Small Cap Value Report (29 Dec 2016) - NKTN
Good afternoon!
There's hardly anything to report on today.
Nektan (LON:NKTN)
Share price: 28.5p (down 12.3% today)
No. shares: 24.1m
Market cap: £6.9m
Results for year ended 30 Jun 2016 - these figures are being filed just in the nick of time - as AIM companies have 6 months to publish audited annual accounts. Here are the AIM rules, which are quite straightforward, and worth familiarising yourself with. It's also good for a laugh, as reading through them, I can think of numerous examples where companies have completely ignored AIM rules, with no consequences.
There's an emphasis of matter from the auditors, regarding the company's ability to continue as a going concern:
Statutory accounts for the year ended 30 June 2016 will be filed with Companies House Gibraltar following the Company's Annual General Meeting. The audit report for the year ended 30 June 2016 includes an emphasis of matter.
The auditors draw attention to the fact that in forming their opinion on the financial statements, which is not modified, that they have considered the adequacy of the disclosures made in note 1 to the financial statements concerning the Group and the Company's ability to continue as a going concern.
The report states that this is dependent on the ability of the directors to successfully raise further funds, the put option held by the Nektan Marketing Services joint venture partner not being exercised as well as other material uncertainties.
Revenues for the year ended 30 Jun 2016 rose over 10-fold on the prior year.
However, the loss before tax rose from £8.1m to £10.5m this year.
Cashflow was also dire, with the company being propped up by issuing more shares, and convertible loans.
Balance sheet - it's basically insolvent, with negative net assets of £6.2m
Fundraising - an additional £2.275m is being raised, although that looks nowhere near enough to keep the company going. So expect more dilution. Warrants are being issued to protect the new investors from further dilution, so that in itself will dilute everyone else even more.
My opinion - this looks a complete car crash, one of the worst set of accounts I've ever seen. That said, turnover is growing fast, so maybe investors here believe the company might grow its way out of financial trouble?
Total bargepole job for me though. The trouble with this type of jam tomorrow share, is that they're usually under-funded from the start. That then leads to round after round of lower & lower priced equity raises. So the share price chart inevitably ends up looking like this:
It's not just private investors invested here, there are some institutions too. What on earth were they thinking?
Fundraising - a separate RNS has just come out, giving details of the current fundraising round. Although it points out this is only short term funding, and more will be needed.
This is priced at 27.5p, hence the fall in share price today. There is an open offer too, which is helpful, if people wish to pour their money down the drain.
That's it, as there are no other announcements of interest in my universe of stocks.
Graham's covering any relevant news in the morning, so I shall bid everyone a very happy new year - let's hope it brings health, happiness, and decent investment returns too!
It's been a pleasure interacting with you here, so thanks for all the input from readers in the comments section.
Kind regards, Paul.
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21 comments
Thanks for all your articles & comments during 2016 - even the early hours ones....!
Hope you have a prosperous & (more importantly) happy 2017.
Andy
thanks for all the reports Paul, I always come on just to read your reports as part of my morning ritual with my cup of tea. learnt a lot from your reports, clear and to the point.
Hi Paul - many thanks from myself also, its the sheer passion in what you do that shines through your reports. Your accountancy background obviously enables you to dig deep into the arcane mysteries that lose me occasionally but why not, one day I might be able to follow the deeper things.
Best wishes for the New Year and thanks for your insight and knowledge
Hi Paul, Thanks for all that you write I am an avid reader and learn a lot and obviously it helps my selection enormously. I look forward to another year of reading you. I wish you a happy and successful 2017. KR Charles
Hi Paul,This is my first contribution and wish to add my best wishes for the new year. I have enjoyed your analysis and have learnt a lot. Hope 2017 is even better.
Mick e
Great stuff Paul have followed you since the Mike Walters days when will we see the elusive book ?
Hi clarea,
I don't want to pressurise the author of my book.
Once something becomes a chore, then it should be quietly dropped, in my view.
