News Release
CHAIRMAN'S OUTLOOK
Our Progress to Date - Over the past 24 months, Earthport has been transformed into a rapidly growing company that is about to achieve profitability, which will guarantee our future growth and ultimate success. Furthermore, although our existing client base and growth from this client base provides enough revenue for the business to cover its ongoing overheads, as new business is won and brought to revenue over the next year, the Company should post a considerable profit in FY2009.
Forecast - As underlined in the accompanying 'SALES & MARKETING FOCUS', the business we are in is fast changing and is presently experiencing a growth phase that is characterised by 'flux'. However, Earthport's growth is forecast to continue, particularly with the number of signed contracts or fully qualified contracts that are presently in the pipeline. Indeed, as is mentioned elsewhere, during the first half of FY2008 revenue increased by 173% over the same period during the previous year and we anticipate strong second half-year growth in revenue to follow on.
This growth will come from the following sources: existing client base; growth in FX revenue; the completion of at least three key new projects (which is a conservative estimate when reviewing our current sales pipeline). Thus, revenues for the second half of FY 2008 are forecast to exceed previous expectation, leading to monthly profitability by the end of this period.
Similar growth in the first half of FY 2009 is forecast and will further increase profitability in the period. By then, balance sheet debt will have been repaid or refinanced and, as a result of this growth outlook, Earthport will be able to invest significantly more in our platform and our technology.
Optimal Business Model - Earthport possesses great operating leverage: per-transaction operating and maintenance costs are minimal; transfers involving movements to-and-from the real global network of segregated bank accounts generate the lowest margins but are still significant, while transfers involving FX generate the highest margins. Finally, transaction margins are expected to fall due to competitive pressures and due to the creation of the Single Euro Payments Area (SEPA). Naturally this will drive down transaction costs in the Euro zone. However, Earthport's increasing levels of automation and our transaction and FX growth are expected to more than compensate for this trend.
Conclusion – It is difficult to forecast the business with complete accuracy more than one year into the future, particularly as significant 'step-growth' will occur during this period. However, it is anticipated that by delivering the performance improvements outlined earlier, we shall reach our next major milestone, namely profitability.
- Sales - Earthport's competitive advantage and operating leverage remain intact. Sales partnerships are growing. More opportunities are being identified and brought to contract. Compliance and technological systems to support successful sales execution are being developed in parallel.
- Technology & Platform – We continue to invest in the consolidation and development of Earthport's competitive advantage, through the evolution of our global account network and our scalable Universal Payments Network (UPN)…a combination that would be prohibitively difficult to replicate and poses a significant competitive barrier to entry for competitors.
- Financials - Investors remain confident in our future as our business plan continues to build. Cash resources now existing will allow Earthport to pass through what is anticipated to be the final pre-profitable stage without a major infusion of new capital. However, should one be required, investors have already agreed to bridge the gap.
- The New Earthport - It is now apparent that Earthport's turnaround is almost complete and a strong performance from Earthport's share price over the past year as well as a ten-fold increase in market capitalisation to £50m is a clear sign of growing strength!
Finally, on behalf of my Board of Directors and myself, I would like to express our appreciation to our clients, our investors and members of our staff who have demonstrated their continuing confidence in Earthport over the past 12 months. It is this winning combination of imagination, determination hard work and, most of all your loyalty…that has made this 'Turn-Around' possible.