The surveillance and snooping technology supplier issued yet another short trading update today (less than two months after the last) yet 'the song remains the same,' to use a well known live album by 1970s rockers Led Zeppelin. Incremental growth but with profits still laughably out of reach.
Digital Barriers (DGB:AIM) says today that it 'expects to report revenues for the year ended 31 March 2015 that are modestly ahead of the prior year and expects losses for the year to show a year-on-year improvement,' helpfully pointing out last year's massive £12 million pre-tax loss on £19 million revenue.
Even Investec, its still supportive house broker, took the hint that progress is for the year just gone will be limited at best. 'We trim our full year 2015 sales forecast to £19.5 million from £21.1 million but make no changes to our loss forecasts, assuming good cost control.' Good luck with that last bit, in 2014 the company ran-up cost of sales of more than £13.3 million and chalked-up up a staggering £20.8 million in admin charges. Investec has also cut its sales forecast for the current year to March 2016 by 9% and upped its loss estimate by more than 30%, to £2.5 million.
For a company so willing to go cap in hand to shareholders for more cash so regularly, and arguably frequently, investors might expect more focus on growth than cost controls. Surely, for any supposedly rapid growth company stuck in the red, the idea should be to accelerate the topline sufficiently quickly to pull the bottom line up with it. Better still, if it's got decent pricing power and fixed costs, red ink should turn black at an even faster pace than revenues rise.
Since joining AIM back in March 2010 Digital Barriers has raised more than £85 million in fresh funding. The market cap today is less than £30 million.
Digital Barriers cash calls
Mar'10 £20m @100p
Nov'10 £30m @160p
Dec'12 £10m @145p
Oct'13 £18m @140p
Dec'14 £7.3m @37p
And what stands out to me is the gradual sucking out of investor enthusiasm which every cap in hand visit to the market. Note the underlying trend of raising smaller amounts of funding at a lower share price. This was once the story of savvy intelligence and security experts that built the fine Detica business back in the day, eventually flogging it to BAE Systems (BA.) for £531 million. While chief engineer of that impressive story Tom Black remains non-exec chairman, and fellow Detica old hand Zak Doffman is CEO, the pair seem incapable of repeating the trick at Digital Barriers.
The shares are actually up today, 2.9% at 35.5p, cheaper again than its last fund raise, but quite why is beyond me.