The Fatfish Group Ltd (ASX: FFG) share price is under pressure today despite posting its first profit in 4 years. The tech venture builder company’s shares are currently swapping hands at 13.5 cents. This is down 10% on yesterday’s close.
The Fatfish share price drop follows the release of the company’s preliminary final report for FY2020.
What was in the report?
For the 12 months ended 31 December 2020, Fatfish Group reported a net profit after tax of $191,000. This compares to a loss of more than $14 million net in the prior corresponding period (pcp).
The gross profits, however, are more precarious. The group went from $1.1 million in the pcp to $519,000 in FY2020. This calculates at a 54% drop over the two periods. Meanwhile, operating costs were down from $1.6 million in the pcp to $180,000. Sales fell from $2.7 million to nearly $700,000.
The nearly $2 million drop in revenue can be attributed to a cessation of online sales. A $167,000 drop in income from cryptocurrency mining is balanced out by a rise in interest revenue and services income.
The large difference between gross and net profit mostly stems from a $10.6 million loss in unrealised gains on investments at fair value to a $1.7 million positive.
Earnings before interest, taxes, depreciation and amortisation (EBITDA) for the year was at $526,000. Net assets increased by 57% on the pcp to total $18.2 million.
Earnings per share (EPS) were reported at 0.26 cents. This compares to a 1.73 cent loss in FY2019.
The company did not pay a dividend for the period.
Mergers and partnerships
In today’s report, Fatfish group also announced its subsidiary, Fatfish Global Ventures, has merged with Abelco Investment Group AB. As a result, Fatfish Group now owns a controlling stake (50.1%) of Abelco Group.
In a separate statement, Fatfish announced it was entering into a strategic partnership agreement with KryptoPOS – a cloud-based point-of-sale (POS) software company with operations in Malaysia and Indonesia. Through its subsidiary, Smartfunding, Fatfish will roll-out its buy now, pay later (BNPL) service to merchants using the KryptoPOS software.
The release said the partnership entailed sharing behavioural and data analytics between KryptoPOS and Smartfunding (according to consent and privacy laws), allowing Smartfunding to improve its credit analysis capability and pre-approve merchants with good credit standing for its BNPL services.
The partnership would involve a revenue-sharing arrangement entitling KryptoPOS to 15-30% of the net revenue for the transactions originated via the strategic partnership.
Words from the CEO
Commenting on the financial results, Fatfish CEO Kin Wai Lau said:
Financial year 2020 is a very interesting period for the Fatfish Group, with the group making its first profit since 2017.
Having concluded and secured our majority controlling stake in Abelco, the management is hopeful about opportunities we have in the innovation hot-bed of Nordic countries in Europe.
He went on to say that the company was excited to continue to grow its businesses, especially the recently launched BNPL services offered by Smartfunding and the online insurance of Fatberry.
We have a very capable and localised team that understands the tech landscape of Southeast Asia well, and this in (sic) shall position us well for the expansion of our core business over the next 18-24 months.
Fatfish share price snapshot
Despite today’s rocky showing, the Fatfish share price is trading substantially higher than this time last year. In early March 2020, shares in Fatfish were trading at 1 cent each – a 1400% increase!
The majority of this rise has occurred over the past month. The Fatfish share price was trading at 3 cents at the beginning of February before hitting a high of 27 cents on 16 February.
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Motley Fool contributor Marc Sidarous has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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