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Concha - call me old fashioned but its latest acquisition is insane

By Tom Winnifrith | Tuesday 15 March 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.


Concha (CHA) has finally done a deal. Chris Akers can call me an old fart who does not understand the world of new media and he may well be right but what he has done appears insane.

Concha has paid £4 million for a 0.43% stake in Ve Interactive Ltd a new media "unicorn" This is not new cash for new shares but shares bought from the founders. The price paid per share (£250) is the same as the last funding round so Concha can claim its decision is validated by VCs.

Ve is described as a "multi-award winning global technology company offering a suite of apps across a single platform which drives website traffic and reduces abandonment at each stage of the customer journey on the site, including at the landing, browse, basket, check-out and post-purchase stage. This is done through display advertising, targeted overlays and email. Ve services over 10,000 clients worldwide and tracks more than £100m worth of transactions a minute via its comprehensive data-set which provides valuable insights into customer activity. Each of its apps are driven to deliver highly-targeted content to customers based on their purchasing activity and profile."

Whatever. It soundly like gobbledygook. So how profitable is it? Sadly we are only told about calendar 2014 results which Ve finally got around to filing on 10 January 2016. There is no sign of 2015 numbers. But for what it is worth:

Sales were £19.662 million however you will note in the accounts HERE that prepayments and accruals were £9.5 million. It is no doubt a very interesting revenue recognition policy. Having paid directors £733,000 the pre-tax loss was £2.87 million and the operating cashburn was a stonking £17.9 million helped by a massive increase in debtors from £4.2 million to £17.9 million. Hmmmm loads of acruals and debtors through the roof why and where dos that ring a bell?

At the year end cash was £914,000 debtors were £17.883 million ( see above) and creditors were £8.948 million. Among those who were owed cash were the directors £2.4 million) although we are told that they were all paid via a VC funding in September 2015.

The related party transactions ( note 19) are pretty enjoyable. It strikes me that this is effectively cost capitalisation of development expenditure but so many related party deals? I dont like it. I must be a boring old fart.

Of course 2015 must have seen growth. But it also needs to have seen serious funding injected given the cashburn. But rthe valuation is just insane, surely? Akers is valuing Ve (depite all the red flags on late filings, accruals/debtors, related party deals etc) at c£1 billion. that is 50 times 2014 sales. If one believes the debtor book can be realised in full, Net tangible Assets were £11 million. There are no earnings, not even bullshit earnings (EBITDA) to speak of.

Sorry Chris but this is bonkers. When the new media bubble bursts I would not want to be long of Concha if you are going to spunk your cash in this way.


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Comments

2 comments

  1. Almost like Totally TLY today. £100k of assets and a TLY director on the board? No mention of that fact anywhere though


  2. Drunken Sailor

    £4m for 0.43% values the company and nearly £1Bn! There must be a decimal point in the wrong place in the RNS.
    4.3% would still be just under £100m, which would still be crazy enough.


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