The Investment Column: Time for Neteller investors to cash in some chips

Click to follow
The Independent Online

The awesome growth at the online money transfer group Neteller, one of the biggest companies on the Alternative Investment Market, continues. Yesterday it unveiled a set of full-year figures which can only be described as outstanding. Sales rose 108 per cent to $171m (£98m), pre-tax profits soared 114 per cent to $98m while the all important cash-flow figure jumped 49 per cent to $114m. Is there no end in sight to the company's growth?

Its chief executive, Ron Martin, says not for a long while. He points out that in North America, where Neteller gets more than 80 per cent of business, sales remain strong and continue to rise. Meanwhile, in Europe and Asia, where the company's operations are in their infancy, revenues are on a steep upward trajectory. To give these an extra push Neteller plans to launch services in four European languages.

The group's key customer base is online gaming ­ it provides an " e-wallet" for gamblers to use when playing poker and other games via the web. Eighty-five per cent of revenues relate in some way to the industry and its popularity has fuelled the bulk of Neteller's financial success. Here the company competes against the credit card companies such as MasterCard and has been doing rather well recently as site operators such as Sportingbet (which runs Paradise Poker) have increasingly promoted its services to punters.

The downside to all this is that the US authorities intensely dislike online gambling. In fact, there are several bills prohibiting the practice awaiting approval from Congress. Whether any of them make it on to the statute book remains to be seen but clearly this represents a significant risk to Neteller. As does the possibility of growing competition ­ the online money transfer sector hasn't particularly high barriers to entry.

Hence it is no surprise that in November the company's founders sold £218m worth of their shares at 625p. Since then the stock has risen and closed at 707p yesterday. Anyone who bought in at Neteller's 200p float would do well to follow their lead and take some profits at current levels.


Consumer debt in this country stands at more than £1.1 trillion. Of that total, £192bn is unsecured ­ that is credit card, store card or overdraft borrowing. Given these statistics, it is not surprising that companies offering advice to debt-laden consumers are flourishing, especially those which specialise in administering "individual voluntary arrangements" (IVAs) a popular halfway house for debtors which means they can avoid bankruptcy.

Accuma is one such company. In fact, after Debt Free Direct, it is the second-biggest player in this fast-growing industry, with a 12 per cent market share. Yesterday, the group unveiled a 310 per cent jump in revenues and moved into the black with interim profits of £304,000. Its business model is relatively simply. Accuma offers IVAs to people who are no longer able to service debts of more than £15,000, works out how much of this total they are realistically able to pay, draws up a repayment schedule and then persuades their creditors to accept this deal and write off the difference. It makes money by taking a fee for this service.

Originally, IVAs were introduced by the Conservative government of the late 1980s to help entrepreneurs whose businesses had hit the rocks but they have become increasingly popular with consumers. Last year the number of IVAs doubled to 20,000 and 98 per cent of these were between consumers and their creditors.

This figure is expected to rise again this year and should help pre-tax profits at Accuma jump to £5.3m by 2007, according to analysts. At 260p, this leaves the stock trading at 18 times forward earnings, which is cheap when one factors in the company's growth rate. Buy


Pinewood Shepperton studios is where parts of the latest James Bond film ­ Casino Royale ­ will be filmed this year. It is also the place where talk show programme Trisha Goddard is produced on a daily basis. If it had not been for banal TV programmes such as the latter yesterday's annual results would have been a lot worse.

The 58 per cent slump in operating profits to £5.3m came after the UK film industry suffered major disruption. To blame was uncertainty emanating from changes to the tax regime governing the industry. Because the film studios have a high level of fixed costs, a relatively modest decline in revenues results in a major drop in profitability. The near halving in film revenues in 2005 was very, very bad news for the company.

A new regime is in place and the uncertainty has passed. This leaves Pinewood in good shape going forward. The recent acquisition of Teddington studios has proved quite a coup. There are also plans to double the size of the company's facilities by expanding the Pinewood and Shepperton sites. The stock has doubled since hitting an all-time low of 120p in June. Hold for more gains.