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Research: TMT
H119 has seen a respite from the drastic write-downs of financial assets of recent years (€0.3m against, for example, €3.9m in H218). Even so, mic remained mildly loss-making at the net level in the period, reducing equity at June 2019 to just €2.9m (€0.19 NAV per share). This is below 50% of total share capital, hence a statutory requirement to call a general meeting. Full 2018 results (net loss €4.9m) have also only just been reported, as correction of the company’s accounts for 2015 to 2017 was not completed until May this year. The main impact was on 2015 (net loss €35.7m vs net profit €1.4m, as originally reported), with consequential changes thereafter.
mic |
Cleaning out
Financials |
Scale research report - Update
11 October 2019 |
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Share details
Business description
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H119 has seen a respite from the drastic write-downs of financial assets of recent years (€0.3m against, for example, €3.9m in H218). Even so, mic remained mildly loss-making at the net level in the period, reducing equity at June 2019 to just €2.9m (€0.19 NAV per share). This is below 50% of total share capital, hence a statutory requirement to call a general meeting. Full 2018 results (net loss €4.9m) have also only just been reported, as correction of the company’s accounts for 2015 to 2017 was not completed until May this year. The main impact was on 2015 (net loss €35.7m vs net profit €1.4m, as originally reported), with consequential changes thereafter.
H119 – relative calm
As previously, interpretation of half-year performance is limited by scant management comment and no disclosure of individual business results. However, summary figures (see page 2) show modest operating returns after minor write-downs (€0.3m) and predictably stretched finances (€0.04 cash but no bank debt).
Tough going in 2018
Newly announced full-year results show both a step change in net loss (€4.9m against €0.6m y-o-y) and year-end equity (€3.1m) well below the benchmark of 50% of total share capital requiring the call for a general meeting to discuss the company’s situation. Write-downs of financial assets (€3.9m) and assorted receivables (€0.9m) were across the board.
Historic flaws addressed
Notwithstanding 2018 revaluations, current management’s focus has been on correcting accounts for 2015 to 2017, which are reported to have given an inaccurate picture of the net assets, financial position and operational results of the company. The bulk of the revaluation of investments and loans relates to 2015, which saw serious misjudgement of mic’s finances and ability to fund investments.
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Historical financials
Source: mic accounts. Note: *Restated in May 2019. **Including €5.1m from capital increase in progress at year-end. |
Needs to deliver
The scale of uncertainties clouds assessment of mic’s valuation. In terms of comparing the price with the NAV, full 2018 accounts will offer only a rudimentary guide to the value of operating companies, as publication is in line with HGB and thus at written-down cost price.
Edison Investment Research provides qualitative research coverage on companies in the Deutsche Börse Scale segment in accordance with section 36 subsection 3 of the General Terms and Conditions of Deutsche Börse AG for the Regulated Unofficial Market (Freiverkehr) on Frankfurter Wertpapierbörse (as of 1 March 2017). Two to three research reports will be produced per year. Research reports do not contain Edison analyst financial forecasts.
Financials
mic conducts its operations through distinct business units, each focused on a specific area of technology and application, and incorporated in discrete corporate entities: micData (large-scale data handling), Smarteag (fibre-optic infrastructure monitoring) and 4industries (industrial applications). One of these – micData – has a stock market quotation in its own right.
However, mic publishes accounts in line with German HGB solely for the parent company. While the presence of intermediate holding companies dilutes the impact of trading performance at the operating subsidiaries, general trends may be derived from the figures.
Exhibit 1: Financial summary
Year-end December (€m), HGB |
2017 |
H118 |
H218 |
FY18 |
H119 |
Income statement |
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Gross profit |
1.3 |
1.2 |
(1.1) |
0.1 |
0.3 |
Write-downs |
(1.1) |
- |
(3.9) |
(3.9) |
(0.3) |
Net profit |
(0.6) |
N/M |
(5.0) |
(4.9) |
(0.2) |
Balance sheet |
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Increase in share capital |
1.0 |
0.3 |
- |
0.3 |
- |
Equity |
7.7* |
8.0 |
3.1 |
3.1 |
2.9 |
Source: mic accounts. Note: *Including €0.1m deposits for capital increase at year end.
As can be seen in Exhibit 1, equity at June 2019 dropped to just €2.9m (€0.19 NAV per share). Equity at December 2018 fell short of 50% of total share capital, hence a statutory requirement to call a general meeting, which is scheduled for 18 December 2019.
Exhibit 2: Restatement of accounts for 2015 to 2017
Year-end December (€m), HGB |
2015 |
2016 |
2017 |
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Net profit: |
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Originally reported |
1.4 |
(29.7) |
0.1 |
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Restated |
(35.7) |
(6.2) |
(0.6) |
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Equity: |
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Originally reported |
45.4 |
20.9 |
21.9 |
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Restated |
8.3 |
7.2 |
7.7 |
Source: mic accounts
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Research: TMT
CLIQ Digital’s half year report shows progress quarter-on-quarter, although gross revenues were 8% down on prior year. Margins are starting to improve after earlier cost cutting, and customer base value (CLIQ’s measure of expected future revenues) has edged ahead from the end FY18 level. Consumer appetite for digital entertainment remains very strong across product groups and the company needs to ensure that its content portfolio remains sufficiently attractive to bring in (and retain existing) subscribers. The market valuation is at a persistent discount to peers.