U.K.-based online work intermediation platform (WIP) blur Group PLC recently released its full-year 2015 financial report.
In the report, blur describes itself as “an Enterprise Services Platform that helps private and public sector organizations eliminate the waste and inefficiency inherent in the ‘traditional’ purchasing of business services.” The report also states that “blur provides both cloud-based software and managed services to create an end-to-end solution that includes sourcing, supplier short listing, contract and project management through to payment processing and reporting.”
Blur Group (LSE: BLUR) is the only other WIP company that is publicly traded besides Freelancer Ltd (ASX: FLN), which we have reported on here and here. Blur was founded in 2007 and Freelancer was founded in 2009; Blur went public in 2012, Freelancer in 2013. Despite some surface similarities, their business strategies and their financial fates could not be more different: While Freelancer has been quite successful, blur has been struggling.
While the to-date performance of blur has been less than stellar, we nonetheless took a deeper dive into the company as the WIP of the Week (available to interested PRO subscribers).
Blur’s Financial Picture Looks Bleak
Note: Revenues are not gross payment volume (spend through the platform). We believe that revenue is about 20% of gross payment volume).
Highlights of the above summary of key income statement line items:
- Drop in revenue 2015/2014 (management attributes to market strategy shift away from SME customers to large enterprise, resulting in longer sales cycles)
- More or less constant profits in 2014 and 2015 are supported by a significant reduction in costs
- Substantial drop in cash and cash equivalents on the balance sheet. (Note: issuing shares resulted in raising $11.5 million and $22 million in 2013 and 2014, respectively.)
Stock price peaked in January 2014, followed by a precipitous drop over the next six months.
A 2014 Financial Times article suggested key factors underlying this plunge: “Sales for the loss making group are expected to be $4.8 million for the year to the end of 2013. This is down from April’s guidance of between $5.3 million and $5.6 million, and well below the $9.4 million that analysts had previously forecast.” According to blur, a major cause of this miss was the delay in a very large project into 2015.
2015: Shifting Gears
Since that time, Blur has been making revenue recognition and accounts receivable practices more conservative and steering itself toward more predictable activities and projects.
The 2015 Annual Report stated that over several years, blur had released four versions of its cloud software platform, with each release increasing functionality and providing greater customer and service provider automation. “With blur 1.0 and blur 2.0 the majority of customers were small buyers and suppliers,” the report noted. “Early revenues were generated through the spot purchasing of small projects with spend in the low $’000s. The release of blur 3.0 and 4.0 marked the introduction of Enterprise features such as Project Space and blurSense and we began to test the platform with medium and large Enterprises to better shape the solution.”
Blur also asserted that “in 2014, project size and complexity grew and the annual spend for the largest customers increased towards $100,000 per annum. By the end of 2014 the platform and marketplace could be said to be proven as an Enterprise class solution.”
Over the course of 2015, the Annual Report states:
“Our focus has been on the Enterprise buyer and Enterprise-class supplier. The release of blur 5.0 saw an increasing number of multinational Enterprises piloting the platform and, having met their onerous selection criteria, commence buying business services online. The repeat purchasing and growing activity from Enterprise customers vindicates our strategy and provides us with confidence that we are on the right path to systematically improve the way Enterprises are able to buy and sell services. At the same time, we have worked to increase the number and quality of our expert service providers, to match the demands of Enterprise customers.
Where blur seems to be going in 2016 is more technology investment in order to extend the platform away from the original spot marketplace model and better support larger enterprises, enterprise buyers, larger and more stable projects.
Whether blur will be successful in re-engineering the business and dig itself out of its deep hole — facing perhaps more challenging revenue growth conditions and dwindling cash reserves — remains to be seen. In any event, we intend to continue following this WIP, because of its fundamental focus on addressing enterprise services procurement.
Still, the million dollar question remains: Will blur be able to shift gears before the fuel runs out?