blur Group announce annual results and share placing at 75p

It’s another public holiday in the UK, but we couldn’t resist one update following announcements made last Friday. And they showed that the travails of the blur Group, who provide a services procurement marketplace, continue. (See here and here for previous coverage). After the recent warning on revenue recognition issues, and disclosure that a new share issue would be needed, the firm announced annual results last Friday along with more details of the fund raising.

Now before we get onto the details, you might ask why we keep covering blur here. I asked myself this, and got the following answer:

1. Their business model is actually quite interesting - a decent website that links buyers and sellers, building supply side communities, with blur acting as in some senses an outsourced procurement arm, more than just an intermediary tech provider.

2. Not many firms in our industry see their share price go from 150p to 800p then all the way back to 80p in the space of a year.

3. The CEO's statements around the invention of a whole new business model were ‘interesting’ to say the least, which brings an element of schadenfreude to the whole episode.

That CEO, Philip Letts, has antagonised many share holders further by failing to apologise or express any remorse over the share price crash - he sold almost £4 million worth of shares in late 2013 when the price was at 400p.

Anyway, the results for 2013 showed revenues of $4.8 million, with a loss of $6.5 million, caused by major investment in technology and sales. But remember that blur acts as the prime contractor in their deals, so in effect they are handling $4.8 million of client spend, then taking a 20% -ish margin from that. So their 'real' income is about $1.2 million - hence you might look at them as a (very) small procurement outsourced service provider, with an interesting technology play through their website.

The other doubt is still the conversion rate, as we said previously. How many of the projects they advertise actually turn into revenues? There is still no visibility on that. The talk has been of delayed revenues, with projects taking longer than expected. But the other possibility is that some projects will never turn into revenues - that's the big worry for investors even at the reduced share price. The firm is still valued at some £25 million, which some might consider a lot for a firm with a ‘real’ turnover of less than £1 million, making a big loss.

However, they announced on Friday that they have raised another $20 million, subject to Board approval, at a share price of 75p. Brave investors obviously still exist. The firm is burning through cash pretty quickly, but that gives some breathing space for a while - but they really need to turn these advertised projects into real revenue sooner rather than later just to ensure survival, never mind a share price getting back to anything like its peak.

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