LONDON (ShareCast) - Shares in 2ergo faded Monday morning as the mobile content software specialist said hopes that its American business would achieve profitability ahead of schedule have not materialised.
Reporting its results for the six months to 29 February 2008, the company said pre-tax profit rose 23% to £1.49m from £1.21m on turnover that grew 13% to £17.8m from £15.7m.
Gross margins were maintained at 26%, which the board said was particularly pleasing “given the current challenging economic conditions both in the UK and the US.”
Basic earnings per share eased 1% to 3.80p from 3.84p a year earlier, reflecting the 25% tax rate levied in 2008 versus the 14% paid in 2007.
Revenues in the US rose 12% to £0.59m but losses widened to £0.24m from £0.2m, as the company continued to invest heavily in the region.
Sales cycles are lengthening in North America, the company warned, and hopes that the American business would move into the black earlier than forecast have proved misplaced.
Nevertheless, the group is witnessing an upturn in the level of interest shown by advertisers and marketing agencies in the US, as brands assign a larger proportion of their marketing budget to mobile campaigns.
“Although the Board is not predicting a downturn in its business, it is very aware of the financial pressure being placed on some of 2ergo's current and future customers,” Barry Sharples, joint chief executive of 2ergo, said.
“Special emphasis is being placed on cost saving products and services offering clients a strong return on their investment, which will prove particularly appealing in the current global economy. In addition, the group's customer base is diversified across many sectors thereby reducing vulnerability to a down-turn in any particular vertical,” Sharples added.
