blur Group Share Price Hit Again

More news yesterday from blur Group following the recent announcement about revenue recognition issues depressing the 2013 revenue numbers. It promised more info at the annual results announcement in May. But yesterday wasn't those full results, just another warning on revenue, reducing the number for 2013 a little further. It now expects revenue of $4.8 million for the year, way below the $10 million forecast a while ago. (Remember, these are its gross revenues, of which around 80% goes to the contractors – so the net revenue to blur is about $1 million).

The firm also suggested it may need to seek more cash this year through a share placing to support its 'rapid growth.' That sounds counter-intuitive given the revenue figures, but the explanation is that large contracts are taking longer to convert into revenue. More large requirements are being advertised on its site, so that requires more funding.

The shares, having dropped 40 percent a few weeks back on the first revenue announcement lost another 40 percent  yesterday, dropping from 280p to around 160p.

None of this matters too much to users of blur -- but one tip for investors. It is clear that there is one key metric that blur needs to expose to rebuild confidence. Of the reported value of contracts placed on its website – a number it put at the heart of its reporting – what percentage will be recognised as revenue within, say 6 months, 12 months, 24 months and never. That “never “ number is key, because some projects will just fade away, some clients may not accept the blur proposed suppliers, and some may happen but at a lower contract value than the original published value. That would tell us how much of the reported requirements being advertised is likely to convert to real revenue.

The market is still valuing the firm at some £50 million ($80+ M) so that is still 18 times even the gross (trailing) revenue. That’s not cheap. So if those numbers on the revenue pattern look reassuring, then blur needs to get them out into the public domain – along with some real client case studies – as soon as possible. Otherwise this latest market loss of confidence might make raising cash challenging.

 

 

 

 

 

 

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