"In the short run........."

To quote Ben Graham:-

“In the short run, the market is a voting machine but in the long run, it is a weighing machine.”

R4e is a company that I've mentioned before, and this morning they released their full year results.

In recent weeks, the share price has shot up with persistent buying from Gate Ventures plc, who now hold just over 18% of the company. Good luck to them I say. To be frank I can't see what the appeal is?

Let's take a look at today's finals.

Firstly, they report in the headline figures a profit before tax of £4.5m. Ignore this totally. This profit comes from writing off a significant debt.

The headline figure is this:- "Underlying profitability for r4e (Adjusted EBITDA*) reduced by 31 per cent to £1.8 million (2014: £2.6 million)". Note that even this is adjusted EBITDA i.e. excluding impairment of goodwill and exceptional items. The true figure is actually a huge £4.3m operating loss.

I cannot see anything appealing about this company at all.

Even though they have recently undertaken a massively dilutive placing at 1p, the balance sheet looks awful. Cash is just £1.16m, net current assets of minus £6m, and tnav of minus £7.1m. Debt whilst more manageable is still a hefty £6.7m.

In summary, it's a company with a horrible looking balance sheet making losses and burning through cash (it burnt through £855,000 last year) with just £1.16m in cash remaining. Gross margins are around 24%. Hardly mouth watering.

The company claims to be the leader in it's field. Well good luck with that.

Can investors seek solace in 2016:-

"The platform for 2016 has been established"

"2015 marks a significant milestone for the Group.  Cleared of the prohibitive debt facility from AIB, the business now has the ability to organically grow as well as invest and expand where the opportunities present themselves, particularly in exploring new geographies and pursing data-based marketing and other digital initiatives.  The management team is confident that the Group will be able to pursue these growth opportunities while maintaining and building upon its position as a theatre and entertainment market leader in the London and New York. "

Reading between the lines it looks like they are going to require a considerable amount of additional capital, and they're not going to fund expansion through their own cash generation.

The voting machine may be in full flow at the moment, but the company's a flyweight and I've got a feeling that it'll all end in tears again.