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Is Blinkx Plc A ‘Sell’ After Reporting An £80m Loss?

Controversial online media platform, Blinkx (LSE: BLNX) announced its results for the six months to the end of September this morning, and the figures made for depressing reading. 

Year-on-year Blinkx’s headline revenue dropped 14% to $91m from $106m as reported in the same period a year ago. Adjusted EBITDA (profit attributable to equity holders of the parent before interest, taxes, depreciation and amortisation, share-based payment expense, and acquisition and exceptional costs) for the period was negative $6.8m, down from a positive performance of $1m last year. 

The group’s adjusted loss for the period widened to $13.4m, from $5.6m and Blinkx’s unadjusted loss for the period rose to a staggering $79.5m, up from a loss of $11.9m as reported last year. 

Not as bad as it looks

Still, while Blinkx’s results may seem terrible at first, after combing through the numbers the company’s position is not as dire as it first appears. 

Indeed, although Blinkx reported a loss of $79.5m for the six months to the end of September, acquisition and exceptional costs accounted for $61m of this total. If we use operating cash flow, which strips out non-cash impairment charges as a proxy for profit, Blinkx’s loss falls to $8.8m for the period. 

At the end of the half, Blinkx had cash and marketable securities of $82.3m, compared with $95.7 million at 31 March 2015. So the company can afford to remain loss-making for the time being as it has plenty of cash to fund operations. 

But Blinkx is making progress in other areas in an attempt to return to profitability.  

For example, the company reported today that transformation strategy is progressing well with “core” mobile, video and programmatic revenues up 37% year-on-year to $62.9m. Core revenues now account for 69% of revenues, up from only 43% in the same period last year. 

Furthermore, during the half Blinkx completed a $1m company-wide restructuring programme, which is expected to reduce fixed annualised operating expenses by over $15m. While revenues are shrinking, reducing costs seems to be a very prudent strategy and should help Blinkx preserve its cash balance. 

Time to buy? 

So, what should investors do following today’s results release from Blinkx? 

Well, it’s clear that the company is struggling to keep up with the competition. Blinkx reported a top-line of $215m last year, and a repeat of the company’s performance to the end of September will see the company clock up only $180m in revenue this year. That’s down from a peak of $250m as reported for fiscal 2014. 

What’s more, it’s difficult to value Blinkx at present. City analysts don’t expect the company to report a profit for the next two years, and Blinkx’s cash balance only amounts to 15.7p per share. 

All in all, Blinkx is certainly not a stock for widows and orphans.

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Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.