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Blancco Technology – “Q3 Trading Update, Cash Flow Review and Funding”. Uh oh…

By Steve Moore | Tuesday 25 April 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.

An announcement from Blancco Technology Group (BLTG) entitled “Q3 Trading Update, Cash Flow Review and Funding”. Hmmm, I’d guess it ain’t gonna be positive…

Wait, you what?… “Blancco announces that trading for the third quarter to 31 March 2017 has been strong… the outlook for full year 2017 sales and adjusted operating profit remains in line with market expectations”. What’s with the “Cash Flow Review and Funding” then?

Well, the company reports that it has now been “identified that costs associated with past acquisition activity, including earn-outs and advisors' fees, the later arrival of a large government contract and the slipping of larger contract deals to later in this current quarter will all build pressure on the forecasted cash available to the company during Q4… requires additional funding of a minimum of £4m over the coming weeks to address the working capital position and increase the company's headroom”.

Er, yep – that is a bit of pressure built! It is now “exploring a range of possible sources for this additional funding and is initiating discussions with its bankers and shareholders… the company is confident of a satisfactory outcome”. It will be interesting to see how this ‘confidence’ ends up squaring with its clear cash desperation!

The desperation raises significant financial planning and contract visibility concerns – and I also note, having in September been “pleased to announce” the appointment of “highly experienced public company CFO” Keith Butcher, it was last month announced (with no additional information provided) that “Keith Butcher has resigned from the board and the company with immediate effect”.

Hmmm! Natch, the current stance is bargepole/sell.

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