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Earthport – “delighted” to announce further partner agreements, but what about that prior “commitment” to cashflow positive?

By Steve Moore | Tuesday 8 August 2017

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

Since I previously updated in July, shares in payment services company Earthport (EPO) had been heading higher, with it also announced “Earthport Partners with Kotak Mahindra Bank”. However, they are currently slipping back on an “Earthport Plc expands into Nigeria” announcement…

The former noted a partnership with India's fourth largest private sector bank, giving Kotak Mahindra Bank cross-border payment capabilities between India and the US, UK, Europe, Canada and Singapore. The latter a partnering with “one of Africa's foremost financial institutions”, Access Bank, to provide delivery of cross-border payment services into Nigeria.

However, no specific financial information is provided for either – this following the company having previously stated “committed” to becoming cashflow positive during its prior year, then updating “not cash flow breakeven in FY 2017” and not making a forward commitment.

It is thus not positive but not a surprise to see broker to the company, N+1 Singer, forecasting further cash burn this year – though it reckoning only £0.7 million (to a £11.2 million cash position).

Given the track record here though, I’ll wait to see on this and on a move to meaningful net cash generation being made. The share price reaction to the latest partnership announcement suggests I’m not alone in this view - and I currently continue to avoid.

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