Full analysis report on OB10 can be purchased at a cost of £250.00 (pdf), please contact the author.
Finally, something trully worth celebrating for Jamie and the boys, a whopping increase of revenues to £7.1m in 2008 from £4.1m the previous year. Breaking the £5m barrier is always emotional, but to report revenue growth of 73% is remarkable. The gamble Stefan Foryszewski, Alain Falys, John Jermy and Chris Lowrie took in the middle of the dot.com bust is paying off. Unfortunately, only Stefan is still involved with OB10. John and Chris left in 2002 with Alain leaving in 2005 when Jamie took the responsibility to drive the company towards growth by estabishing strategic partnerships. Alain continues to remain as a key shareholder of the company.
Whilst the revenue growth is always a joy to celebrate, the profitability continues to remain in red. The operating costs have jumped up to £13.6m from £11.8m resulting in Profit Before Tax and Interest (PBIT) of negative £6.4m. The key contributor for operating losses remains the cost of salaries at £7.4m, of which the highest paid Director (assume Jeremy and not Stefan) netting a cool £221k. Employees have increased from 93 to 123 but salary costs have seen marginal rise to £7.4m from £7.3m. It is possible that this may be due to using more labour from the South East Asia due to OB10’s presence in Malaysia.
Bank and deposits show a healthy £5.2m compared with £4.7m for the previous year. Trade debtors have also increased from £1.3m to £1.9m. Unfortunately, trade creditors have decreased from £898k to £581k. It would have been better if this could be increased to improve the working capital. Short-term liabilities have continued to increase, giving a total current liabilities of £5m. But due to high amount of cash and deposits, OB10 managed to report a healthy balance sheet. This is mainly due to an injection of about £7.4m fresh capital, which means, at this rate, OB10 needs to continue tapping into further investments.
Unfortunately, I cannot see at what stage OB10 will start to make profits. Looking at the last 4 years, from 2008 to 2005, OB10 have tapped into £7.4, £8.9, £3.9 and £5.6m respectively, giving a whopping investment of £35.1m since 2000. The accumulated losses have risen to £33.9m.
In terms of ratio analysis, Return on Shareholders Funds is at negative 163.5%, Return on Capital Employed (ROCE) is at negative 154% with Return on Assets at negative 69.4%. Turnover for employee is £58k with Average salary cost at £60k. No point looking at profit per employee (ok, it’s negative £52k).
Financially, other than revenues, there is nothing to celebrate about the Profit & Loss account or the Balance Sheet. Yes, OB10 continue to attract investments and the question remain how long will OB10’s financiers be willing to continue this investment (I remember sitting next to the VC who funded Marraketch speaking about negative ROI). More than anything else, how much effort does Jamie has to put into raising finance, when he could spend time growing the company further through strategic partnerships.
But, in this case, we cannot simply look at the finances to declare whether OB10 is a successfull company or not. OB10 has contributed significantly to make e-invoicing a market segment each medium to large businesses must think of, not just as a cost cutting exercise, but as a vital functionality in governance and efficiency. In this respect OB10 pioneered the industry.
I keep coming back to the same conclusion over and over with OB10. Shouldn’t they be better aligned with a company that could continue to finance the remarkable growth demonstrated by Jamie and the boys? Aligning with a bank is no longer possible in this current environment, as they have enough problems of their own. Perhaps adopting a similar route to Accountis might be the way forward. Accountis was lucky in finding a suitor (perhaps not so on valuation) that allowed them to run as an independent operation without too much influence from the holding company. This has allowed them to grow without having to worry about periodic capital injections. On the negative side, personally, I would hate to see OB10 follow a similar suit to Xign and Harbor Payments, and become lost in a large multinational. OB10 is about innovation and therefore they need to be allowed to innovate.
This is a short financial analysis of OB10. If you wish to purchase a full analysis report on OB10 at a cost of £250.00 (pdf), please contact the author.
