RE: Placing15 Feb 2022 14:32
Interesting review of todays news... asktrader
The trading update tells us that revenues in FY 2021 will be around expectations, at £19 million and change. OK, so if it’s hitting expectations then why is the LoopUp share price down 25%? Because the same trading statement says that expected FY2022 revenue is in the £15-£16 million range. Oh, and that FY2020 revenue was £50 million.
Much of the announcement is about how the contract pipeline is looking really good, actual contracts are being won, clients onboarded. Everything’s just swimmingly good – except for those revenue figures. There’s even a certain amusement at the way that 2020 and 2021 numbers are right at the beginning of the update, the estimates for 2022 right at the end, with hundreds of words about how many contracts are being won in the middle.
That is, LoopUp faces a common enough problem in a time of technological change. However, cutting edge the company and its technology is the prices for what it is selling are cratering. It needs to have a massive client base growth rate just to keep revenues stable that is. Something which, obviously, it’s not actually achieving.
How LoopUp gets out of this isn’t obvious either. It needs either that client growth rate to soar, thus enabling the diminishing revenue per client to cover overheads, or it needs prices to at least stabilise if not rise. The increasing the client base solution also won’t work well if there are variable costs of any significance in bringing on the marginal customer.
We don’t know what the answer is here and nor does the rest of the market. The LoopUp share price will likely depend upon intimations of there actually being one.
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