GDC goes on a search for margins

Friday 20th December 2002

Things are finally looking up for GDC Communications, which saw its $1.50 issue share price treble in a few weeks after the May 2000 float.

The shares then trickled down steadily to their low of 76c in late-October but doubled in recent weeks after Telecom agreed to resell GDC's iVASP service to its customers. This week's profit warning has sent them back on the downward track. In these days, the resignation of the CFO doesn't help.

GDC's sudden upspike wasn't related to any increase in its profitability the company in August announced a $1.44 million June half-year profit, down 4.5% on a 12% drop in revenue.

But it has dumped or downgraded its low-demand, low-margin hardware-sales lines, such as PABX and Eftpos installation, and is concentrating on becoming "a seller of services."

Even so the low-margin Telecom "patch" maintenance business brings in two-thirds of revenue while the newish iVASP business turned over only $1.7 million in the half-year.

Given GDC has invested more than $9 million in iVASP to date, investors will be waiting to see if this is more than this year's flavour, even if Telecom is helping to market it.

With revenue last year of $70 million the company deserves more attention than it gets.

But it's arguably a sharemarket play only for those who know their way around telecommunications services; most investors wouldn't have a clue what it actually does.

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