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Servision - from bad to worse - 2 profits warnings in less than a month, lying to AIM on June 15, shares crashing but still 100% too high

By Tom Winnifrith, The Sheriff of AIM | Friday 30 June 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.


A couple of weeks ago AIM uber dog Servision (SEV) warned that its calendar 2016 results would be worse than expected. Today we have those numbers and guess what? Not only was that June 15 trading statement a slam dunk lie but we also have a new (lack of) profits warning about 2017. Why the AIM Rule breaching delay in announcing that bad news. It gets worse...

The 15 June lack of profits warning stated

The result of reduced sales and increased costs meant that the company is expected to report a total comprehensive loss for the year that is marginally worse than 2015. Overall, revenues for 2016 were slightly ahead of 2015 but slippages of orders into early 2017, a lower gross margin and the higher costs referred to above has led to the increased loss.

Well that was a great big fucking lie was it not? 2016 sales were $2.145 million which was $9,000 LOWER than in 2015. As for the comprehensive loss it came in at $2.922 million which was indeed marginally worse than in 2015. But why the lies about sales? Surely Nomad Allenby cannot really like signing off on lies? Or maybe it does not care as long as it gets paid a fat retainer.

"Lets leg over the mug punters by signing off on a lie, its Friday we just banked another retainer, coke and hookers all round!"

Then we have the fact that there is a 2017 profits warning. Surely Servision knew about this on June 15 when it had the ;last warning. In which case it is in clear breach of AIM rules in not disclosing this fact? Again do the pathetic wretches at Allenby give a damn about this sort of thing. For what it is worth the warning reads:

Sales for the first half of 2017 have been behind our internal expectations. On a more positive note, the Group has been asked to tender for a number of new projects, many of which would hopefully fall into the second half with several being quite substantial in size. At the time of the announcement of the Cascade subscription in February 2017, the Board was confident that the improved balance sheet position coupled with improved trading during 2017 meant that the Group should have sufficient working capital for the foreseeable future. Our working capital position is tighter than we anticipated, not least with the requirement to invest in these tenders.

Ends.

So here is an insistence that Servision did not on February 22nd 2017 know that its sales in December 2016 had fallen catastrophically short of expectations. Whatever...

But the grim fact is that because 2017 so far has been a dog's dinner even by the lacklustre standards of Servision and despite taking out new loans and raising $2 million of funny money from Cascade the company's "working capital position is tighter than we anticipated."

How tight? Why not give us some hard data? Is it perhaps because it is utterly grim? I note that there is a loan repayment due to Yorkville on 6 July ( er next week). Er

"As at the date of the announcement a total of US$475,000 is owed to YA II PN Ltd under the loan arrangements entered into between the group and YA II PN Ltd. This balance is due to be repaid on 6 July 2017. As a result of the cash requirements in respect of tenders currently underway, the Group intends to engage with YA II PN Ltd to discuss revising the payment schedule for the outstanding loan."

Did anyone say blizzard of confetti? gazillions of shares to be issued at a mega discount o Yorkville ahoy?

So what do the auditors say about this crap? Well even the directors admit there may be a problem or two stating:

The directors believe that due to the aforementioned post year end developments, including the US $2 million investment from Cascade that the Group is a going concern. However, the future of the Group is dependent on it substantially achieving its trading projections and on it being successful in securing further funding as and when required.

As to the auditors ( the underline is mine):

Emphasis of matter - Going concern

In forming our opinion, which is not modified, we have considered the adequacy of the disclosures made within note 1 of the accounting policies concerning the group's and the parent company's ability to continue as a going concern. The group incurred a net loss of $3,050,000 during the year ended 31 December 2016 and had net current liabilities of $2,114,000 as at that date. This, along with the other matters explained within note 1 of the accounting policies indicate the existence of a material uncertainty which may cast a significant doubt about the group and company's ability to continue as a going concern. The financial statements do not include the adjustments that would result if the group and company were unable to continue as a going concern.

Ends.

In summary. The company lied to investors on June 15 about 2016 results. It breached AIM rules by hiding the grim 2017 trading. It's current trading is dire and it is almost out of cash and burning it at an alarming rate. If Allenby were not so desperate for a retainer then the unprincipled cocksuckers would be resigning on the spot. Why knows, even these spineless wretches may have had enough after today. The company remains a cash guzzling enterprise with a balance sheet that is 100% fucked.

The shares are off by almost 20% today at 2.625p but that is 2.625p too high. SELL.


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