Interactive Investor shares slump 12% on warning

Interactive Investor International, the financial website, yesterday warned it would have to cut back severely on marketing costs and cast doubts over its European expansion strategy.

Interactive Investor International, the financial website, yesterday warned it would have to cut back severely on marketing costs and cast doubts over its European expansion strategy.

The company, which floated earlier this year, saw its shares dive 12 per cent to close at 56.5p after the warning, having been as low as 36.5p yesterday morning. Floated at 150p in February, the stock was as high as 415p at the beginning of March.

Interactive Investor said that it had been hit by the decline in equity market activity since March, which has seen as severe correction in technology stocks. It said that there would only be "modest" growth in revenues in the second half of the year, compared with the £2.8m turnover for the six months to 31 March. It made a loss of £9.6m for that period.

It said that transactional revenues from stock trading, which accounted for 29 per cent of its first half turnover, were depressed, as was income from the construction and operation of trading systems. In addition, it said that sponsorship earnings from stock brokers had been hit by capacity constraints.

Tomas Carruthers, chief executive, said the company would have to cut "many millions" from its marketing expenditure plans and concentrate on existing users. At the time of the flotation, Interactive Investor said it would spend £33m over the next two years on marketing.

The company said also said that "increased emphasis" will now be placed on strengthening its presence in the UK.

Analysts said it pointed to a possible abandonment of Interactive Investor's expansion plans for continental Europe. Mr Carruthers said that company would now only enter Europe by forming local partnerships, rather than use advertising to build business from scratch. He said he was in talks with potential partners.

Justin Bates at Charterhouse Securities, said: "I don't see how this company is ever going to make money in its present form. The announcement shows up the deficiencies in its business model, and those of all business-to-consumer sites."

Mr Bates yesterday increased his forecast losses for the current year from £16m to £20.4m.