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By Tom Winnifrith & Steve Moore | Wednesday 6 December 2017
Disclosure: Financial Investigative Media Limited, which is not owned by Tom Winnifrith but by a trust for his dependants, owns shares in companies mentioned in this article. 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.
Having noted on a potential Reach4Entertainment (R4E) placing last week that we understand that there has been strong demand at 1.5p per share and that we’re looking at £5 million at least being raised, the company has now announced a, conditional on General Meeting approval, £5.5 million placing at 1.5p…
This follows half-year results having showed £5 million of net current liabilities and then an announcement that banking covenants had again been breached. It is stated the placing is “providing working capital to support cost saving initiatives” as well as “to assist the company's strategy for growth through the expansion of its existing activities and beyond into promoting non-theatre productions, both organically and through strategic acquisitions, as well as focusing on new geographic markets”.
This all follows the welcome recent appointment of CEO Marc Boyan – who has taken £1.7 million of the placing, with other management taking £0.14 million and substantial shareholders Gate Ventures £1.32 million, Herald Investment Management £0.77 million and Nigel Wray £0.5 million. There is also a vast share option package for Boyan at 1.5p for three years - though conditional on increasing adjusted EBITDA by up to £3 million (and at least £1 million) or the share price to up to 4.5p (and at least 2.5p).
We believe such support for the placing reinforces our view of the annual profit potential here – from a restructured base, £2 million+ and potentially meaningfully more on aggressive cost and growth moves.
What price this from a newly solid base? We consider a £30 million market cap more than attainable – suggesting a more than 3p share price. At up to 2p, the stance is buy.
This article first appeared on the Nifty Fifty website which Tom Winnifrith runs with Steve Moore & Lucian Miers. To access the website ahead of the next share tip from Tom & Steve and a new shorting piece from Lucian shortly click HERE
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