Netservices

Restructured business communications supplier Netservices slipped into losses at the halfway stage as restructuring costs took their toll.
 
The Manchester-based company revealed that previous profits had given way to pre-tax losses of £0.42m as one-off costs exacerbated a decline in revenues by 13% to £3.2m. Costs of £410,000 from redundancies and a number of small asset write-offs dragged a £1.4m gross profit into the red.
 
However, chief executive Mark Vickers, who has been forced to totally restructure the company over the last few years, is optimistic that a turnaround is on the horizon. The chief reason for his exuberance is the recent winning of accreditation from networking equipment giant Cisco to target small- and medium-sized companies.
 
‘This means that companies have a choice to either get into bed with the carriers [network cable providers such as BT, Cable & Wireless or Colt] or get into bed with us,’ says Vickers. ‘That's like either being cared for by the wolf, the carriers, or the shepherd, which is us.’
 
Vickers says this will make a significant difference to the company’s ability to win contracts and has already seen a first win. ‘While this year’s numbers won’t be significantly moved from what we’d said we are moving into a period of significant growth.’
 
Despite the company’s gloss, trading is very tough and the outlook remains rather gloomy. Rob Sanders at house broker Arbuthnot recently slashed his forecasts for the full year to £7.2m sales, £100,000 profits and 0.4p earnings per share, but admits these are still ‘at the top end of expectations’.
 
Netservices shares recently spiked up from a recent low of 3.12p in expectation of the news, but have come jolting back with a bang. Although the Cisco relationship should be a powerful boost, they remain too speculative for our liking.