The credibility of the senior management of Aim-traded Bilby (BILB:42p), a provider of gas heating appliance installation and maintenance services to residential and commercial properties, has been shredded after the directors warned that cash profits would only be £2m-£3m for the financial year to end March 2019. At the time of the interim results in mid-December 2018 the company reported first-half cash profit of £2.7m and the directors were guiding investors to expect full-year cash profits ahead of the £6.3m reported in the 2018 financial year.
Moreover, the downgraded profit guidance is before accounting for non-underlying restructuring costs and losses associated with the termination of a contract to supply building maintenance services for Ministry of Defence properties, which is subject to dispute and resolution proceedings. In addition, there are ongoing delays to a major gas installation contract, and the company is in active discussion with the client regarding a resolution.
It’s a truly shocking result and one that makes my decision to rate the shares a buy, at 72p, in December the wrong call. It also leaves institutional investors Ruffer and Northern Trust sitting on hefty losses. They both purchased 8 per cent stakes in Bilby in September 2018 at 100p a share from founder and departing chairman Phil Copolo and his son, Leigh Copolo. Fund management group Miton has fared no better, having raised its stake from 15.1 to 19.8 per cent at the same time.
Bilby’s shares fell by more than a third on the profit downgrade as investors headed for the exit. My advice is to join them. Sell.
