Good morning! Just a brief skim of a few announcements this morning, as I have a full day of meetings from 11am until 6pm, so fancied a lie-in before that gets started. Apologies for any inconvenience.

 

 

Kromek (LON:KMK)

This is the biggest faller of the day, down a stomach-churning 48%. This company does colour X-ray imaging for the security & defence markets. I looked at it briefly when it floated last atumn, but decided it was too speculative for me - with the valuation hinging entirely on projections of future profits.

It has issued a profit warning today, with the key bit saying;

 

Despite strong revenue growth year-on-year, the Company expects revenue for the period to be significantly below current market expectations. The shortfall for the year is due to a delay in a number of large contracts.

 

They do dangle some upside in front of investors by saying;

 

The pipeline includes substantial new orders that we hope to announce in the near future, which could materially impact our growth expectations going forward.

 

It sounds as if the cash position is OK though;

 

Whilst the Company had anticipated breaking even in the current financial year, it does not now expect to be profitable, however cash balances at the year-end continue to be strong and the Directors believe that the business has sufficient capital required to execute the business plan and deliver growth in the years ahead.

 

They also warn on the following financial year today (year ending 30 Apr 2015), saying;

 

These combined factors will also impact the performance of the Company in the next financial year 

 

If orders are delayed, then surely they would benefit next year? So it sounds like the existing forecasts were far too aggressive. Management credibility looks shot - you can't warn on profits five months after Listing, that's just a no-no. Companies that come to the market need to start with realistic forecasts that they can achieve/beat, and thereby build a track record that gives investors confidence. That clearly hasn't happened here.

I think this is an example of companies that are being brought to the market too soon. Perhaps the rules need to be tightened up so…

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