Earthport's losses double in dash for growth

Losses more than doubled at Earthport in line with ballooning administration expenses as the cross-border payments company splurged on pursuing its quest for top line growth last year.

Revenue for the second half of 2011 increased 5.3% to £1.39m from £1.32m at the interim stage the year before.

Like most companies, Earthport prefers recurring revenues to lumpy one-off revenue wins, and was pleased to see recurring transaction related revenue grow 22.8% from a year earlier to £1.36m.

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The number of transactions processed increased at a much faster pace, by 34.6% year-on-year. The higher growth in the number of transactions processed versus transaction related revenue was primarily due to the addition of domestic transfers as a product offering, which have a lower per transaction revenue but similar margins.

Administrative expenses rose 93.3% to £5.6m from £2.9m in the second half of the previous calendar year, due to the planned and continued build out of the Earthport team, across all areas, in order to prepare and drive forward opportunities in the pipeline.

Loss before and after taxation widened to £5.2m from £2.1m the year before.

Cash at the end of 2011 stood at £10.9m, up from £6.5m a year earlier, after the company raised £10.6m from institutional investors in November 2011.

The growth in the pipeline of potential clients continues to be rapid and encouraging, Earthport said. Of the 250 plus opportunities in the current pipeline, 46 are in later stages of the sales process; although the company would not be drawn on how many of these late-stage opportunities would be converted into contract wins, or when, it did say that if 50% of them were to contract and go live it would result in an estimated additional £3m of recurring revenue per annum.

Virtually all the late stage opportunities are in the core segments of Banks, Corporate foreign exchange (FX), Retail FX and Processor relationships, where the group's sales function continues to focus.

Judging by the negative share price reaction to the trading update, the market is inclined to see whether Earthport's dash for growth pays off. The shares were down 1.25p, or 7.6%, at 15.25p at the end of the morning trading session.

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