Tangent Communications has now released their interim results for the year end 2015.
When compared to the first half of last year, revenues were broadly flat with an increase in online sales offsetting a similar decline in agency revenue. Cost of sales, however, increased so that gross profit was £416K lower. Operating expenses also increased and there was a one-off £226K charge for staff redundancies, counteracted by a lower taxation. The profit from continuing operations was £538K, less than half what it was this time last year and the disposal charges meant that the profit for the half year was some £684K lower at £416K.
When compared to the end point of last year, assets fell by £806K driven almost entirely by a £1.2M fall in cash levels, somewhat offset by an increase in inventories. Liabilities reduced during the period as all items showed a small reduction apart from provisions which remained flat. The end result is that net tangible assets fell by £728K to £5.4M.
Before movements in working capital, cash profits were some £816K lower than during the same period last year. All working capital movements went against the cash flow but the decrease in payables was far less than last time so cash generated from operations was some £367K lower at £791K. After tax this fell to £544K, a £292K decline. All of this cash was spent on software development and the purchase of tangible assets and somehow they managed to loose cash on disposing of the Australian business as they gave it away for free. Therefore there was no free cash flow with which to pay the £663K of dividends and the £379K purchase of shares exacerbated the situation so that at the half year point the group had a cash outflow of £1.2M, I am not sure maintaining the dividend was a prudent move here.
During the period the agency business made an underlying operating profit of £158K but was pushed into the red by the £226K of restructuring costs. This compares unfavourably to the £671K achieved during the first half of last year. Sales at Tangent Snowball fell by 22% to £3.2M and were affected by budget cuts at two key clients and the divestment of operations in Australia. Headcount has now been reduced at the agency and the second half of the year should show an improvement. Sales at Tangent on Demand grew by 3% to £1.2M and gross margin continued to be above 70% as the business intensified its focus on selling innovative print displays to high end retailers.
The online business made a profit of just over £1M, which was very similar to the result achieved this time last year as strong growth from printed.com and Ravensworth was offset by the underperformance of Goodprint. Printed.com had a strong first half with sales up 30% to £3.6M as new customers were up 15% and repeat purchases were up 56%. Sales at Ravensworth were up 17% to £4.1M and innovations during the period included backlit window cards, home information packs and the first digital offering. It is testament to the business that all customers purchased more than once. Sales at Goodprint fared less well, falling by 31% to £1.2M as competition in the business card market intensified and the group lost customers to lower cost operations. The re-building of the customer base will take time and the re-design of the website and new product launches will incur higher costs.
During the year the group disposed of an 81% holding of Tangent Snowball in Australia. The group actually gave these shares away and with it lost control of £22K of cash, not to mention a net £30K of receivables. It is a shame that they could not make it work and were so desperate to get rid of the subsidiary as it made a loss of £45K in the first half of last year, although this improved during the second half. Management expects the second half to improve for Tangent Snowball but current softness in the goodprint division and investment to improve the performance will affect the outcome for the full year as a whole.
At the current share price the dividend yield is a decent 4.1% but I am unsure as to whether it is sustainable. The group had a net cash position of £1.7M at the half year point, a decline of £1.1M from the end of last year. There is no doubt that this was a disappointing performance. The underperformance at Tangent Snowball seems temporary but the problems at Goodprint seem more long term. Until there is some confirmation of improvement at Tangent Snowball at least, I don’t think these shares represent a buy. I still like the company though, so will keep watching on the sidelines.
As expected the chart looks pretty poor. The share price does not look like it is going anywhere positive fast.
On the 11th February the group released a trading statement covering full year results and it does not make pretty reading. Underlying operating profit is expected to halve to £1.2M and net cash is expected to be £1.4M. The property print business struggled after slow sales over Christmas and to address this the group is undertaking some restructuring in its Newcastle site. Non-recurring costs are expected to come to £700K for the year. The one highlight was Printed.com, where sales are expected to grow by 20% to £7.6M. In addition the group released wrap.me, a consumer photo product selling personalised wrapping paper. Trading at Goodprint was slower and a recovery was not forthcoming with sales for the year expected to fall £900K to £2.3M.
Ravensworth trading has slowed since the last update due to a softer housing market and the next year is likely to be governed by uncertainty surrounding the general election. T/OD sales were in line with expectations and are expected to increase by £100K to £2.6M. Tangent Snowball is now performing better as a leaner business but it will take another 6 months to see the full impact of the changes implemented at the end of the first half. The board are not going to pay a final dividend, which is probably prudent in the circumstances. Overall then this is a poor update, numerous business sectors seem to be struggling and I am not going near this for the forseeable future.
On the 11th March it was announced that Jamie Beaumont would join the board as CFO, taking over from Finance Director Kevin Cameron who will move to the position of Managing Director of the Print Services business. Jamie is a sprightly 34 and has previously worked at LSL Property Services and as CFO at David Phillips ltd.