Time to take flight from ebookers
SurfControl swims against the tide; And Thus, a real profit came to pass
Tuesday 04 November 2003
SurfControl swims against the tide
Spam is getting beyond a Monty Python joke. The battle against junk e-mail is being fought across the corporate world, and SurfControl has been a beneficiary. It develops web filtering software that numbers P&O Cruises among its anti-spam customers and (you'll be pleased to hear) keeps journalists at The Independent off the porn sites.
The explosion in customer growth is probably behind SurfControl now, although it did register a creditable 4 per cent rise in customer wins in the first quarter of its financial year. The focus now has to be on developing new filters and trying to get more out of existing customers, bundling together existing products. There was less evidence of success in these areas in yesterday's statement. It is selling few early-stage products to big companies that might incorporate the software into their products. Also, SurfControl admitted it usually has to concede profit margin to get customers to sign up to new contracts. Customer churn seems high, at between 69 and 86 per cent depending on the type of product or customer.
Areas such as mobile computing on laptop computers and BlackBerry handsets will open up new opportunities, but in anti-spam in particular, new competitors are emerging that will make life considerably tougher from here.
On around 30 times current year earnings, the shares, up 24p to 779p, are a sell.
And Thus, a real profit came to pass
Profits - the holy grail for smaller telecoms companies and an issue most skirt around - are now tantalisingly close for the Scottish group Thus.
Spun out of ScottishPower in 1999, Thus reckons it will make an operating profit around the end of next year, while the year to March 2006 should see its first real, bottom-line profit.
Thus is ticking off its targets one by one. Yesterday's six-month report showed the numbers are continuing to move in the right direction. Given market conditions remain tough and prices are still under pressure, this is a decent achievement. Losses in the half-year to 30 September narrowed to £10.2m from £30.8m in the same period a year before. Sales rose 10 per cent to £157.5m.
The only blip in the figures seemed to be the division which runs corporate call centres, where revenue fell 23 per cent to just under £10m. A big customer, Microsoft, has shut down a number of its centres. Thus has hired another 250 staff, however, and seems confident the unit is back on track.
The company is happy with analysts' forecasts of an underlying, or Ebitda, profit of about £44m this year on sales of about £330m. This column recommended the shares as a speculative buy back in May and the stock, up nearly 5 per cent at 33.75p last night, has more than doubled since then. While it remains a good long term bet, there is likely to be a pause for breath now. Hold.
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