Yolo – in the spirit of St Valentine, please allow me to play Cupid

Comments

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   Drunken Sailor

   15 February 2016, 05:46

   Simplestream – From accounts to 31 May 14 (filed 1 month late on 31 Mar 15 ie after YOLO valued them at £10M) made an operating profit of just under £200k which was an improvement on the nearly £300k operating loss the year before. Revenues were £1.4m, up by about £500k so extra revenue does seem to go straight to operating profit. Net current assets were only £362k (of which £1.1M is debtors!) and total Net Assets £364k.

   None of this is screaming £10m valuation at me. Especially as their 90% owned subsidiary TVPlayer Ltd made a loss of £1.1M and had negative net assets of £828k They also got a First Strike Off notification on 9 Feb 16 for late filing of their annual return. AR now filed strike off action discontinued. AR shows TVPlayer is now 100% owned by Simplestream.

   I think Gert should wait a couple of weeks to see if things have improved before piling in, assuming both companies do file accounts on time this year ie on 29 Feb and not 31 Mar. Both companies filed abbreviated accounts so there is no all important cash flow data to analyse. Consolidating the 2 sets of accounts would make rather a mess of Simplestream’s

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   Drunken Sailor

   15 February 2016, 07:23

   CB,

   Digging up the info for the above comment got my spidey senses tingling. I will bet you a bag of your favourite flavour crisps that the increase in revenue in the year to 31 May 14 all came from the loss making subsidiary TVPlayer Ltd and it was at 100% margin. For a second bag of your favourite flavour crisps I will bet you that the majority of the debtors booked as current assets is the loss making and heavily indebted TVPlayer Ltd. The accounts are abbreviated and the auditor has only certified that they have the right to file abbreviated accounts and that they have been prepared in the right format. There is a note against the debtors, shown as a current asset, which says “debtors include an amount of £842,202 (2013 Nil) which is due after more than one year” so it is not a current asset then is it! True net current assets were negative! Interestingly TV Player’s creditors went from £0 in 2013 to over £1m in 2014. So it could well be more than just the increase in revenue which came from TV player.

   Do we have a deal on those bags of crisps?

   Do you want to go for double or quits on Simplestream being a completely worthless POS? The money YOLO has pumped in in equity and later as a convertible loan has probably gone to clear real debts across both companies.

   The question I am struggling to answer is why do this? It is handy to have an unlisted investment so you can ramp how wonderful it is and how great it is doing without getting rumbled straight away – anyone can check the share price and read the reports of a listed investment. However YOLO do not seem to have done that yet, from a cursory inspection of RNSs.

   Simon Robinson CEO of YOLO went on the board of Simplestream the day before the first investment was announced. Apart from that I have been unable to find an obvious prior connection. I do question though whether having the CEO of the investment company on the board of an investee company is maintaining the separation required by the new rules. Perhaps Cairn Financial could answer that one.

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   Cynical Bear

   15 February 2016, 08:09

   DS – a few thoughts:

   Simon is one of 5 directors and it is quite normal for an investor to put someone on the Board of an investee company and with a relatively small shareholding I reckon they will be ok on any control test.

   I am willing to assume the revenue is third party revenue until proven otherwise; however if you consolidate Simplestream and TVPlayer accounts (ignoring the loss-making JVs for the moment), the large respective debtor and creditor balance would probably fall away, leaving a business that had revenue of £1.4m, losses of about £900k, creditors of c£750k and cash of £120k.

   Yolo’s first investment of £550k was part of a £2m round, part of which would have been used to reduce creditors and they state that £150k was used to repay a loan note in Dec 14.

   The rest will have been spent on ongoing operational losses hence the need for the recent loan note but that also is not unusual for an early stage business. I am sure they have been running around VCs and other investors recently explaining why revenues and profits are suddenly going to explode upwards off the back of increased contracts that they refer to in the accounts.

   The recent loan note could have been to give the business sufficient time to get some of these deals signed before raising a big chunk of money at a higher valuation.

   Is it a POS? Not if they find investors that believe the story it isn’t.

   The Falcon reference was tongue in cheek but wouldn’t put anything past the mgt team that bought a long term asset with short term debt at Challenger!

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   Keith

   16 February 2016, 01:02

   You may want to check if Yolo actually owns the share investment in the Chinese company or if it only has the economic benefits due to contractual obligations. The business appears to be internet related and possibly one of the industries prohibited to be owned or controlled by foreigners. Could Yolo confirm if their investment is by a VIE (variable interest entity agreement) or do they own the shares?
   See article 8 February 2016 about Grand Group Investment PLC and the risks of investment when VIEs are used rather than owning the shares in an investment in a trade prohibited to foreigners.

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   Cynical Bear

   16 February 2016, 03:22

   Keith – which investment do you mean as Simplestream is a UK company and Boom and Gfin are both on AIM?