Good morning, it's Paul here.
Just a brief report today, as I have to prepare for tomorrow's UK Investor Show.
Graham is travelling over to the UK today, as he's appearing in the bears panel discussion tomorrow at UKIS. Should be an interesting, and quite fun day! I usually run into lots of SCVR readers on the day too, so am looking forward to putting some names to faces, and catching up with long-standing friends.
Ed & the team are having a well-deserved break this year, so there won't be a Stockopedia stand at the show. So I'll be flying the Stockopedia flag, and hopefully won't say anything inappropriate! (that comes later, at the Westminster Arms!)
Pebble Beach Systems (LON:PEB)
Share price: 4.77p (down 6.9% today)
No. shares: 124.6m
Market cap: £5.9m
Final results - for the year ended 31 Dec 2016.
These are pretty shocking numbers. The original core business (which has now been sold) is split out as discontinued operations. Business there just seems to have fallen off a cliff;
- Revenues down from £46.9m in 2015, to £31.7m in 2016
- Despite cost-cutting, the adjusted profit fell from £3.3m in 2015, to a loss of £7.8m in 2016
NB. the figures above are just for the discontinued part of the business. I'm highlighting them because it's a reminder that demand for products at any company can just dry up. It's not clear what exactly went wrong here, but for whatever reason, some customers clearly just stopped buying its products. Maybe competition overtook Vislink, with better & cheaper products?
Technology generally seems to be moving ahead so quickly, that this is an ever-present risk with any company making technology-driven products. The product life cycle seems to be getting shorter, and cheaper competition from e.g. China seems to often move in, and destroy existing businesses such as Vislink.
Therefore, as investors, we have to be very careful not to buy companies which are subject to such forces, and can move from being highly profitable one year, to being dead in the water just a couple of years later. I'm increasingly wary of investing in any companies like this, with technology products which quickly become obsolete. They have to run to stand still very often.
This point is also important for broker notes. They usually just assume a continuation of business, with x% uplift each year for revenues. Yet in some cases,…