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Parallel Media FY16 Results: The lesson in following BBs hits reality

By Nigel Somerville | Sunday 2 July 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.

I was pretty straight back in January  when calling the shares in AIM-listed Parallel Media (PAA) lower. Having headed north from about 16p, people were buying at 48p. With institutional investor Harwood bailing out a couple of days later the shares headed back to 24p (still jolly expensive in my view) but still the madness went on, peaking several time over 30p before the FY16 results were released on Friday. Then reality set in.

To be fair, I have no particular gripe with the company, this is more of an example of what happens when the BBs get hyped up – here because of a deal (which didn’t happen) with the company chairman’s private enterprise. The thinking was that it would be worth loads of money because he would give his private company away for free. Right.

Unfortunately, the FY16 numbers brought reality with a bump. For the whole of 2016 the revenue came in at just £221,000. With £78,000 cost of sales but a raft of Admin Expenses operating loss was £522,000 and further losses from write-offs brought the FY loss in at £1.7 million. Ouch.

Worse, the balance sheet shows just £1,000 of non-current assets and current assets of £48,000, with £2.6 million of current liabilities, and a further £166,000 of non-current liabilities. So the whole outfit was worth MINUS £2.7 million. Ouch.

We are now told that the chairman’s loans (keeping the whole thing afloat) total £1.9 million, having been formalised into a 5% loan due in a year. So the company is good so long as the chairman decides. But it seems to have very little business right now, and little way to pay down the debt.

As things stand, the sports division is continuing to seek sponsorship for its European Tour date, the Media division is under review and Entertainment organised the sponsorship by AIA of Maroon 5’s tour of Hong Kong and Thailand.

The co-promotion of the Classic Rock awards in Japan in November 2016 went well until the bills had to be paid, when the show went into liquidation in December.

So where’s the excitement? The BBs are still full of a potential RTO for Brick Live, which is connected to Lego in some way. Maybe something will come of that, but given that the company is in negative equity it’s hard to see the shareholders coming out with anything much form that even if it does.

The shares closed down 3.5p at 18p (market capitalisation £0.54 million, according to ADVFN) and there seems to be little to support it going forwards. Indeed, the downdraft looks set to continue.

As for the chairman, it was noticeable who he didn’t thank:

I would like to take this opportunity to thank my fellow board members, as well as all of our hard working staff around the world.

No thanks to the shareholders, then.

We will see what happens next, but the BBs don’t look to be worth following, do they?

Not one for me!

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