PlusNet shares bounce on results
Future's bright, but not Orange
PlusNet shares recovered slightly today after falling sharply on results yesterday. Shares are at 110p, after falling 9.5 per cent yesterday.
Although PlusNet posted good financials for the three months ended 30 June 2006 the City is concerned about new competition in the broadband market. Turnover was up 37 per cent to £22.5m and operating profit up 41 per cent to £3.1m. Profit before tax was £3.03m for the six months ended 30 June 2006 compared to £2.28m for the six months ended 30 June 2005.
PlusNet's chairman Kevin Adams said in a statement: "Market uncertainty caused by new mass market entrants may continue to affect our growth rate in the short term, but in the longer term we are confident that our clear focus and unique technological advantage will deliver growth as the market evolves and matures."
The ISP believes many of the current so-called "free" broadband offers are unsustainable in the long term and that many punters don't want the "legacy services" being bundled with converged broadband offers. 90 per cent of PlusNet revenue comes from broadband and related services.
PlusNet claims its users "are typically drawn from a growing audience of IT professionals and technology enthusiasts" who are interested in quality service rather than just low price. Furthermore the company believes that users of mass market ISPs "will become more discerning" and look for better quality connections.
The ISP has 198,000 broadband subscribers, up 75 per cent on a year ago. PlusNet said it was disappointed by this - it said take-up had been slowed by the problematic rollout of BT's 8Mb services and slowed between the first and second quarters of 2006.
For more download the press release (pdf) here.