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Boxhill Technologies: Disappointing results - what was the point of all the acquisitions?

By Cynical Bear | Saturday 8 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.

The poor results from Boxhill Technologies (BOX) yesterday were not a huge surprise as the drop in the payment processing revenues had been flagged in the recent trading update that I covered HERE. However, while there is still a chance that an unsuspecting PI thinks there’s opportunity here, I will continue to emphasise a couple of odd points about this business that continues to make it uninvestable for me.

The revenue for the year to 31 January 2017 was down to £1.7 million generating an operating profit of only £12,000. So a break-even business for the year as a whole, although it lost about £280,000 in the second half.

The outlook statement hints at a pick-up in the payments business in H2 2018, which implies that the first half will continue to be disappointing, although more will become clear at the next trading update due before 28 July.

The balance sheet looks ok with cash of over £800,000 and net current assets of around £500,000; however, as ever, the balance sheet doesn’t look quite so strong under a bit of scrutiny.

The cash includes £100,000 or so of customer cash and also the current assets also include litigation costs of £138,000 from Eupay Group (good luck with getting any of that!) but the two most peculiar bits are in the debtors and creditors.

At the year-end, there is £1.7 million due from Phillite D UK Limited which is a company solely owned by the ex-CEO, Philip Jackson, who remains an employee. That’s an astonishing amount for a business of this size and I thought these services were now being undertaken in-house by the Emex companies that it acquired so not sure why it is so large. Has Boxhill now received those funds?

On the creditor side, there has been an even bigger increase due in the main to an amount owing to customers of £1.46 million. I’m guessing this must be linked to the Phil Jackson debtor in some way  but it is such a big number in the context of Boxhill’s balance sheet, it would have been good to know whether it had been settled by now, almost six months later.

One of the most frustrating things about this business is the fact that despite undertaking four different payment company acquisitions over the years and issued about 1.4 billion shares in consideration, the payments side of the business has stalled. I’ve always been suspicious of these transactions and nothing in the results make me any less convinced that those deals were merely a way of getting shares into friendly hands who could then sell and cash in for very little in return.

The share price dropped yesterday, now down to 0.1p valuing the business at £2.4 million which still seems on the high side until the business can show some growth on the payments side again.

In the meantime though, there is some good news, as apparently the business is planning the appointment of a new CEO in “the near future”. Great, as it’s only taken fourteen months so far!

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