Whichever way you cut it today's news is a complete disaster and Arria NLG (NLG:AIM) is at serious risk of going to the wall. With barely a handful of clients, having its most revenue meaningful one walk away - Shell (RDSB) - cannot be underestimated. With the shares collapsing more than 60% (over 75% at one stage this morning) to 11.5p, the market isn't.
'The termination of the contract will have a material adverse impact on the Company's trading and revenues for the year ending 30 September 2015, which are now expected to be significantly below market expectations.'
It gets worse, since Arria has now had to pull the plug on fundraising talks that would have meant a massive dilution to existing shareholders as it was. It'll take the silverist of tongues to rescue the situation, and failure would likely mean administration and complete collapse.
This shouldn't come as a surprise. Shares analysis back in December 2013 warned investors off this story stock, and in our four-part AIM feature in January, I wrote:
'More interesting for its technological innovation than as an investment, IP-protected algorithms automate written reports from underlying data sets. But very early days, few clients, precious little revenue and mountains of losses.
Just days later I put more colour on events in a Shares web exclusive, following Arria's deal with IBM (IBM:NYSE).
Arria is the result of 25 years of very clever mathematics by several boffins whose algorithms promise to draw valuable meaning from vast amounts of data and statistics. Data2Text, a product of Aberdeen University, sits at the heart of the business, providing data analysis software based around its natural language generation (NLG) intellectual property. The software effectively automates the process of turning numbers and statistics into meaningful words. It sounds futuristic but a couple of very big blue-chip organisations are early adopters.
Trouble is, the company continues to struggle to earn any money from the technology. Revenue last year to September 2014 was a piddling £0.79 million, and that was down on the previous year. On that the company ran-up a staggering £10.9 million loss. What's more, it's been burning through cash like there's no tomorrow, more than £7 million worth in that 12 month period. That implies nearly £600,000 a month. With just £1.7 million net cash on its books in September, supplemented by an extra £0.4 million gross raised in February, I reckon the bank balance must be threadbare today.
Interim results are due in June, but there's a very good chance Arria might not make it that far.