The thing is, it's all out there in the open already. Here's the unedited version;
I left work in 2002 to become a full-time investor, starting with £180k
Made £5-10m between then & 2008
Lost the lot & ended up £2m in debt due to the financial crisis, and illiquidity+gearing
Sold my house & negotiated settlements with most creditors, slowly recovering from 2008-2012
Hit an emotional low & took 13 Ecstasy tablets over 3 days & nearly died in 2012
Hanging on to the toilet for hours, decided I wanted to live
Blogging about small caps would be a new good thing - so tried it out
Now: pretty much got things sorted out.
Moral of this story? No matter how low you feel, things WILL get better. You can't always see how, but with a bit of gumption, and being honest with people, there's always a way out.
Best wishes, Paul.
Good to hear your in a better place these days, I have worked in the wealth management industry for many years and have seen many of my friends blow themselves up due to trading and also gambling not stupid people by any means but it does seem to attract people who have a destructive gene in them.
One of my best friends went to the brink of the edge stared in and thankfully pulled back from there in an industry that has a lot of bad sorts lurking on the edges yourself and people like Robbie Burns are the good shepherds showing a safer path.
Best wishes and here's to a healthy and safe 2017.
Fantastic what you have achieved, Paul.... And it's very considerate at this time of the year to remember that unfortunately some (I hope not many!) investors are right now going through those dark moments as you in your past... May the new year bring them hope comfort and any possible success
best to all
Paul,
Thank you for sharing that with us. I volunteered at "Crisis" again this year which is a charity that helps the homeless get back on their feet. Over the Christmas period the charity provides 3 proper meals a day and a warm and safe place for guests to sleep, supported by an army of volunteers. The reasons people become homeless are many, but the majority of them are men.
Hi Paul
This is my first post after joining Stockapedia last month. I have to admit I have had a free ride for the past year. Sorry.
I have enjoyed reading all your reports and also the comments. I would like to offer my thanks for the articles I have read so far. I would like to recommend Stockapedia to others as I have benefited thus.
Happy New Year Roly
Hi Roly,
That's great to hear.
I never, ever do any advertising. Ed & Dave are so classy, they would never even ask me to.
That's one of the many reasons I love working for Stockopedia - it's just streets ahead of everything else. It's amazing to be surrounded by classy geniuses, who let me do what I want - hopefully most of which is good.
Best wishes for 2017,
Paul.
Happy New Year Paul,
Many thanks for your insightful reports, may it be a proserous New Year for you and all your readers.
Regards Craig
Happy new year Paul and thank you for your reports always interesting , look forward to more in 2017 .
I see that 16.6% of Nektan is held by Octopus Investments. According to their website they offer "Investing, the way it should be done. Say goodbye to the stuffy old way of doing things. We're changing the investment world for the better."
I think I'll stick to the old fashioned stuffy concept of investing in companies that make money.
Stockopedia and the various contributors and commentators here have helped me to a successful 2016 so here's to more of the same for us all in 2017.
Paul, I can only repeat what the others have said. Thanks for all the reports through the year. Enjoy the short break. I look forward to reading your reports in the new year and continuing to learn from you. Keep up the fabulous work.
Best wishes
James
Yes thanks for all the reports this year Paul. Always great reading and the reader interactions that follow.
Best regards
Andrew
Happy New Year Paul
I'm enjoying the fact that Nektan (LON:NKTN) has a stockrank of 0 , a great endorsement of the value of using stockranks to sieve out the complete duffers.
Cheers to everyone, enjoy your New Years one and all
Paul, Happy New Year and Thank you.
Likewise Paul, thank you very much for your insightful articles and humour. I've been learning more and more from yourself and I have to thank you for leading me into some excellent share purchases such as Avesco and to date on RBG.
Very best wishes for the new year and I look forward to reading your and Graham's articles in 2017!
Regards
Dom
Just a big thank you, Paul, for all the insight and analysis you have provided this year. I always do my own research (at least some research) as it is important to know that any investments that don't work out are my responsibility (or maybe just examples of a good process sometimes leading to a poor result). And learning from you is making me a better (and more solvent) investor.
Good wishes for the New Year
Julian