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By Steve Moore | Wednesday 13 September 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.
Previously writing in May on live events agency Aeorema Communications (AEO) I concluded though the shares had fallen below 25p, with self-admitted “challenging” trading, a dividend policy ‘review’ and still wary of erosion of the balance sheet, I’d currently continue to avoid. The shares are presently down below 24p on the back of a “Trading update, Board changes and proposed placing” announcement…
This latest announcement includes that “the company is pleased to announce that following a strong end to the fourth quarter, profit before tax for the year ended 30 June 2017 will exceed £200,000” and “cash position of in excess £1.2 million”. Hmmm, “pleased to announce” hey – despite they comparing to a pre-tax profit of £340,165 in the prior year and cash at that year-end in excess of £1.4 million!
It had also been announced that “the board believes it is prudent to review its dividend policy”, with it now updated that “Aeorema can advise that it is the intention of the board to pay a final dividend to shareholders for the year to 30 June 2017, confirmation of which and its level are subject to the company's final audited results for the year”.
It is then revealed that Steve Quah, board member and Director of Events, and Andrew Harvey, Operational Director (non-board), have been promoted to the board role of Joint Managing Director with immediate effect. What about those who have been leading the company – Deputy Chairman Peter Litten and CEO Gary Fitzpatrick? “Having worked with the company for over 21 years”, they have “stepped down”. Hmmm. And a problemo – they had a 37.9% shareholding.
This has though been placed out by Allenby Capital… at a price of 18p per share. Considering the size of the stake and size of the company – a £2.35 million market cap at the last close 26p, the size of the discount is though not altogether surprising.
It is added Litten and Fitzpatrick “will remain strong supporters of the company” - how is that then? By selling all of their shares at a discount? Chairman Mike Hale talks of ‘having long recognised the prospective growth opportunities in the events sector’ and that “my confidence in Aeorema's prospects is shared by my fellow board members and new and existing shareholders, as highlighted by the share purchases”.
It is stated “the incoming Joint Managing Directors, Steve Quah and Andrew Harvey, and existing non-executive director Richard Owen, have, in aggregate, purchased 281,010 of these shares”. That thus equates to £50,582 – not exactly an overwhelming vote of confidence!
It is though also stated “the board of Aeorema is now interested in 2,416,010 ordinary shares in the company in aggregate, representing 26.69 per cent of the issued share capital”. That’s somewhat more attractive, but the issues of my prior update still largely remaining in conjunction with the uncertainty of new leadership see me, at least ahead of the further results detail, continue to avoid.
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