Looking at the latest half-year accounts for DGS, they show receivables at about 10 million, against revenue for the six months of about 23 million. That seems a high number to me - the accounts say that Trade accounts receivable are generally payable within one month of installment by the customer. I.e. one might expect receivables at any one time to be under 4 million, not over 10 million.
The latest trading update says they have just written off 4 million as having been due more than 12 months. Even so, the 6 million left still looks a high number given the nature of the business. And the implication of the update is that of the 10 million receivables on the balance sheet at end-December 2015, some 4 million must have been overdue for more than 6 months. And possibly a whole lot now that is still long overdue, and may never get paid.
You have been following them more than I have - do you have any idea why they are finding it so hard to get paid? Their revenue growth doesn't mean much if 20% of it is never going to be paid.
Moving back up, presumably in advance of the year end trading update, which last year was on June 23rd.
Current forecasts are:
- year to 30/6/16 : 6.83p EPS, 3.62p dividend
- year to 30/6/17 : 9.46p EPS, 4.34p dividend
In March the CEO sounded pretty bullish:
"We are pleased to confirm that the strong trading momentum from the second half of fiscal 2015 accelerated into the first half of the current financial year, with this period marking our strongest first half performance to date. The Company has experienced record growth over the twelve-month period, driven by expansion within our existing core customers, the launch of new business offerings and growth into new industry verticals. With our strong balance sheet and healthy profit generation, the Board is confident in continued profitable revenue growth."
Panmure Gordon's comprehensive 28 page initiation note on Digital Globe Services (DGS.L) can be found at http://bit.ly/1QS0Wlr
*Profitable growth, large runway, low valuation
*Growth market, DGS has grown revenues at 26.3% pa over the last three years
*We forecast good double digit revenue growth, solid profit margins, and improving rates of cash conversion, allowing the group to maintain high dividend distributions
Midas tipped DGS today, which is probably the first time that many will have read about this exciting company.
It's very early AIM days for the Colorado based business which has now been quoted for less than three months.....so early days with a company which is exhibiting a huge growth and intends to start paying dividends quite soon.
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