On paper Forbidden Technologies' (FBT:AIM) firm contract win with Channel 5 looks excellent news. After six months of trials the broadcaster has signed-up for Forbidden's FORscene cloud-based TV editing suite, exciting investors enough to push the shares more than 8% up today to 33.5p. 'Channel 5 will deploy FORscene from the outset of its next production, The Great Christmas Toy Giveaway and plans to test the full potential of the platform,' spells out the microcap.


There would seem to be some potential for Channel 5 to roll out FORscene more widely across its production layers, although I wouldn't hold my breath given that Forbidden admits to having worked with the broadcaster for the past eight years. With no financial details given of today's server purchase, we must assume the impact on revenues is limited. That's a running theme, contract wins in June and March gave nothing away either, presumably because neither is significant in its own right.


Forbidden is no new face on the Aim scene, nor is FORscene a new suite. Longer-in-the-tooth investors may well remember the company as one of those supposed hyper growth stocks that promised to turn ordinary investors into millionaires at the peak of the dot.com madness. In August 2000 the shares were trading at a record 232.5p, heights the stock hasn't gone close to since, or are likely to again, in my opinion.




Back in 2003 (the oldest annual report I could find) Forbidden ran-up pre-tax losses of over a quarter of a million pounds on minuscule £40,471 revenues. Last year (to December 2012) revenues hit £812,744, a 20-fold hike in 10 years at a compound average growth rate (CAGR) of 39.6%. What's that line, 'revenues are vanity, profits sanity'? Despite top line progress Forbidden remains mired in red ink, running up losses of £270,318 before tax. Tax? What a laugh, the government actually pays Forbidden through tax rebates as part of its policy to encourage small, growth companies. Yet Forbidden has never made a profit, not once in all those long years.


At least the cash drain from operating activities might be turning a corner, cutting the outflow last year from £171,537 to £32,378, yet the company was forced to go cap in hand to investors again in June for £8 million of extra funds. If you believe Cenkos' forecasts, Forbidden might be at a tipping point. The broker reckons £1.075 million of revenue this year will hit £2 million in 2014. Yet tipping point to what? That dreaded red ink promises to drown the profit and loss account again and again, to the tune of £107,000 this year and £464,000 in 2014. This all means that Forbidden, now worth £44 million, is on an eye-watering enterprise value (EV) to sales multiple of 22. Now that's forbidding.

Issue Date: 25 Oct 2013