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Eagle Eye Solutions – interim results & Europe partnership, balance sheet “sufficient”?

By Steve Moore | Tuesday 14 March 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.

Having previously emphasised caution on digital promotions technology company Eagle Eye (EYE), I note the shares currently circa 6% higher today at 145p on the back of results for its half year ended 31st December 2016 and a partnership to deliver digital loyalty solutions in Europe with retail marketing company TCC Global.

The results statement emphasises “strong progress with revenue of £5.1m representing a significantly accelerating half on half growth rate of 44% (19% H2 2016 vs. H1 2016)” and that “the new partnership with TCC Global will support our move into the previously untouched European market”.

However, there was a £1.50 million (prior year H1: £1.57 million, full-year: £2.97 million) reduction in net cash, particularly due to increased operating expenses. This saw the company end the period in a £0.18 million net debt position.

It argues that it is “confident” that a £3 million Barclays revolving credit facility “provides sufficient headroom to support the group's current strategic ambitions” and “remains excited and confident about the future”.

However, debt for a cash-burning enterprise makes me particularly wary and I’d want to at least see a much stronger net cash result from continuing higher revenue before reconsidering my stance to avoid.

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