Earthport (EPO) has endured a troubled few months. Last October, we downgraded the cross-border payments group from a ‘buy’ after it launched a £25m share placing. In December, the company warned on sales for the year to June 2018, and former chief executive Hank Uberoi swapped roles – becoming executive chairman. Challenges facing the group included delays in expected contracts, and the loss of a UK line of business with a major e-commerce client.
Still, revenues rose by 8 per cent, with transactional sales comprising 94 per cent of the top line – buoyed by Earthport’s existent customer base. This growth came despite transactional volumes remaining flat year on year at 5m. Adjusting for the aforementioned business loss, transactions climbed 11 per cent.
This momentum waned further down the income statement. The adjusted gross margin fell 6 percentage points, weakened by network delivery costs and the geographical blend of transactions. Administrative expenses climbed 10 per cent to £14.3m, contributing to a widening of pre-tax losses.
There was good news post-period-end. Earthport received its New York State money transmitter licence, paving the way for further US expansion.
N+1 Singer forecasts adjusted pre-tax losses of £10.8m and losses per share of 1.9p for the year to June 2018, against losses of £7.2m and 1.1p in 2017.
| EARTHPORT (EPO) | ||||
| ORD PRICE: | 11.4p | MARKET VALUE: | £69.9m | |
| TOUCH: | 11.4-11.8p | 12-MONTH HIGH: | 30p | LOW: 8p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 7.1p* | NET CASH: | £30.6m | |
| Half-year to 31 Dec | Turnover (£m) | Pre-tax loss (£m) | Loss per share (p) | Dividend per share (p) |
| 2016 | 14.3 | -3.28 | -0.61 | nil |
| 2017 | 15.4 | -4.65 | -0.93 | nil |
| % change | +8 | - | - | - |
| Ex-div: | na | |||
| Payment: | na | |||
| *Includes intangible assets of £7m, or 1.1p a share | ||||
