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Ten Lifestyle Group – interims emphasise “increase in member satisfaction levels”, what about shareholders'?

By Steve Moore | Wednesday 16 May 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.


Having IPO’d on AIM at 134p per share in November, ‘lifestyle’ and travel concierge services group Ten Lifestyle (TENG) has announced results for the six months ended 28th February 2018. These include CEO Alex Cheatle “delighted with the increase in member satisfaction levels” and “as convinced as ever about the significant market opportunity and Ten's growth potential within that market as well as our ability to generate value for our shareholders”. The shares are currently at, er, 97.5p…

This is with the financial ‘highlights’ including “net revenue up 6% to £17.3m” and “adjusted EBITA of £1.4m loss (H1 2017: £0.8m gain)”. Additionally, the latter is a better metric than EBITDA but only slightly – net interest (-£0.1 million) and tax (-£0.4 million) have to be paid and when investment spending is £2.4 million more than depreciation as a result of “ongoing investment” why quote before £1.4 million of amortisation? There was then also a net £0.8 million working capital outflow and £0.4 million of ‘exceptionals’ to see £5.5 million of cash burn before net new financing.

The period-end balance sheet did still show net cash of £23.6 million and total current assets over total liabilities of £23.8 million and it is stated “the board expects net revenue to grow faster in the second half of the year supported by the new HSBC contract launching in June 2018. There will also be the benefit of a full half year of revenue from contracts that were launched part way through the first half of the year”. However, also “as announced on 30 April 2018, Ten reduced net revenue growth expectations for the financial years ending 31 August 2018 and 2019 compared to expectations at IPO”.

I noted on the back of that from IPO emphasising support for its “traction” to profit warning in 5 months! and questioned a “strengthened” customer and competitive proposition, with “differentiation and appeal of Ten's customer service proposition as well as the company's new proprietary technology platform” but unsuccessfully tendering due to price competition and a deferral of business?

With the results further highlighting the improvement needed to justify a still £78.6 million market capitalisation, the stance is bargepole / sell.


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