Good morning!

Earthport (LON:EPO)

This company is probably the worst long term performing company on the UK market, in my opinion. It's gone absolutely nowhere in many years of being a listed company, raising endless rounds of money, promising growth & profits that never materialise. It's basically just an admin company with a load of bank accounts in various countries, that moves money around for clients that need to pay relatively small remittances to lots of countries, where it wouldn't be economic for them to open their own bank accounts in numerous countries.

trading update has been issued today for the year ended 30 Jun 2014. Revenue has grown from £4.1m to £10.7m, 160% growth. However, organic growth was 60%, the rest has come from an acquisition called Baydonhill. So the core business grew turnover from £4.1m to £6.6m. So some progress, but it's still heavily loss-making.

It also remains heavily cash burning, with net cash used in operating activities of £5.3m vs £5.9n in the prior year. There was £9m cash on the Balance Sheet at year end, so the next Placing will probably be in 12-15 months at a guess. Although note that the H2 cash burn was reduced, at £2m, an apparently improving trend - so it will be worth keeping an eye on whether that reverses in H1 this year, or if the improvement continues.

It will be nothing short of a miracle if they manage to create a viable business out of Earthport, as many people have tried and failed over the last 15 years or so. The same pattern as I've heard for years is continuing, of new contract wins with big name clients, and good things around the corner, etc. It's never turned into profits or positive cashflow in the past, so I remain deeply sceptical. The market cap of £176m (at 42.85p per share) looks lunacy to me, given the serial disappointments of the past.

Although having said all of the above, you do wonder why some big name banks are signing up to use the Earthport service, although we don't know on what terms - if they're being offered the service free for example for PR reasons, then they might well decide to use it. Until profits flow through, there isn't a viable business. Anyway we'll see, but it's not something I will ever touch again, having…

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