Fond memories - not really!

A brief blog post from me today. It's a company whose shares I don't hold, but have in the dim and distant past. Talking of dim, I remember taking a loss of 27% back in 2004. More positively and looking at the current share price that could have been a lucky escape? We'll see in the fullness of time.

The company in question is Coral products. If memory serves me correctly, I vaguely remember them producing CD casings? Do you remember CD's? Yep, that's why the share price went into freefall I think? Like most investors my memory becomes a little hazy when recalling the duff investments. Anyway, that was then and this is now. Perhaps Coral products is about to rise from the ashes? If they don't go under it's surprising how many companies rebuild and prosper. They can be the most lucrative purchases if you catch them near to their recovery path.

Anyway CRU released an encouraging trading update today and the shares are up 5% as I type.

https://www.londonstockexchange.com/exchange/news/market-news/market-news-detail/CRU/13838153.html

Firstly, I should point out that they're still  a specialist in the design, manufacture and supply of injection moulded plastic products. So what are the all important figures?

The market cap is just over £8m, and the results to the end of April 2018 showed a loss of £370,000 on revenues around £23.5m, although the underlying operating profit was £879,000 with earnings per share of 0.84p. Net assets came in at £13.2m, but just over £7m of that is goodwill and intangibles.

The company does generate cash, but had just £471,000 in cash on the balance sheet against approximately £6m debt back in April. Gross margins are ok at around 35%.

In summary, it's not one that interests me too much at the present since I always compare the financial metrics, market cap and prospects against company shares I already hold, and at the moment I'd tend to add more to some existing holdings rather than add CRU.

However, others may beg to differ or wish to do far more research than I have.

Incidentally, on the subject of plastics, if you haven't read my post on Biome Technologies then you may wish to do so by clicking the link below:-

http://michae1mouse.blogspot.com/2018/09/buy-one-get-one-free-bogof.html

I hold.

twitter: @michae1mouse

One I hold and one I don't!

First of all, a very quick mention of a company I hold.

PCF group released a trading statement this morning which has been well received since trading is in-line with market expectations. The growth metrics are looking very good, and as I write the shares are up almost 6%.  Here's their statement:-

https://www.londonstockexchange.com/exchange/news/market-news/market-news-detail/PCF/13836455.html

A recent earnings enhancing acquisition should also aid growth prospects going forward:-

https://www.londonstockexchange.com/exchange/news/market-news/market-news-detail/PCF/13819226.html

A very neat summary of where they are at the moment and what they hope to achieve can be found in the Midas article below:-

https://www.thisismoney.co.uk/money/investing/article-6146579/MIDAS-SHARE-TIPS-invest-PCF-Group-bank-thats-horsebox-expert.html

I'll be holding for the long term because I like the growth prospects, particularly as they continue to improve operational gearing and I'm always happy with a progressive dividend policy. Although the dividend is modest at the moment, for long term holders this income source can become quite substantial over time.

One I don't hold is Croma Security Solutions (CSSG) who released their final results this morning.

I've managed to contrive to miss out on buying into this company on two separate occasions now, in the mid teens and then early twenties. That's the share price I'm referring to btw and not my age. The share price is over £1 now. Never mind! :-(

They released a great set of figures this morning with a 59% increase in revenues to £35.1m (2017: £22.1m), a  significant rise in EBITDA to £2.5m (2017: £0.80m), a massive increase in pre-tax profits to £1.98m and earnings per share to 9.89p (2017: 0.36m and 2.13p respectively) and paid and proposed dividends up to 1.6p (2017: 0.5p). 

An outstanding performance all round. 

The share price has risen a very modest 1% as I write, chiefly I suspect due to the fact that this stellar performance won't be repeated next year:-

https://www.londonstockexchange.com/exchange/prices-and-markets/stocks/summary/company-summary/GB00B5MJV178GBGBXASX1.html

"In the current financial year, we can expect to replicate some but not all of the project income we received in FY 2018 due to some large exceptional projects that are unlikely to be repeated.  However, there has been a substantial increase in contracted income and this together with the expectation of some further project work make the Board confident of achieving a good result for the year, consistent with the underlying growth in the business. "

It's a great little business which is supported by a very solid balance sheet which boasts £2.2m in cash (up from £770,000 the previous year) and has next to zero debt. The current market cap. is a very modest £15m or thereabouts. In summary, many of the qualities that attract me to micro-caps.

CSSG is back on my watchlist, although even in my most optimistic mood I can't see the share price slipping back to the teens or twenties. Sadly, I can't envisage me revisiting my teens or twenties either except by way of a mid-life crisis?

I will be monitoring any opportunities very carefully though. 

As ever, this is just a personal blog and isn't an attempt to provide buy, sell or hold advice.

twitter: @michae1mouse

7digital - A journey from cash burn to cash generation?

I've mentioned a company called 7digital before. It's a company I hold shares in. Here's the company website to find out more about what they do:-

http://about.7digital.com/services

A quick look at the share price graph will indicate what a great performer it's been for me so far. Apologies for the sarcasm. It's been a company that has consistently pulled off great defeats from the very jaws of almost certain victory. So why am I still here? Well, it may have lost some short term battles (certainly in terms of share price performance), but I'm still hopeful they'll eventually win the war.

I like their business model and I believe that the services they provide and their vision for the near future could bear fruit.

In April 2017, 7digital acquired a company called 24-7 Entertainment which provided them with considerable scale, and left them as last man standing in Europe in their field. In fact they claim to be the world leader with their PaaS offering.

However, the acquisition has come at a cost in terms of consolidating it with 7digital's existing offering and cash burn has been high. Certainly far higher than I had anticipated. In December of last year (2017) they raised around £8.5m by way of a capital raising and open offer for working capital and consolidation costs. Just over six months later they've burnt through most of this, and have taken a further loan from two existing shareholders to see them through to cash flow positive and profitability.

Not great reading so far, and indeed a delay to publishing full year accounts for the year ending 2017 in the summer months did not help sentiment, although that turned out to be much ado about nothing in the end and results showed good progress.

Back to the question. Why am I still here?

I'm hoping that 7digital are now very close to the end of needing further financing. Indications have been that by the end of this month they should be close to completing the consolidation. Once consolidation is complete, they anticipate annual cost savings of £5m a year. With gross margins around the 70% mark, recurring revenues and huge cost savings, 7digital should easily move into profit and be cash flow positive in 2019 with revenues around £20m+. At a modest market cap. of  around £12.5m, and with high operational gearing then it's easy to envisage a massive uplift in the share price.

In my view, the next few weeks will be pivotal in establishing 7digital's long term credibility and I'd expect some investors to wait on the sidelines since it's been less than a smooth ride so far. However,  are good things just around the corner?

I hope so, and shall wait to hear of further developments. If 7digital does turn cash positive and profitable in 2019 without the need for much more funding and serious dilution then the shares will multi-bag without question. Of course, it is an IF at the moment.

As ever, the shares are illiquid and can move quickly either way. I'm not a tipping service, these are just my personal thoughts and not advice so DYOR thoroughly.

twitter: @michae1mouse