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Tern – Another £2 million invested today into Device Authority but can it pick winners in the technology space?

By Tom Winnifrith | Wednesday 19 October 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.

Tern (TERN) has today announced that it has invested another £2 million into Device Authority. We wish it well but can it be guaranteed to pick good investments. Let's have a butchers at Push Technology Limited.

In the six months ended 30 June 2016, Tern announced that it had written down its investment in Push Technology Limited but did not specify the quantum of the write down. Tern had recorded its investment in Push at cost of £120,197 according to its audited 31 December 2015 accounts.

It will be interesting to see what, if any, value will be placed on its shareholding in Push as at 31 December 2016.

Push’s audited accounts for the year ended 31 December 2015 were signed off on 29 September 2016. The auditor’s report contains an emphasis of matter paragraph on the company’s ability to continue as a going concern. This paragraph indicated that the company incurred a net loss for the year of £3,478,756 and at 31 December 2015 it had net liabilities of £913,172.

The notes to the accounts indicate that it has an unconsolidated 100% owned US subsidiary Push Technology Inc. which had incurred a loss of £1,387,263 for the year ended 31 December 2015 and had net liabilities of £2,778,924 at that date. The accounts made the following comments about the going concern basis was considered appropriate:

Since the year end the company has secured an additional £2,557k of funding, £112k through issuing equity and £2,445k through convertible loans. Based upon detailed cash flow forecasts prepared, the post year-end sales contracts signed and forecast commercial activity in both the UK and US, the directors have a reasonable expectation that the company has adequate resources to continue to trade as a going concern for a period of at least twelve months from the date of signature of these financial statements. However, as the forecast commercial activity does not fully comprise signed sales contracts, any delay or amendment to these deals could lead to the company requiring further support from its shareholders.

Push has customers and does generate revenue but it needs to grow revenue to meet expenses, so the jury is out on whether it will be a winner. At this stage the verdict is far from certain.

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