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Cellcast – argues more optimistic about trading… but fund redemption problem

By Steve Moore | Monday 13 November 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.

Shares in interactive broadcast and gaming services company Cellcast (CLTV) are currently among the top fallers today on the back of an “Update re Lexinta Fund and trading update” announcement…

This update follows results for the first half of 2017 in September – which showed a swing to a £0.14 million loss as the company noted more online revenues, which carry more direct costs, in a “challenging marketplace”. The balance sheet showed current assets over liabilities of £1.82 million, though cash of just £0.86 million. This included with;

“The company's treasury management scheme and investment strategy (the Lexinta Fund, based in Zurich) as reported in the last annual accounts amounted to £510,920. In the period, the decision was taken to redeem the investments and bring the cash back into the business, as the fund manager had decided it was time to liquidate the entire portfolio. The funds due back to the group are included in debtors as at 30 June 2017.”

It is now updated “in the company's interim accounts for the six-month period ended 30 June 2017, the carrying value of the assets related to the investment in the Lexinta Fund amounted to £754,358”. Hmmm, why wasn’t this stated at that time? And now;

“The company was previously informed in writing by the Lexinta Fund that it would be receiving these funds last week, however, as at the date of this announcement, payment has not been received. The company, together with a number of other investors in the Lexinta Fund (which includes a private equity fund), has written to the Swiss financial regulator to notify it that the payments have not been made by the Lexinta Fund in accordance with the previously agreed timetable. At this time, the company has no reason to believe that the amounts due to it from the Lexinta Fund will not be received.”

Hmmm! It is also noted cash as at 31st October was down to £0.72 million, though Cellcast seeks to reassure that recent trading has been profitable, that it is “optimistic about the prospects for the next financial year” and that re. the current cash “the directors consider to be sufficient for the continued running and expansion of the business”.

However, I’d want to see the further financial results evidence of this – and, with also the noted Lexinta Fund situation currently removing what would be a useful cash buffer, certainly presently avoid.

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