European Dotcom "Burn Rate" Improves to 20 Months
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[London, ENGLAND] The rate at which Internet companies burn through their cash before needing more has improved from 13 months to 20 months since last December, says PricewaterhouseCoopers in a report out Tuesday.
However, the research conducted in conjunction with Fletcher Advisory shows that there are still plenty of companies at risk of burning up their cash within a year. Most at risk are the B2C companies with an average burn rate of 15 months compared to 23 months for those in the B2B sector.
Published as "PricewaterhouseCoopers Internet 150," the report looks at the top 150 publicly listed Internet companies headquartered in Europe.
One finding that will be picked up by the U.K. media is that 50 percent of German Internet companies are already profitable, while only 26 percent of similar British firms are making a profit.
"What we're witnessing is dotcoms throughout Europe beginning to take proactive steps to consolidate their position and regain the confidence of the market, including fundamental business restructuring or seeking appropriate merger partners," said Ellis.
He added that the improving burn rates indicate that management teams are focusing not only on cash management but also on bringing forward their breakeven points. This way they could take control of their own destinies, said Ellis.
According to the report, Germany is becoming the dominant Internet economy in Europe with 45 percent of the whole market capitalization. It also has 56 of the top 150 companies, and has attracted 34 percent of the funds raised since the beginning of the year.
In second place is the U.K., with 35 of the top 150 and 16 percent of market capitalization. The Netherlands and France follow behind -- although several observers have reported very strong Internet growth in France in recent weeks.
As for share performance, that is a less encouraging story. The fact is: since January this year the PricewaterhouseCoopers Internet 150 has underperformed the Nasdaq, TechMARK and the FTSE 100. Since March it has dropped over 100 points.
"The current market view of the dotcom sector is at odds with the strong performance enjoyed by sub-sectors such as software and infrastructure," said Ellis.
Investors have been strongly influenced by a few high profile insolvencies, according to the analysts. By contrast, in the software and infrastructure sector -- which has been free of major collapses -- stocks have increased in value by 60 percent this year.
The report comes from PricewaterhouseCoopers Business Recovery Services, the branch of the global professional services organization which deals with under-performing businesses.