UK internet companies suffering high burn rate

- One in four UK internet companies will run out of cash within six months according to a survey into burn rates by PricewaterhouseCoopers.

- One in four UK internet companies will run out of cash within six months according to a survey into burn rates by PricewaterhouseCoopers.

The research, carried out by PWC's Business Recovery Services, looked at the burn rate of 28 internet companies listed on the FTSE and AIM exchanges.

The research calculated burn rates by taking the most recent financial statements from a company and dividing the cash on the balance sheet by the cash operating expenses minus gross profit.

Coupled with the assumption that cash operating expenses and gross profit grow at the same rate as internet commerce - 130 per cent per annum - the findings exposed ten companies with a burn rate of less than a year.

From the findings, the company has concluded that such vulnerability could be the catalyst for consolidation in the dotcom sector in the coming year.

It also concluded that there is no clear link between companies' share price performance and the length of their burn rate, the relevance of which investors have failed to acknowledge in share prices.



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