Remote audio meetings company LoopUp (LOOP:AIM) has seen its share price slashed by 43% after issuing a profit warning. Customer churn has spiked as already intense competition gets even hotter.

That’s a stock discount that matches the Black Friday theme but one that will leave shareholders feeling lost.

The share price has collapsed from 155p to 88.5p, meaning that the stock has lost about 60% of its value during what has been a strong November run for UK stocks overall.

The FTSE All-Share has risen more than 13% so far this month, even including this week’s soggy showing.

WARNING LOOKS MILD

The company said it expected performance ‘moderately below current market expectations’, with revenue forecast to be no lower than £50 million. Earnings before interest, tax, depreciation and amortisation, or EBITDA, was pitched to be at least £15 million.

Both measures would represent strong growth of 2019, about 18% higher in sales terms and an impressive-looking 134% up on EBITDA.

But things turn ugly next year. ‘Looking to 2021, we see headwinds including lower post-pandemic usage per user, plus risks from current higher churn rates,’ said Numis analyst Will Wallace on Friday.

‘The pipeline for telephony is very large, but conversion rates are very uncertain.’

FORECASTS SLASHED

The analyst hasn’t so much taken a red pen to his previous estimates, more a tin of red paint. ‘We cut our 2021 revenue forecasts by over 40% and forecast a £4 million cash outflow in the year.’

Numis had anticipated £3.8 million of 2021 free cash flow. Wallace has also withdrawn his previous buy rating on the stock.

Revenue in 2021 is now projected at £32 million from £55 million and EBITDA goes from £13 million to £6 million. This will mean, according to Wallace’s calculations, that where a £5.8 million pre-tax profit was meant to be, a £1.3 million hole will now sit.

LOSING TO VIDEO RIVALS

‘Whilst trading through the Covid-19 crisis was always going to be difficult to forecast, what is most telling about today’s release is that LoopUp’s core conferencing revenues are now some 9% below pre-Covid-19 levels, despite continued high levels of remote working, and with even the more resilient professional services sector only up 6%,’ said Megabuyte analyst Philip Carse, who had warned of the threat from rivals back in July.

‘Put simply, the shift to IP-based and generally free at point of use conferencing services such as Microsoft Teams, Google and Zoom that was evident last year has now resumed, and actually accelerated, as organisations have implemented longer-term solutions to the new Covid-19 world.’

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Issue Date: 27 Nov 2020