Is the honeymoon over?, page-4

We don't really know why the share price would dip after an announcement made when Nick Clark was in the MD role. We don't know whether it was driven by brokers or by retail. However I do think back to some of the posts being made by a couple of notable posters. In retrospect I believe some of their comments were more accurate than we then understood and I also believe I accurately identified who was posting - and it wasn't an ex employee. If I was right they were in a position to influence what happened. Moreover maybe there were some shareholders (who'd acquired their shares cheaply or as payment for services) who'd see an announcement and mentally go "here we go again". Maybe it was a trading tactic. Maybe.....We will never really know will we.

However I do not think the drop yesterday had anything to do with the same scenario - well not quite.

The factors I see in play include:

• While we have changed the MD and now have a different CEO we haven't changed much else. Maybe some ask how much of a free hand Dirk will have to follow the course he has plotted. I'd imagine out there in institution land some of the key players would be well known from their history and performance in other companies. Maybe that plays a role.
• If you have to undo what was going on last year in terms of unprofitable sales, (and so far that has taken nine months) then there is no visible benefit from new sales other than improved margins. You can't generate interest in a stock that already had trust issues and loss of confidence until it becomes sexy again. And it can't become sexy until it has both high growth in revenue and good margins. I'd expect that to start happening at least within this financial year and maybe even before the end of this calendar year
• I did think there were mixed messages in the webinar. I was having to multitask during the broadcast but I couldn't get straight in my head whether we should expect a slowdown from the bedding sector to continue till Xmas or whether there would be the needed growth in revenue. That may have been because the slow down was much emphasised
• While we can be pleased that other market segments are finally looking like opening up I think Alexium is going to suffer for a while from the "I'll believe it when I see it and not before" syndrome for some while yet. (All the talk of new markets has to happen before the cynic in me, will so easily roll over and think that AJX really has changed its spots). In the meantime we are heavily dependent on a few customers and what looks like a single market segment. That's still high risk though not as high risk as implying you have secured contracts that weren't really going to come to fruition or generate profitable business
• I have never been a fan of lost leaders or thinking that generating revenue without worrying about margins is a good idea. I was ok about the original Alexium story that the low margins were because of the supposed additional step in the sales cycle creating bespoke solutions. But that was because generally you can extract higher margins for such effort and because it typically promotes a partnership between customer and supplier. Sadly that appears to have been less than the truth. Over time it seems that the focus was on just getting money in the door and damn the cost of that. (Ref the auditors annotations)
• I thought that releasing the 4C after the close of business bought risks, the biggest of which was that it gave time for a game plan if retail shareholders looked shaky. My view was that hotcopper posts were mixed and even the more supportive posts seemed..... well sort of .....
• We've seen enough posts on hotcopper complaining about the lack of announcements, the lack of new contracts and so on to suggest that despite the pain that last year's communication strategy caused some people haven't quite been able to adjust to not being fed. However it may do well to remember that these people are in fact precisely the sort of shareholder targeted by certain types of entrepreneurs. - We are all easy meat under certain circumstances. But what this does mean is that the new approach to communication has its own downside. Maybe there is a more effective middle path that retains the clear ethical stance that Dirk and his team appear to show

As for whether Dirk has been given time. He's been in the job since 1 July - 3 months. That's 90 days. It's clear he has had an impact but normally you don't see a turn around happen till at least 6 months after a change of guard. So maybe things are in a bit of a holding pattern.

The trouble with a holding pattern for stocks is that can translate to what we are seeing with the Alexium share price. It doesn't take much to nudge it down.

Parsifal