By Tom Winnifrith, The Sheriff of AIM | Thursday 28 January 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.
Nomad Allenby still appears happy to take the filthy money offered by Servision (SEV) to act on its behalf notwithstanding the now clear demonstration that its RNS statements are, on a serial basis, utterly misleading. So let us now look at the accounts which, natch, are a total joke. I refer to the issue of bad debts.
All businesses have some bad debts. I guess that across the UK PLC world bad debt provisions runs at c2-3% on average over the long run. So let's see how Servision fares. Below I set out the last five half year periods with the numbers that follow being sales, bad debt provision and the percentage of sales which are bad debts. The numbers are in thousands of dollars.
H1 2013 $1260 $444 35.2%
H2 2013 $2252 $292 12.9%
H1 2014 $1842 $578 31.3%
H2 2014 $2394 $26 0.9%
H1 2015 $1242 $462 37.1%
Of course there are timing issues we cannot know. Some of the bad debts shown in any period will relate to a prior period sales but the overall pattern is clear: bad debts are a consistent feature for Servision and over the 30 months above average 20%. That is off the chart comparted to any other company I have seen on AIM both in terms of size and also consistency.
How on earth have auditors HaysMacintyre not picked up on this? There can be just two explanations:
1. The company has a very aggressive reveue recognition policy aimed at maximising reported profits/minimizing reported losses to allow it to push the shares to get bailout placing after bailout placing away?
2. The company ships shit products which customers routinely refuse to pay for?
Either way this is a matter of great concern. Given the fact that this company is almost out of cash and teetering on the brink of insolvency it only confirms my view that the shares are worthless, that Nomad Allenby should quit at once and that the target price is 0p.
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