cautious123

Looked over the half year financial statements. Not looking good at all in terms of cash. They only have $109k at end of Dec and have drawn into their overdraft. Net current liabilities are $3.9m. They REALLY REALLY need to raise more cash somehow or other if they are to keep drilling more. Equity issue coming?

I have had another look at this. A few things I had forgotten: CEO sold 900k shares at 400 pence in Oct 2013; they announced on 19 Feb that "a major new finance system being implemented in the next two quarters [not sure if that means by end of Q2 or end of Q3]" - it probably means that the existing controls and systems are weak which will not please the auditors; in the accounts for FY Dec 2012 they put in a provision for impairment of receivables of $0.7m out of gross receivables of $2.1m - massive and the average debtor days was 198 in FY 2012 vs 39 in 2011; the bookings that they refer to are NOT contractually obliging the customer the pay but depend on the project being successfully completed; it is really hard to know how much of the bookings will actually turn into revenues and they say themselves in the “could be timeline delays to project delivery by either customer or supplier, both of which are outside the control of the Group” - BIG ISSUE; by my calcs I think that the cash balance at end Dec 2013 may be nearer $5.5m NOT $9.5m (forecast by analysts) because of slower in invoicing and then collecting payment); they could have confirmed their cash balances at 31 Dec 2013 quite easily but have chosen not to do so; given likely H1 2014 losses (say $3m or more) they will perhaps be with $1 to 2m of cash by end June ? They need more money and I cannot see a cap raise occurring easily without the full year results out; I am not sure they will get the accounts signed off as a going concern because they will not have certainty of funding for 12 months (but perhaps Philip will lend the company some of the cash which he got from selling his shares - £3.6m). Looks a VERY VERY risky situation and probably out of control with CFO only in the job for 6 months before he left in Feb this year.

Simon Thompson of Investors Chronicle has retipped it with the same price target of 60 pence.

Big seller out there with 5 million ++