Earthport is out of this world

Cross-border payment platform provider Earthport has shattered City forecasts, and with the backing of many of the world's largest banks, prospects for further substantial growth are clear and the investment case compelling.

Revenue of £10.7 million might not seem like much, but it's 160% more than the company generated last year. Even if you strip out the acquisition of Baydonhill, a foreign exchange service provider, in October, like-for-like revenue rocketed by 60%. Broker Panmure Gordon had pencilled in just £9 million.

And cash burn is slowing, too. Net cash used in operating activities during the period fell to £5.3 million - which included £700,000 of acquisition costs - from £5.9 million, and fell by over a third in the second half to £2 million. Panmure had expected a year-end loss of nearer £7.3 million.

With the backing of big banks like HSBC and Bank of America Merrill Lynch, both of which are scheduled to go live perhaps as early as six months' time, the future looks bright. In all, Earthport signed up 33 new customers in the year to 30 June and 14 went live. Another 25 are under contract and the revenue potential as more go live is significant.

Panmure reckons Earthport will more than double sales to £20 million in the year ending June 2015 and generate free cash flow of £1.8 million, turning an underlying profit of £500,000. It could be £7.5 million in 2016. "As the adoption rate improves we expect exponential growth in the business given the massive market opportunity in international payments," explains the broker.

It's hard not to agree. Increasing international exposure through deals with major banks should continue to drive rapid growth, providing both catalysts for the share price and significant profits for Earthport in just a few years' time.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.