Shares digital

Figures from the clothing retailer do not make the case for further investment

by John Marshall

When online ethical clothing retailer Adili (ADIL:AIM) floated at 17.5p nine months ago Shares (17 Oct ‘07) described the company as ‘clearly speculative.’ An April profit warning and now a fresh cash call justify this view and investors should ignore the chance to increase their stakes. The £1.7 million cap has not specified how much it is seeking to raise but Shares believes the sum to be at least £750,000.

Adili has persuaded Hawk Investments Holdings, owned by Bob Morton and holding 27.4% of the shares, to subscribe at 5.5p. Hawk is seeking a waiver from the takeover panel to raise its stake above 30% without making an offer to other holders.

Chief executive Adam Smith told Shares he will not be subscribing as he is already fully committed. Founder and 16.4% shareholder Quentin Griffiths said he is ‘undecided’ as he has ‘put a lot in already,’ adding ‘you have to draw a line somewhere’.

At the time of April’s earnings setback, when the Dorset firm warned it would lose some £1.4 million, £400,000 more than expected, Adili warned it had to clear ‘seasonal stock at lower margins than normal’. This probably means the 2008/09 loss will be greater than expected, just as last year.

Tempting parallels with online retail giant ASOS (ASC:AIM) would be inappropriate. Adili is seeking to develop a niche where there are no barriers to entry. Were it to succeed in developing this market other larger online retailers could muscle in .

Shares says: The original investors have lost two-thirds of their investment and the stock should still be avoided. Avoid