When Easynet Group Plc floated on London’s Alternative Investment Market in March there was no shortage of takers for the Internet access provider’s stock – after all, at that time the very word Internet still had investors flocking. And anxious to capitalize on the Internet frenzy chairman David Rowe said the company just couldn’t afford to stand still (CI No 2,835). Six months on, the future doesn’t look quite so bright. Easynet’s shares were at at all-time low of 38.5 pence yesterday morning. Following the announcement of the group’s interim results, the share price rallied seven points to 45.5 pence, but it remains a distant cry from Easynet’s 100 pence per share flotation price, in which UKP2.6m was raised. Managing director Graham Davis said he felt the collapse in share price could be attributed to a recent general deterioration in the technology market as a whole.
Inaccurate and damaging
Private investors with little or no understanding of the group’s technology or business expected to make a fast buck, but have since been scared off by a spate of recent bad press which the company excoriates as both inaccurate and damaging. One article published in a London evening newspaper last week, which alleged its disappointing performance was the result of a bitter price war in the industry, effectively wiped about 20 pence off the group’s share price, claimed Davis. Yesterday the group turned in pre-tax losses for the half that were up at UKP244,133 on revenue that jumped to UKP627,000 from UKP134,000 last time. Undeniably, establishing a network takes time and money. During the period a UK national Internet Infrastructure that offers local call Internet access countrywide was completed. As promised at the full year stage (CI No 2,861), the company now also offers nationwide local call access throughout France through its 71.5% owned subsidiary Easynet SA. Initially, Davis said the company has used France Telecom’s infrastructure, but suggested it would build its own network at some point for added security. Easynet made alliances during the half in a bid to establish itself as a major player in the Internet access world. UK on-line business information supplier MAID Plc took a 15% stake in February and signed Easynet as its preferred Internet access provider. In July it paid UKP215,000 to acquire small Internet service provider with 1,600 subscribers, Pavilion. And although the group has increased its subcriber base by 150% this year, it still amounts to only 7,500 customers. Compared with the 60,000 subcriber base at rivals Demon Internet Ltd, Easynet is up against tough competition. There seems little love lost between the two. Davis claimed Demon practiced pile it high and sell it cheap techniques – as co-founder of Demon, Davis spent 10 years working with the now rival team before leaving to set up Easynet. His focus is now on the quality corporate end of the market, and is confident the company can make a success of itself by forging new strategic alliances and developing new products to add value to the existing service. Latest from the company is that its service will be one of t he five or six providers on offer when Microsoft Corp begins bundling Internet access with Windows95 software. There is to be no dividend before profits justify payments.
