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ECSC Group – “pleased to announce” trading “in line”, so why a c. 20% share price fall?

By Steve Moore | Wednesday 10 January 2018

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.

Cyber security services group ECSC (ECSC) has updated, including that it “is pleased to announce that trading performance for the 12 months ended 31 December 2017 was in line with market expectations”. So why a current circa 20% share price decline, below 200p?...

The company joined AIM at 167p in December 2016 and the shares had performed very well before a June “conversion of sales pipeline into reported revenue is taking longer than anticipated” warning. In September there then followed a rate of growth “below our revised expectations” warning. As such, the now-stated trading “in line” is with much-reduced expectations.

The latest update also includes “the cash balance of the company at 31 December 2017 was £1.6 million”. This compares to £5 million at the end of 2016 and £3.1 million at the half-year. And;

“ECSC has agreed to return the payment of service fees to its three Non-Executive Directors from the issue of nil exercise price share options to monthly cash payments. This change has taken effect from 1 January 2018”.

So as the company approaches cash crunch ahoy, it returns to cash payments to the non-executive directors?!?

All of the above, depleting the cash position to the noted level despite it little more than a year since AIM listing, suggests a depressed share price in anticipation of attempted bailout fundraising ahoy. Bargepole ahoy! Sell / avoid.

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