LONDON (Alliance News) - Earthport PLC said Friday it narrowed pretax losses in the year ended June 30 as new customer wins boosted revenue. The cross-border payments service provider said it is now on track to break even by the end of 2014.
Earthport saw a pretax loss of GBP8.1 million, narrowed from GBP9.6 million in the previous year.
The company posted revenue of GBP4.1 million, up from GBP3.0 million in the previous year. Revenue growth was driven by increased activity with existing customers and new client wins such as Bank of America and American Express.
"For the first time our revenues grew faster than our investment," Executive Director Hank Uberoi told Alliance News in an interview. "It's a very high fixed-cost business."
However, revenue growth was hurt by its decision to discontinue three customers as they failed to meet Earthport's compliance criteria, which lost the company around GBP330,000. Although the company's shift towards more stringent controls on compliance lost them these customers, Uberoi considered it a positive step.
"Actually it has turned out to be a very positive thing for us," Uberoi said. "We took a revenue hit, sure, but the large client after we terminated them, they ended up on the FSA's bad list. So, we caught them before the regulators caught them. We got lots of credit from our partner banks for being proactive and being willing to give up revenue."
The FSA is the UK financial services regulator the Financial Services Authority.
"It strengthens our position. If we're going to be an industry utility, we need to be really strong on compliance," Uberoi said.
Administrative expenses dropped 11% to GBP9.68 million from GBP10.83 million, as the company saw lower staff and contractor costs. However, Earthport said that, due to its increasing customer base and pipeline, it expects to increase its sales team headcount in the year ahead and increase investment in its technology.
Earthport said it is confident for its future as traditional methods of international payments are struggling to cope with increased demand.
"We are building this to be a solid bulletproof long-term utility for the industry that can process billions of transactions," said Uberoi.
Uberoi told Alliance News that Earthport expects to break even towards the end of 2014, and "from there we'll be generating free cash which we'll either give out in dividends or use to buy back stock."
Market trends had been favourable, Earthport said, although it cautioned that it can be a slow process to gain traction in the banking industry. The pace of regulatory changes in the industry has also been high, as regulations such as the European Commissions' Payment Services Directive, which regulates payment services and payment service providers throughout the EU, proved beneficial for a specialist provider like Earthport.
In the year ahead the company said that it will be focusing on growing revenue from existing and new clients, going live with global banking partners, and further expanding its geographical footprint.
At the year end Earthport had a banking network of 58 countries. However, progress since then has been "very slow", Uberoi said. "We've only added two countries since the year end. It takes time."
Uberoi added: "Every country is different. You have to understand the local regulations. You have to talk to the banks, the regulators."
Shares in Earthport were trading up 1.2% at 20.50 pence Friday afternoon.
By Hana Stewart-Smith; hanassmith@alliancenews.com; @HanaSSAllNews
Copyright © 2013 Alliance News Limited. All Rights Reserved.
