By Steve Moore | Tuesday 26 July 2016
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
Shares in previous wrongster Rightster Group, now Brave Bison Group plc (BBSN), currently trade more than 17.5% higher today, at 5p, on the back of a trading update ahead of its results for the first half of 2016, expected to be announced on 31st August. Is it really now recovery ahoy here?
The update notes “following a successful re-structuring and cost management programme… adjusted EBITDA* loss has reduced by 84% year-on-year from £5.2m to £0.8m” - this on net revenue increased to £9.7 million, with half-year end cash £8.4 million.
CEO Ashley MacKenzie adds that “the business is undergoing a transformation from a third-party technology provider to a social video broadcaster. Following our recent re-launch as Brave Bison, we are now being recognised as a disruptive global digital media company with intellectual property ownership, social talent and scaled distribution on social platforms as core pillars” and notes “a growing sense of confidence about the future”.
Hmmm. Firstly, the noted adjusted EBITDA performance includes gains and losses on re-translation of foreign currency monetary balances. With approximately 75% of the group’s revenues generated in currencies other than British pounds, “for the first half of the year these amounted to a £0.8m gain (2015 £0.2m loss)”.
Secondly, the cash compares to a previous update that “at the end of March 2016, the group had £9.7 million in cash” - thus the cash burn seemingly much greater than the noted adjusted EBITDA loss. This is key to monitor going forward – the warning having gone out here that “turning a company around is not an easy task. Particularly when it means stemming a severe cash drain and, at the same time, devising a completely different strategy. But that is what your new team has taken on”.
I continue to wish them good luck and there does look to be some progress being made, but this is not sufficient as yet for me to consider an investment here has a reasonable margin-of-safety. As such, for now, at best on the watchlist.
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