Monday, 4 June 2018

Cauli Rice aka Fullgreen are looking for money again - this time their numbers really dont add up!

As an investor, I am interested in how well company management deal with important issues. There isn't anything much more important for a growing company than raising capital. So why would you send out an email about a new round with a massive typo?

Ok, so I know this blog is littered with typos, but Im not asking for your money, yet. 

In its latest announcement to SHs, Fullgreen tells them that its 2018 expected revenues will see an increase of 869% on 2017. That is certainly a eye catching number and if true Id be putting some money in. But unfortunately it's not - the real increase is a somewhat sad 86.9%. Talk about handling expectations. 

What must be alarming for SHs is that the company raised £1.47m on Crowdcube (for the umpteenth time) at the start of 2018 and now they are back for more. As usual with Fullgreen, it's what they dont tell you that carries importance, rather than what they do. 

Ignoring the unbelievable gaff on the percentage increase, the sales for the UK for 2018 have already been reduced from £2.6m to £1.8m - that's since the last Crowdcube pitch in February 2018. This reduction is made up for (or most of it is) by projecting heavier future sales in the USA. Whilst they have achieved excellent distribution there and are looking to do the same in Australia, these projected sales are not certain. They are not numbers based on pull through. 

What happens if, like in the UK, sales flop? If you read reviews of their products, they get a large number of yuks. Far too many in our opinion. Is that why sales in the UK have been slashed by £800k or 30% in the last 3 months? Initial listings were excellent here but pull through sales have slowed (the yuk factor?) and now numbers for overall UK sales have been cut. That pattern has to be worrying. We have said many times on here and many many times about Fullgreen: initial listings are not the crucial thing - pull through sales are.

In the last Crowdcube pitch, they explained away a fall in turnover of 50% from the previous projections, as being down to a major listing being delayed. As they dont mention the large fall of UK sales in this latest email, they dont have to explain it either.  

This new raise is at the same value as the one earlier this year - so is essentially a down round if you take into account the £1.47m that went in in February. 

Another problem we have is that the last round, just 3 months ago, was to raise £400k and they achieved £1.4m - so that's more than 3 times the 'required funding' they talked about. Has turnover risen by 3 fold? No. Do they expect it to? No. So why have they run out this £1.4m when it's so much more than they told investors they required to do the same numbers? I think they are just not good with figures. Their reasons are that growth has outstripped the funding they have. Enough said.

Finally we couldnt help notice that in the Crowdcube IM for last February, Fullgreen wrote the following for investors information -

'We expect UK sales to continue to grow at a healthy year on year growth of 50% due to continued introduciton of new flavours and new product formats.'

So not only have they reduced the UK sales for 2018 by 30% (£800k), only 4 months ago they were confident that these sales would see increases of 50%. I think even they might have a problem explaining that. You also have to factor in the dramatic fall in the GDP for the product about ot be manufactured in the US  - a fall from 41% for UK sales to 29% for US sales. Meaning that for every sale lost in the UK, US sales have to increase by around 1.5 times just to stand still. 

In case you are wondering, the bronze geezer is the earliest example I could find of cauliflower ear. And why not.

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