Good morning! A short report today, as I have to travel from the south coast up to Derby for the Mello 2014 extravaganza! I'm looking forward to seeing lots of you there. See yesterday's report for details on how to get a ticket for Saturday for only £10.
Sweett (LON:CSG)
Share price: 24.25p
No. shares: 68.7m
Market Cap: £16.7m
Another stock on my Bargepole List which has cratered - down 32% this morning on a negative update.
It beats me why anyone would be holding this stock, given the seriousness of the allegations against it, and the ongoing investigations by the authorities in the USA and UK. Any company that is being investigated for wrongdoing is likely to find it difficult to win new business - surely that is obvious? The CEO resigned on 6 Oct 2014 too, which is nearly always a precursor to more bad news.
I reported on the last accounts here on 1 Jul 2014, explaining why the shares are uninvestable. So hopefully no readers got caught on this one. We have thousands of shares to choose from, so why pick one with a huge cloud over it?
Profit warning - not good;
Trading in the first half of the financial year has reflected good progress in our UK market which accounts for over half of the Group's turnover and mixed trading in our overseas businesses. Following a recent review, the Board has identified challenges in certain overseas operations and the Board now expects that the Group's results for the year ending 31 March 2015 will be materially below market expectations.
More detail is given, with the problem areas being Hong Kong, Australia, and the M.East.
Net debt - I don't like this one bit;
The Group will now report net debt such that it no longer includes funds being held on behalf of clients. As a result, and accounting for the working capital requirements of the continued growth in the UK and China, net debt at 30 September 2014 is likely to be approximately £10.0 million versus a reclassified figure at 31 March 2014 of £8.1 million. Improving working capital management is the Group's key focus during the second half of the year.
That's a huge red flag. Working capital being a key focus is code for we're in financial trouble. So don't be surprised if the company is forced into an…
