Thus stung by 21% markdown in shares

Thus, the telecoms group spun out of Scottish Power, was left stunned yesterday by a 21 per cent slump in its share price after the company's trading update at its annual meeting.

Thus, the telecoms group spun out of Scottish Power, was left stunned yesterday by a 21 per cent slump in its share price after the company's trading update at its annual meeting.

Thus reported strong revenue growth and cash flow for the first quarter but said selling more high-speed internet and telephone services to BT's rivals had reduced gross margins.

Bill Allan, the chief executive, said the market's reaction was "bizarre" when the core business had performed well. Thus also announced it had sold off a non-core, call-handling business for £4m and that it was reviewing the future of an interactive technology operation, another non-core business.

However, the company said it was "cautious" about the general economic outlook and the telecoms market in particular although it remained "comfortable" with full-year expectations. Mr Allan blamed the market for being too obsessed with unavoidable changes to gross margins, caused by new product lines, rather than its strong cash position.

"This goes back to the bubble economy when people told me that you valued companies on revenue models. But that's completely bonkers unless you've got a business generating cash otherwise you go out of business," said Mr Allan. "I'm not going to sacrifice our cash line or covenants for the sake of margin."

Thus said the rate of revenue growth for the first quarter had exceeded the same period last year. Cashflow performance remained strong, it said, with positive cash flow after interest and capital investment compared with a negative position of £6.8m last year. Lower gross margins had been caused by the company selling more high-speed internet services and the strong growth in alternative telephone services supplied to BT's rivals such as BSkyB and Tele2.

"If we are being punished this much for delivering strong growth across our product set, a strong balance sheet, positive cash flow without writing off network assets or breaching banking covenants, like other companies, then all I can say is I'm glad I'm not running any of our rivals. We've been here before but I'm not going to change our strategy or focus."

As a way of countering its problems with gross margin erosion, Thus announced it was investing in its advanced telecoms network that will be able to deliver new internet protocol (IP) services that carry voice and data services using internet technology rather than traditional telecoms networks.

It has a signed a deal with Nortel Networks for advanced switching technology that it says should drive longer term margin expansion. Thus shares closed down 4.25 at 18.5p.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
News
i100
Extras
indybest
News
peopleLiam Williams posted photo of himself dressed as Wilfried Bony
Sport
Martin Skrtel heads in the dramatic equaliser
SPORTLiverpool vs Arsenal match report: Bandaged Martin Skrtel heads home in the 97th-minute
Arts and Entertainment
Caroline Flack became the tenth winner of Strictly Come Dancing
tvReview: 'Absolutely phenomenal' Xtra Factor presenter wins Strictly Come Dancing final
Arts and Entertainment
The Apprentice finalists Mark Wright and Bianca Miller
tvBut who should win The Apprentice?
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Carlton Senior Appointments: Private Banking Manager - Intl Bank - Los Angeles

$200 - $350 per annum: Carlton Senior Appointments: Managing Producer – Office...

Carlton Senior Appointments: San Fran - Investment Advisor – Ind Advisory Firm

$125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...

Sheridan Maine: Commercial Finance Manager

Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Sheridan Maine: Regulatory Reporting Accountant

Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Day In a Page

The week Hollywood got scared and had to grow up a bit

The week Hollywood got scared and had to grow up a bit

Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

Panto dames: before and after

From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
Thirties murder mystery novel is surprise runaway Christmas hit

Thirties murder mystery novel is surprise runaway Christmas hit

Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

Anne-Marie Huby: 'Charities deserve the best'

Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
The botanist who hunts for giant trees at Kew Gardens

The man who hunts giants

A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there
The 12 ways of Christmas: Spare a thought for those who will be working to keep others safe during the festive season

The 12 ways of Christmas

We speak to a dozen people who will be working to keep others safe, happy and healthy over the holidays
Birdwatching men have a lot in common with their feathered friends, new study shows

The male exhibits strange behaviour

A new study shows that birdwatching men have a lot in common with their feathered friends...
Diaries of Evelyn Waugh, Virginia Woolf and Noël Coward reveal how they coped with the December blues

Famous diaries: Christmas week in history

Noël Coward parties into the night, Alan Clark bemoans the cost of servants, Evelyn Waugh ponders his drinking…
From noble to narky, the fall of the open letter

From noble to narky, the fall of the open letter

The great tradition of St Paul and Zola reached its nadir with a hungry worker's rant to Russell Brand, says DJ Taylor
A Christmas ghost story by Alison Moore: A prodigal daughter has a breakthrough

A Christmas ghost story by Alison Moore

The story was published earlier this month in 'Poor Souls' Light: Seven Curious Tales'
Marian Keyes: The author on her pre-approved Christmas, true love's parking implications and living in the moment

Marian Keyes

The author on her pre-approved Christmas, true love's parking implications and living in the moment
Bill Granger recipes: Our chef creates an Italian-inspired fish feast for Christmas Eve

Bill Granger's Christmas Eve fish feast

Bill's Italian friends introduced him to the Roman Catholic custom of a lavish fish supper on Christmas Eve. Here, he gives the tradition his own spin…
Liverpool vs Arsenal: Brendan Rodgers is fighting for his reputation

Rodgers fights for his reputation

Liverpool manager tries to stay on his feet despite waves of criticism
Amir Khan: 'The Taliban can threaten me but I must speak out... innocent kids, killed over nothing. It’s sick in the mind'

Amir Khan attacks the Taliban

'They can threaten me but I must speak out... innocent kids, killed over nothing. It’s sick in the mind'
Michael Calvin: Sepp Blatter is my man of the year in sport. Bring on 2015, quick

Michael Calvin's Last Word

Sepp Blatter is my man of the year in sport. Bring on 2015, quick