Crimson Tide – Profits up 25 Times in the First Half-Year

This tiny little company could have the hallmarks of a winner in the making.

At the end of last month, it announced its interim results and they showed that in the six months to end June on revenue that was up by just 5.5%, on the corresponding half-year in 2018, it had multiplied its pre-tax profits by over 25 times, in the same period.

Furthermore, in the first half year, it has already seen its pre-tax profits rise some 46% over last year’s total profits.

And yet it is only capitalised at around £12.9m!

The Tunbridge Wells based Crimson Tide (LON:TIDE) is in the business of providing mobile solutions.

Originally set up in 1996, the company in 2003 switched away from specialising in telecoms and the development of CRM solutions on to mobile data solutions and has been developing ever since.

It has only recently strengthened its sales team and their efforts are now beginning to reveal some success, with a mass of new clients in various stages of contract development – a long and winding process, but such time is necessary when the contracts being negotiated take a long period in developing, but could then become long-term business.

The kernel of Crimson Tide’s service is offering its ‘mpro’ mobile solutions to help improve the efficiency of staff working out in the field, such as nurses or engineers.

The cloud-based software helps in job scheduling, in alerting users and, also in reporting data whilst on location. The hardware used can be smartphone, personal digital assistant or tablet. It works on iOS, Windows Phone 8 and Android.

The enterprise class mpro5 gives out of office staff the tools to better use their time and the ability to complete their tasks. Paperwork, photographic evidence and geo location tagging, signed authorisations, among others, can all be carried out, recorded and then stored remotely.

It is well worth noting the calibre of the company’s recent client awards, like Nestle, Northern Rail, Chiltern Railways, a Middle East waste management firm, and it is currently just finalising a deal in Denmark with the Compass Group. If that initially proves successful perhaps that client could roll it out to all of its 45 countries in which Compass operates.

A couple of months ago the company declared that a new contract had been signed with Interserve for three years. That group has been a loyal customer for many years and uses mpro5 to deliver industrial cleaning and security auditing across a multitude of large customers such as the BBC, Sainsbury’s and the NHS.

Just last week the company announced that it had won a significant long-term contract with a major supermarket company. Valued at £1.4m and covering a 36-month timespan the contract allows for use of its mpro5 platform in the retail group’s 4,000 locations in the UK and Ireland.

This client has been able to replace a number of internal systems from competitors and consolidate its requirements for catering, store cleaning, distribution, security, safe and legal compliance, and food safety into the single mpro5 offering.

There could well be a quite substantial potential in rolling out the mpro5 platform to this retail client’s international interests.

Furthermore, the company has clearly stated with its end September announcement that although it does take time in developing its sales cycle, it now has an enlarged pipeline of business and that includes various enterprise organisations.

A number of announcements could well be given in the near future.

There are 457,486,234 shares in issue, which trading at 2.8p values the company at just £12.9m.

Executive Chairman and founder, Barrie Whipp, holds 102.8m shares, some 22.5% of the equity, whilst another 25% is held by board members and close associates.

Institutional holders include: Helium Special Situations Fund (18.9%); Fitel Nominees (10.2%); and Lion Trust Investment Partners (5.0%).

The interims that were announced a couple of weeks ago showed sales revenue of £1.27m (£1.23m) and pre-tax profits of £101,000 (£4,000).

Last year’s revenue was £2.4m and pre-tax profits were £69,000.

Current year estimates are for £3.5m sales and profits of £0.3m, worth 0.1p per share in earnings.

Already brokers are suggesting that next year the company could well see sales of £5m produce £1.1m pre-tax, which would be worth about 0.2p of earnings.

Those estimates, with the shares at 2.8p, puts them out at just 14 times earnings, which looks very low to me for a company like this, at such an early stage in its development.

Its sales process is now bearing fruit and I see its shares becoming quite a ‘penny stock’ favourite with speculators.

I now fix a none too optimistic target price of 5p on the shares before the end of next year.