Tuesday 23 January 2018 ShareProphets: The one stop source for breaking news, expert analysis, and podcasts on fast-moving AIM and LSE listed shares

CloudCall – Trading Update emphasises positives, but it remains cash burn ahoy!

By Steve Moore | Wednesday 11 January 2017

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.

Integration of telephony systems into existing customer relationship management software-focused CloudCall (CALL) is “pleased to announce” a full-year trading update – and the following reviews with the shares currently more than 17% higher, at 76p, in response.

This is with the update including that the company “expects to report revenue growth in 2016 of circa 50% over the prior year to approximately £4.9 million, at circa 78% gross margin” and “recurring revenue growth of 63%”.

Additionally noted is “a continued reduction in the rate of churn, which is now at record low levels and customer feedback on CloudCall's products and service levels remains consistently positive, with numerous larger customers expanding their CloudCall usage to further departments and offices”. This all sees board “confidence in the group's outlook for 2017”.

All sounds good, but added at the end is that “at 31 December 2016 the company had a cash balance of approximately £3.2 million”. This despite a gross £3.77 million placing announced in August – and that less than 5 months after the company stated that, with tight cost control and on conservative assumptions, it “clearly” has enough cash to reach break-even.

That saw me conclude that I consider there trust in management needing to be regained here and would need to see clear financial progress before reconsidering a cautious stance which has served well thus far – I having originally warned on the shares at 92.5p. Certainly ahead of the further detail of the full-year results, that remains my view.

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