Good morning, it's Paul here.

Apologies, I forgot to put up a placeholder article last night, so here it is.

It's a quiet day for results & trading updates today.

Earthport (LON:EPO)

Share price: 18.5p (down 4.5% today)
No. shares: 630m
Market cap: £116.6m

Final results - for the year ended 30 Jun 2017.

This is an international payments company, which has been listed on AIM since Jan 2001, with an utterly dismal track record. Over that time it has accumulated total post-tax losses of £152m.

Profitability (or rather, losses) have either got better, or got worse compared with last year, depending on whether you focus on adjusted, or statutory operating profit, as shown in the P&L excerpt below;


The cheerful narrative obviously focuses on the adjusted operating loss, which shows an improvement from -£10.435m loss last year, to £-£6.268m loss this year. Only in the bonkers alternative reality world of Earthport, can this be seen as a "positive year.."

That said, there is some impressive growth reported in revenues & transaction volumes;


11m transactions processed is actually quite impressive. So how come the company cannot make any profit on that? It reports gross margin of 67%, but of course it depends how costs are classified. A big gross margin can be reported if most costs are reported lower down the P&L, in administrative costs. Although note that, despite good top line growth, admin costs only rose marginally, which does support the idea that there could be good operational gearing here, maybe;

Administrative expenses marginally increased by £0.6 million to £26.4 million (FY2016: £25.8 million). Administrative expenses as a percentage of revenue were 87%, compared to 113% for the previous year, mainly due to increase in revenues and cost efficiency.

This supports the idea that if big increases in revenues continue, then the trading performance could transform. I'm starting to warm to this company a little.


Balance sheet - this is already out of date, as the company raised £24m (after fees) in a placing priced at 20p, on 4 Oct 2017. When you adjust the balance sheet for this recent fundraising, it looks fine.  Net…

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