Given Maitland boss Neil Bennett's fresh accolade as one of the top 20 PR influencers in Britain, his client Mobile Streams (MOS:AIM) may have wished for better advice on how to brace the market about foreign exchange issues. Shares in the Appitalism device and operating system agnostic app store operator crash 35% to 41.75p on a profit warning.


We'll get to why in a minute, but it is somewhat galling that the most salient bit of information, the bit about 'expected to have a negative impact on the company's financial results' is buried fully half way down a fairly lengthy update, in paragraph seven no less and after lots of seemingly positive noises about international expansion, revenue growth and increasing cash.

MOBILE STREAMS - Comparison Line Chart (Actual Values)

The problems facing Mobile Streams are not new. It's core market, Argentina, is among the biggest in a Latin American ecosystem enjoying the rapid proliferation of smartphones and apps.


But foreign exchange controls implemented a couple of years ago mean Mobile Streams' locally-based cash has been locked within the nation's economic borders.


That's bad luck more than a management mistake, but the effects are still being felt, not least lately due to the plunging value of the Argentinian peso.


Five years ago a peso was worth about 20p sterling, now its worth 7.5p. Cash increased by £1.7 million from June 2013 to £4.6 million at December, with £3.3 million locked in Argentinian bank vaults. About £500,000 of that has evaporated over the last month thanks to the peso collapse.


The effect of this is to halve Mobile Streams' revenue growth this year to 14%. As Megabuyte analyst Philip Carse points out, 'things are also going to get a lot worse, with the Argentinian Peso being devalued by a further 23% this month, suggesting full-year expectations will be substantially missed.'


Increasing marketing spend as the company attempts to widen its catchment area to Mexico, Colombia, Brazil and into markets outside Latin America, meaning earnings before interest, tax, depreciation and amortisation (EBITDA) will come in below last year's reported £1.9 million.


'Underlying growth is strong and the growth in Mexico shows the diversification and expansion strategy is making good headway,' argues Mobile Streams' broker, N+1 Singer. But it's going to be a rough ride for the share price until much needed currency stability returns to the peso.

Issue Date: 29 Jan 2014