This is one I made a note to circle back to after reporting season. Used to be Corum Group but recently got renamed to align to its remaining products in market after selling its pharmacy software business.

What's to like:

• Profitable (after backing out discontinued operations)
• Growing revenue
• Improving gross margin
• All while reducing operating expenses
• Solid free cashflow
• Difficult to find operating metrics of the remaining business that aren't moving in the right direction
• Heaps of cash, no debt

Sounds great, it must be expensive. Its market cap is $17 million but it has net cash of $12 million and so an EV of just $5 million. If you annualise the half year result it is on an EV/EBITDA ratio of 2.5!

What gives? Well one of the reasons for the significant cash pile is it won $8.1 million in the Victorian Supreme Court last year in a case against Fred IT Group. Despite Fred paying the damages, the ruling has been appealed and is expected to be heard in a couple of months. That has led to an $8.1 million liability on the balance sheet and you have to put some weighting into the possibility it (and possibly additional costs) has to be returned to Fred.

It also has a new CEO, who was most recently COO at Douugh Ltd (ASX:DOU). I'm not sure that recommends him...

Plus, despite being profitable, it is tiny. Its two remaining technology offerings (both related to connecting pharmacies with their suppliers) collectively earnt $3.2 million in the half).

It does feel like in the short term there will be a fairly binary outcome, depending on the result of the court case under appeal, but it also feels like a lot of the downside of that has already been priced in. If you exclude the $8 million under appeal it's still only on an annualised EBITDA to EV multiple of 6.5. It might be one to do some more work on.

[Not held]

Sale of Corum Pharmacy Software business

• Sale of Pharmacy Software business for total potential consideration of $6.25 million plus

earnout payments

• PharmX growth opportunity enhanced as an independent technology provider

• Potential capital management options to be considered

The business is being aquired by Jonas, which is another operating entity owned by Constellation Software.

With this, and the Fred IT legal cost settlement, the company is certainly cash rich (~ 20m), and is effectively only about PharmX now.

Given the current market cap, it looks like you're getting PharmX for not much at all, even if it is only a slow and steady grower.

Advantage Corum after the release of the Victorian Supreme Court judgement over PharmX, but the market hasn't quite cottoned on yet. Perhaps an appeal is expected? That will drag things along further.

Legal Proceeding relating to PharmX started in May 2021

Judgment was handed down today

• PharmX connects suppliers and pharmacies and charges as per platform usage
• By adding 600 odd pharmacies - one would expect more platform usage and more revenue ( no $ figure given)
• Potential to upsell backend software to these groups

Steady numbers, and an improved cash position.

Hopefully they have laid the foundations and can land some big wins for the remainder of FY22.

Key Highlights

• Revenue $6,642k, an increase of 33% on pcp

                     Heath Services $5,774k, up 43% on pcp

                     eCommerce $780k, down 18% on pcp

•  Underlying EBITDA $2.2m (1) compared to $0.1m in pcp, up 2,501%
•  Underlying NPAT of $1.5m (2) compared to a loss of ($0.5)m in pcp
•  Underlying EPS of 0.31 cents per share (2) compared to a loss of 0.11 cents per share in pcp
•  Operating cashflow was $559k in the half
•  Cash on hand at 31 December 2020 of $7.6m

01-Sep-2020:  Corum Executive Management Changes   plus   Corum New Company Secretary Appointment

and  Acquisition of Remaining 57% interest in PharmX   plus   Offer Booklet   and   Investor Presentation September 2020

Looks like David Clarke, COO's (Corum Group's) CEO and MD (for the past 7.5 years), has either had enough, or was pushed.  COO now have a new CEO & MD - who happens to be a mate of COO's new Chairman, Nick England, and was brought into the company (as a non-executive Director) by Nick back in April.  COO also have a new Company Secretary as from today.  Corum is also now buying the 57% interest in PharmX that it does not already own:

• Acquisition price is $7.90m in cash. $3.75m to be paid on Completion on or before 4 September 2020 with the balance of Deferred Consideration of $4.15m to be paid on or before 15 October 2020
• The Corum Board expects the acquisition to be earnings per share accretive in its first year (big tick!)
• Capital Raising:  Corum to undertake a pro-rata 1 for 3 Non-Renounceable Rights issue (NRRI/“Offer”) to raise up to approximately $5.6 million before costs at 4.2cps as part funding for the acquisition
• The Offer is partially underwritten to $3.0 million by PAC Partners as Lead Manager and Underwriter to the Capital Raising
• The Corum Directors and their related entities will be fully subscribing for their respective entitlements and unanimously recommend the Offer to all eligible shareholders

--- click on the links above for more ---

[I do not hold COO shares.  They are a turnaround that hasn't turned yet.]

31-7-2020:  Appendix 4C - quarterly

Not held.  No surprises.  No movement.  In fact, no shares traded in COO today (at 3:54pm eastern/Sydney time).  Last traded at 5cps (on Wednesday July 29) and that was the first day they had traded in a week.  Very illiquid.  There's currently a 16% gap between the highest bid (at 5.0 cps) and the lowest offer (at 5.8 cps).  Tightly held.  The turnaround hasn't happened yet.  Still watching.

30-Apr-2020:  In the 2 straws that I posted last night on Corum Group (COO), I said that I expected them to release their March 2020 Quarterly Report (Appendix 4C) shortly.  I did not have to wait long.  Here 'tis:  Appendix 4C - March 2020 Quarterly Report

They still look cum-capital-raise again to me.  Their cash balance has reduced from $4.025m at 31-Dec-19 down to $2.569m at 31-Mar-20, so they're still operating at a loss and burning through cash.  They anticipate that they've got enough cash to last for another 4.75 quarters (just over 1 year) from March 31, but that is based on a cash burn of just over half a million dollars per quarter, and that's just their cash burn from operating activities and makes no allowance for "Cash flows from investing activities", which includes PPE (property, plant & equipment), investments and IP (intellectual property).  That "investing activities" cash burn was an additional $1.635 million (loss) in the March quarter and has averaged -$1.1 million per quarter for the past 3 quarters.  It is twice the amount they are losing in "net cash from operating activities" each quarter.  When you add the two together, you get their real cash burn rate, which is ~$1.5 million/quarter, hence their cash balance reducing by $1.5m in the March quarter down to less than $2.6m at 31-Mar-2020.  If they continue to burn through cash at $1.5m/quarter, as they have been, they have NOT got enough left to last until the end of September this year (i.e. 5 months) without raising more money, hence I still think we're looking at another imminent raising.  

There are signs of a turnaround - not so much in this report, but in the board renewal and new management focus, and other announcements they have made.  However, it's early days, and many turnarounds never do.  Smaller companies are however generally easier to turn around, and Corum has a market cap of only $18.5m at their current SP of only 4.6 cps, so they are a tiny nanocap company.  I think it can be done, but they're still too risky at this point for me to be investing any of my hard earned into them just yet.  They're on my watchlist, and I'll keep an eye on their progress.