Disclaimer: Above is a quick analysis based on publicly available information. The opinions expressed are solely of the author and may not be factual. Believe it or not, author very much is a fan of OB10.
Author: Manoj Ranaweera, eveo Ltd, Daresbury Innovation Centre, Keckwick Lane, Daresbury, WA4 4FS
manoj@ranaweera.name +44 7769734491
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This article is available as a blog post at http://eippworld.com/?p=617
Best regards
Manoj
I have been pointed out by Chris that John Jermy and Chris Lowrie are still part of OB10 but not Directors of the company.
Best regards
Manoj
Dear Manoj,
At OB10 we appreciate your ongoing enthusiasm for the company and recognise that you are basically a fan, not a critic.
In your most recent blog entry you have gone out of your way to recognise the poineering role that OB10 has played and you rightly point out the dangers of being acquired by a large multinational and subsequently disappearing inside it.
Over recent years you have written several times about OB10, and whilst a lot of it has been speculative and wide of the mark, we didn't consider responding as we have never wanted to get drawn into unnecessary public debate. Our focus is on growing OB10 for the benefit of our customers and shareholders.
However on this occasion I need to respond, to correct a number of seriously misleading and dangerous comments that you have made, which will be read by prospects in what is an increasingly buoyant market.
We have talked before about the need to blog responsibly. While everyone is entitled to their opinions, I would much rather that prospects, VC's and journalists read reports from knowledgeable analysts such as Forrester and Gartner, or read the detailed Directors Report on Activities provided in the accounts which we recently filed at Companies House, about whose results you have written in your blog. I would direct anyone who reads this piece to those sources.
Forrester has recently written two excellent reports on the EIPP space, the second "Wave" report giving their rating of a number of major vendors, including the views of their customers, so your contention that
"Forrester and Aberdeen Group's reports are great but they do not ever try to scrutinise vendors" is way wide of the mark!
To some of the specific points then: while we were pleased with last year's growth, we are only at the beginning of the journey, and our revenue run rate (never mind our new billings) is already way ahead of that published at Companies House for the year to April 30th 2008..
You incorrectly referenced the departure of two key founders which you have since retracted, but the more important point to make is that OB10 has very successfully grown its business globally from its small origins with all of its founders and other key early contributors still fully committed and integral to the company's future. This is a testimony to Stefan, Chris and John, but also to all of the more recent key senior players who have been able to develop strong working bonds across geographies and functional disciplines.
You worry about our expense growth and lack of profitability, but our expense growth has been investment in increasing our geographic footprint, in developing our third stage technology platforms, in expanding our service portfolio and developing our worldwide talent pool. As to profitability, while our reported results show losses, our ongoing business is already substantially profitable (as in seven figures before the decimal point), with most of our resources being devoted to winning new business, onboarding suppliers and servicing our customers.
We have never yet lost a contract because of financial viability, even despite the quality and size of our typical customers.
With regard to the patience of our investors, this is simply not an issue. On the contrary, they are delighted with progress and have continued to support us as and when needed. The picture you paint of me running around the City with a begging bowl rather than running the business is hilarious! Every funding round over the past three years has been oversubscribed by our internal investors - we are already well funded through breakeven, and myself plus the rest of the management team can get on with the job in hand.
I appreciate that those who write about these things love to speculate about ownership changes,what we might or might not do and whether we have enough funding, but the truth of it is that our strategy is clearly defined, our growth rate in line with our plans and our shareholders fully supportive with others warmed up and ready if necessary, should we choose to expand further and faster.
So I hope these comments are helpful to you and your readership. I think it would be very difficult for anyone to glean much about OB10's performance by simply applying traditional financial ratio analysis on summary published accounts, which is why the Directors chose to include a weighty commentary this time around, but you clearly have every right to attempt to do so!
With good wishes.
Jamie Gunn, CEO OB10
Hi Jamie
Many thanks for your response. I published it with few of my thoughts on engagement here
Best regards
Manoj