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Mobile Streams reveals the effect of Argentina's currency devaluation

President Mauricio Macri, who took office last month, has lifted controls imposed by his leftist predecessor to allow the Argentine peso exchange rate to be determined by the market.
Mobile Streams reveals the effect of Argentina's currency devaluation
The company is a specialist in mobile media.

Mobile Streams (LON:MOS) has warned the devaluation of the Argentine peso will have a marked impact on revenue and profit.

President Mauricio Macri, who took office last month, has lifted controls imposed by his leftist predecessor to allow the country’s exchange rate to be determined by the market.

The peso has now fallen by around a quarter since the reforms were enacted on December 16.

For businesses such as Mobile Streams that operate in the country but report in sterling, the revaluation is a problem. Balancing this out slightly, costs (incurred in pesos) will be much lower.

Mobile Streams estimates the currency hit to revenues last month was £300,000.

The impact to net asset value will be a negative £800,000, while underlying earnings (EBITDA) will be reduced by £800,000 for the six months ended December 31.

The company, a specialist in mobile media for emerging markets, is currently sitting on cash of around £1.5mln.

In earlier statements, Mobile Streams has said its core market in Argentina is “changing rapidly”.

Customers are moving away from the traditional model of subscribing for basic content via their mobile operator to advertising-funded models to obtain free content and buying premium subscriptions to access more content. 

As a result, it expects revenues for July to December to be half those of those in the same period a year earlier.

“If this run rate continues and with the added impact of devaluation we would expect Argentinian revenues for the current financial year (ending June 2016) to be much lower than those reported for the previous year,” said chief executive Simon Buckingham. 

“However the negative impact on profits will be less as much of our operating cost is incurred in pesos.”

The company said it will issue its usual half-year trading statement later this month and will update shareholders on its new ad-funded products as well as its push into markets such as India.

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