The likes of Betex and BurstMedia have adversely affected the perception of overseas companies on AIM. However, one group showing the positive side of the market’s internationalisation is mobile phone content services provider Velti.

Based in Greece, the company has built strong market positions in neighbouring Balkan countries and is expanding in the UK and the US. The C12.5 million (£8.5 million) raised at float last year is financing growth and the repayment of borrowings.

Founded by chief executive Alex Moukas and chief operating officer Chris Kaskavelis, Velti has more than 100 customers in nine countries and uses its data centre in Athens to provide its services. Main target markets are the mobile operators, advertising agencies and those that deliver content for media groups. Within south-east Europe, the core business is built around the mobile operators, whereas in the UK and the US, Velti focuses on advertising agencies.

Mobile phone penetration in the Balkans is below that of Western Europe so there is still potential for growth in users as well as spending on advertising and marketing to them. Velti has relationships with the main operators in the region such as Vodafone, TIM Hellas and Turkcell. The company provides them with software for services as well as managed services and marketing, and has revenue share agreements in place with small operators. Its expansion is concentrated on Turkey, Romania and Bulgaria.

Velti has a mobile marketing platform that manages, plans and monitors mobile advertising campaigns. In the UK, it manages a service for Argos whereby mobile users can check if a product is in stock. Moukas says that Argos has gained £41 million of additional revenues from this service and is considering including a voucher facility.

It might seem strange that such a small company is trying to win business in the US, but it is worth pointing out that its Athens base helps it to compete in terms of costs and Velti has already handled US campaigns for BP and CBS among others. Moukas argues that the US mobile content market is ‘catching up with Europe’ and, based on his belief that companies in the US are more willing to take risks, he can foresee that market overtaking the European one in the near future.

Velti, which releases its figures in euros, was already profitable when it floated and more than doubled profits from C1.1 million (£750,000) to C2.7 million (£1.84 million) in 2006 as revenues rose 122 per cent to C10.8 million (£7.37 million). Last year was one of heavy investment with C5 million (£3.4 million) spent on equipment and intangible assets, including development, though management has budgeted for reduced capital expenditure this year. Balance sheet strength is an investment plus, with Velti still sitting on pro forma net cash of C4.5 million (£3.07 million) after the initial consideration paid in March for M-Telecom, a deal giving the group two-fifths of the Bulgarian market. Needless to say this financial firepower will prove invaluable as Velti looks to supplement organic growth with acquisitions.

The shares have risen by nearly one-third since the annual results were published in March, placing Velti on nearly 15 times forecast earnings for 2007. However, that rating is expected to fall to around 11 times the following year and Moukas says 80 per cent of forecast revenues for 2007 have already been secured, leaving Velti exceptionally well positioned to hit this year’s numbers. Buy.

Velti	AIM	£42.17m	125.00p	0.00p
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