I've held Tricorn (LON:TCN) in my portfolio since May of this year, and the shares spiked at a price about 70% above my buying price in late September. I had a look and decided to continue to hold then; a decision I might come to regret as the shares drifted down from that week-long peak, and dropped further upon the release of their results this week. They now sit at 28p. As ever, then, the question is how to interpret the drop and results; is it an attractive entry point forged by market misunderstanding, a worrying turn of events, or - and this should always be the default option - the market pricing in the news.

Having spoken to Tricorn's management before, I got an email from their nominated adviser and broker asking if I wanted to have a brief chat once again (prior to the results, I should note), which sounded, as always, like a nice chance to get their take on events. I'll present this post as a sort of two-parter, then; I'll briefly talk about my gut, immediate reaction to the results, and then talk about what management said by way of explanation.

The results

There's not really any escaping the fact that the headline figures are pretty bad; net debt is up to £3.6m (when I first talked about them I pondered what they were going to do with a £3m cash pile!). Revenue is up 15%, and gross profits are up with that, but a far higher level of operating costs means that the company posted a £.281m operating loss and a £.324m loss before tax in the first half of the year. This is a non-trivial loss for a group with a market cap of sub £20m and net tangible assets of about £6.5m. It's also over £1m worse than last year's figures. 

That's first glance, then. What are potential mitigating factors? In essence, when looking at a company which has just posted figures below market expectations, the question you want to ask is the nature of the disappointment. Does it call into question the structure of the business, the way it operates, or its potential future cashflows - or is it just a temporary blip because of one-off factors? The latter is annoying but hopefully transient. The former should make you…

Unlock the rest of this article with a 14 day trial

Already have an account?
Login here