Belluscura (LON: BELL) shares are down 10% today. BELL shares are suffering from the announcement of the results. Which show a fall in revenues, a rise in losses and a further rise in stock. Well, yes, it’s possible to say that the company is gearing up for a full on sales campaign but holding 8 million of stock when sales were 0.4 million does look a little excessive.
The announcement: “Group revenue of $0.4m (2022 H1: $0.6m; FY 2022: $1.4m) Adjusted EBITDA of $2.9m (2022 H1: $4.1m; FY 2022: $6.2m) Basic loss per share of $0.052 (2022 H1: $0.039; 2022 FY: $0.068) Inventory at 30 June 2023 of $8.8m (2022 H1: $5.7m; FY 2022: $8.4m) The Company has raised net proceeds of £7.0m ($8.8m), through the issue of 10% Unsecured Convertible Loan Notes, via a Placing and Broker Option in January and February, to raise £4.2m ($5.3m) net of expenses, and an equity issue, via a Placing, a Subscription by certain Directors, and a Retail Offer in May, which raised £2.8m ($3.5m) net of expenses Net cash as at 30 June 2023 of $3.8m (30 June 2022: $11.6m; 31 December 2022: $2.0m)”
You see the possible worry? They’ve raised lots of money (and that convertible looks expensive, net of expenses), sales have significantly dropped and stock levels, compared to sales, are through the roof. Are we sure we’d want to value a stock that size at production cost? Or at a discount?
Belluscura share price from Google Finance
On the other hand there is this from after the reporting period: “Belluscura exclusively licensed its proprietary technology to InnoMax in China, Hong Kong, Macau and Singapore in a deal valued at $55m in minimum royalties over the term of the license” On that third hand we also already knew about that: “Indeed, after securing $15m worth of pre-orders only 2 weeks ago for its new DISCOV-R POC, Belluscura said today that it had signed a transformational 10 year agreement (effective 1st Oct’23) worth a minimum of $55m in royalties (increasing annually) with its world class manufacturing partner, lnnoMax Medical Technology (a JV between a Foxconn subsidiary & the Chinese gov’t).”
Those preorders might also usefully explain that stock level.
The question is obviously whether these financial results are the nadir before the growth or represent a longer term state of affairs.