Why Coms plc Has Tumbled 13% Today

Although we don’t believe in timing the market or panicking over every stock fluctuation, understanding how a business is performing, competing and changing is vital to sensible investment.

What: The share price of Coms (LSE: COMS) — a company that provides VoIP solutions to business customers in the UK — has tumbled 13% in trading so far today, following release of interim results for the six months to 31 July 2014.

So what: Revenue increased by a colossal 833% — up to £23.1m, from under £2.5m in the same period last year — and gross profit rose 418%, to £5.3m.

The huge rise in revenue is largely due to acquisitions made in the latter part of last financial year and the early part of this one. Earnings before interest, tax, depreciation and amortisation were also up, rising 180% to just over £89,o00.

However, the company recorded a loss before tax and exceptional items of  £417,469 — nearly quintuple that in the same period last year, when it was just £88,645. But exceptional items of £202,933 — comprising  £797,067 of one-off reorganisation costs, offset by the release of a £1m provision for contingent consideration — helped reduce the pre-tax loss to £214,536.

What now: The company says that its immediate priority is now to fully integrate its acquisitions, and it says that it hopes to make “significant progress” on this in the second half.  It also says that acquisitions will continue to be part of its growth strategy, and that it aims to be a “consolidator” in its target markets. 

Commenting on today’s interim results, CEO David Breith said:

“In a short space of time, we have successfully built an all-encompassing telecoms business that offers a broad and technically robust range of services. Our aim now is to leverage this and ensure that all operations build on their current market positions and deliver the growth potential that I firmly believe exists within the Group.

“The results we have reported today I believe do not fully reflect what the business has achieved to date but also provide an indication of what is possible in the future.“

Thanks to this morning’s fall, Coms’ share price is now down 8.25% on this time last year, although it’s still beating the AIM All-Share, which is down 11.33% in that time. However, the longer-term story is less comforting, with Coms’ share price having plummeted 55% over the past five years, compared with a 10.4% rise by the AIM All-Share.