25 May 2012

Change in regulation to hit 2ergo

14/06/2011 Miles Nolan

Mobile technology specialist 2ergo (RGO) has announced that changes by the phone-paid services regulator PhonepayPlus may dent its profits.

The 12th Code of Practice has recently been published and shifts the burden of compliance to the mobile network operators. As a result some of the products provided to clients of 2ergo are now at odds with the rules so the AIM listed counter has put on hold a number of its services.

The net effect of this is that 2ergo may have to re-sign clients that use its services for billable items. Though the impact is yet to be quantified and could be minimal there is also the risk of a 'significant short term impact on the group's net profit'. A further update will be made when there is more clarity.

The core business continues to trade strongly, and just four months ago it raised £3 million by way of a well subscribed placing at 126p a share. Prior to the news today house broker Numis was predicting 2011 pre-tax profits of £2.5 million and EPS of 5.8p, however these numbers are under review. 2ergo has slumped 19 per cent today to 75.5p, until there is more clarification of the impact from the new guidelines there seems little reason to chase the shares.

Tags: 12th Code of Practice, AIM market, Numis, PhonepayPlus

Sector: Mobile Telecommunications

Companies: 2ergo

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