They report an increase in sales up up 72% to £15.5m - this is due to their affilaite business (which the bought). The problem is that they are reporting all transactions tracked through the platform as sales - not the 30% comission they take for tracking the sale. Thus it overinflates the figures.

The most interesting figs are the Proforma ones:

Reported Proforma CHANGE
£'m 2008 2007

Email marketing 5.6 7.8 -28%

Affiliate marketing 7.1 7.6 -7%

Research 1.6 1.2 +33%

Publishing 1.2 1.1 +9%


Total 15.5 17.7 -12%

United Kingdom 13.8 16.2 -15%
Netherlands 1.7 1.5 +13%

Total 15.5 17.7 -12%

The management are diluded, they have no products which are unique and no killer applications. They will be bust within 18 months or bought out.

[baheid101] 11/12/2008 16:10

I am just reading the results release now and I am wondering whether they were on drugs when they wrote it.

Their description of the divisional performance is absolutely laughable in its misdirection and absense of concrete detail.


'Affiliate Future showed growth in the second half of the last financial year'

WHY ARE THEY COMMENTING ON PREVIOUS TRADING AND OFFERING NO COMMENT ON TRADING DURING THE ACTUAL REPORTING PERIOD?!?!?!

On the pro-forma accounts Affiliate Marketing revenues look to have shrunk by 6.5% year on year - where did THAT come from? why no comment on it? AF going ex-growth for the first time in its history in the first full 6 months of ownership by TMN and the company doesn't even recognise it in their statement?

Whats happened to margins across the divisions? impossible to guage from the release.

For example, anybody who bothers to read the A4U forum will know that AF are doing a major upgrade to the core platform, and it seems to be taking quite long to sort out. Does this mean that extra spend on IT contractors etc has pulled down margin? who knows, because they haven't even mentioned it in the release despite it being a major system upgrade (and hence a potentially material, but temporary, cost item) in what is now the largest part of the group by revenues.

New debt facility - AT WHAT COST???? do they think investors won't think it important to know?

[the analyst] 11/12/2008 16:00

I do really hope the board handle 'situations' better when it comes to business, than they do with a few shareholders during an AGM.

However, whilst trying to research the company a bit more pre-results (after becoming very concerned at the AGM), I managed to get a chat with a media buyer that has tried to work with them - he found them very aggressive and suggested to me that his company didn't trust them at all (and wouldn't work with them, until their attitude changed) as a result. Hopefully that was just a one off and nothing to worry about, but it wasn't good to hear.

As a result of the AGM and that research, I tried to sell what I could since the AGM. Very difficult though, and I'm still left with 200k shares :(

I'll be keeping those 200k now, but wish I had managed to get rid of all of my holding...

[the analyst] 11/12/2008 15:57

Hi Mark

I agree with you that the "shut up" comment from that chap was poor form. My comments, though, were based on the aggression leading up to that moment. However, I arrived just as the meeting was starting, so may have missed a bit of banter in the build-up to the meeting starting...

I stand by my "terrified" observation, though - It was very clear, imo. It's understandable, imo - Imagine how it must have felt to be up there, knowing that your current trading is dire, you are about to issue a profit warning and your results will be way below expectations, yet trying to pretend things were 'in line with expectations'. A difficult position to be in.

Cheers

[chiva20] 11/12/2008 15:46

I did predict this last year to the day for you all when the share price was 50p, not to deflate you all, but as an investor who has been burnt and knows how it feels! I recieved some serious bashing as a response and had to battle to get my point & sincerity across. TMN has a double whammy of tough market conditions and a faltering business model. There are better places to be.



Chiva20 - 11 Dec'07 - 13:07 - 168 of 1865 edit


I suspect the slide is being caused by the steady erosion of the effectiveness of their data assets, in direct relation to their peers in this sector.

Increasingly suppliers of data (especially online data, like TMN, EDR, & IPT) are having to mail their member bases multiple times to achieve any profit for clients. With competitors increasing, EDR and TMN are at the forefront of this activity, and unfortuantely the more they mail, the less value they achieve. I can recieve hundreds of emails a day from the main suppliers in this field. I'm sorry but that is SPAM and no good for anyone. As a result the value of their data is increasingly depleated. Very few suppliers can offer real value in this space now, TMN included. Very soon (months) their data will be worthless, the brokerage business (EDR) will also be worthless since they operate in the same channels and simply broker the other suppliers who have opted to choose the same channel since they desire to turn profits and compete.

Investors who understand this part of the business model have probably contributed to this slide, whether it continues remains to be seen, however I wouldn't expect a meteoric climb or Google etc wanting to buy them.

Sorry don't want to take the wind out of your sails, but nothing drops like this without problems round the corner.

[marben100] 11/12/2008 15:27

Davidosh - count me in please, excellent idea. Now there's no "closed period", let's hope they feel able to be somewhat more frank. I hope after his AGM experience, Harkness might realise there are some bridges which the company ought to mend. Sadly, this is not the first company that has told me "we'd have to issue a warning if results weren't expected to be in-line" - and then come out with something pretty dire. Marchpole springs to mind.

I hope very much Danson can be persuaded to come along too. Surely the Board would be more comfortable if it felt it had the support of long-term shareholders? Well, it won't get that support without a lot more openness & honesty.

the analyst - to be fair to the Board (though why should we be?), one of the shareholders present (none of us, I hasten to add) was very aggressive to the Board, telling Harkness to "shut up" at one point. That was really out of order, despite provocation. I think that goes some way to explaining their response. I wouldn't go quite as far as you in suggesting they were "terrified" but they certainly had something to be sheepish about!

Best,

Mark

[lord buffett] 11/12/2008 14:49

davidosh - you can put me down on your list of owners wanting clarification!