Interims

Reporting its interim results, blur Group has announced the successful transformation of its strategy to become 100% focused on the acquisition of mature, repeating enterprise accounts (as opposed to chasing one-off projects). It also announced the closure of the Financial Reporting Council enquiry, resulting in the restatement of its 2013 and H1 2014 financial results as it updated its revenue recognition and cost of goods allocation policy. We feel that blur now has a robust, scalable policy in place that reflects its position as principal (under accounting guidelines). We also feel that the stricter quality criteria that blur has adopted for admitting projects and customers to the marketplace, and the focus on enterprise customers, provides for a higher quality and more reliable income stream. We have updated our forecasts. With the shares offering investors exposure to the high growth services-commerce market, we continue to classify the shares as a growth stock.  

Interims

For the six months ended 30th June 2015, revenues decreased by 10% to $1.67m (H1 FY14: $1.85m). An 8% decline in the US market was cancelled out by an 8% improvement in the UK market. The period also saw an improvement in both the average value of enterprise projects that completed (92%) and the total value of those enterprises completing projects (75%). Gross profits reduced by 13% to $349k (H1 FY14: $401k), leading to a gross margin of 21% (H1 FY14: 22%). Administrative expenses reduced by 21% to $5.33m (H1 FY14: $6.72m), leading to a 21% improvement in the operating loss, to $4.98m (H1 FY14: $6.32m). Excluding exchange gains/losses and bad debts, underlying operational costs reduced by 5.8% on the comparative period a year earlier. The EBITDA loss similarly reduced by 23.7%. Net cash position reduced to $12.41m (FY14: $17.40m).

Forecasts

For FY15, we are forecasting revenue of $2.87m (previously $5.00m), gross profit of $323k (previously $1.56m) and LBITDA of $9.27m (previously $8.90m). For FY16, we are forecasting revenue of $4.79m (previously $7.98m), gross profit of $1.04m (previously $2.79m) and LBITDA of $3.76m (previously $4.49m). We continue to expect a higher focus on reducing costs as efficiencies are realised in the business and the platform, and estimate EBITDA breakeven by the end of FY17.  

Valuation

blur’s addressable market is significant and we estimate it reached $265bn in 2013 and will grow to $641bn in 2018. Assuming blur’s share of this market reaches only 0.05%, we estimate the company could be worth $51.02m (£32.65m).