Restructured Software Distribution Division Now in Better Shape

Apr 28, 2010

ASX RELEASE – Wednesday 28 April 2010

SIGNIFICANT RESTRUCTURING OF THE SOFTWARE DISTRIBUTION DIVISION HAS BEEN COMPLETED AND IS NOW ON TARGET FOR A POSITIVE CONTRIBUTION FOR FY2011.

  • WRITE-DOWN AND ONE-OFF COSTS FORECAST FOR THE SOFTWARE DISTRIBUTION DIVISION FOR FY2010.
  • ONLINE LOTTERY DIVISION CONTINUES STRONG TRADING AND GROWTH.
  Manaccom Corporation Limited (ASX:MNL) today announced its software distribution division was on target for an improved full year result in 2011 following a successful restructure and change in focus.
“As a direct result, the software distribution division is now in far better shape than the first half year ended 31 December 2009 when it contributed a loss to the Group”, Manaccom Chief Executive Officer, Mr Mike Veverka, said today. “Meanwhile our lottery division continues to perform exceptionally well and is on target for a record $5 million net profit before tax and $60 million revenue contribution to the Group for the 2010 financial year”, he said.   ONCE-OFF EFFECTS FROM THE RESTRUCTURING
A once-off write down of the software distribution division plus other once-off items are forecast to have a $9.5 million negative effect on the full year results to June 30, 2010.This is primarily a result of a write-down in the value of the Manaccom business acquired in 2007 for $5.1 million and Star System Solutions acquired in 2008 for $3.45 million.As announced in the half year report on 24 February 2010, the task of improving the software distribution division began in November 2009 following the resignation of former Board member Mr Ian Mackay. This process commenced immediately with the reduction in costs and renegotiation of key agreements with partners. “The problems that plagued the software distribution division have been resolved and it is now in a much stronger position to make a positive contribution to the Group. Key partners have been supportive and have assisted in the restructuring process”, said Mr Veverka. STRONG CASH BALANCE Despite the restructuring effects on intangible assets, cash assets are on target to exceed $8 million at 30 June 2010. Intangible assets are expected to decline from approximately $13 million to $4.5 million resulting in a net asset surplus of approximately $6.5 million at 30 June 2010.
 
SUMMARY OF RESTRUCTURING EFFECTS The following table summarises the effect that restructuring and other once-off costs are expected to have on the forecast current year results. These results are subject to the annual audit.
 
    FY 2009   12 months  

HY Dec 2009

 

6 months

 

Forecast FY 2010

 

12 months

  Group Revenue   $59 million   $36.2 million   $70 to $75 million
  Group NPAT from trading   $2.88 million   $1.15 million   $2.0 to $2.5 mil
  Restructuring and other once-off effects   $0.074 million   ($0.006 million)   ($9.5 million)
  Reported NPAT   $2.96 million   $1.15 million   ($7.0 to $7.5 million)
  Due to the restructuring of the software distribution division and the resultant revised forecast loss for the full financial year, a final dividend will not be paid for the 2010 year. The interim dividend of 0.5c per share paid recently would therefore become the only dividend paid for the current financial year. Directors are hopeful of resuming dividend payments in the same manner as previous years in FY2011, following the once-off write down.   ONLINE LOTTERY DIVISION CONTINUES STRONG GROWTH
Manaccom’s online lottery division - the Group’s primary business - is continuing to perform strongly with a second half year profit forecast to exceed the first half year, resulting in $5 million net profit before tax contribution to the Group.Website traffic, customer acquisition, retention and average spend by online customers all continued to be strong during the third quarter to March 2010.
 
On 1 April 2010, the Tatts Group became the operators of NSW Lotteries and Manaccom welcomes the new association in New South Wales. Manaccom’s lottery business already has existing long-term relationships with the Tatts Group in other states dating back 20 years and looks forward to continuing the successful relationship in New South Wales. “I look forward to working with the Tatts Group in NSW and continuing our mutually successful relationship into the future”, said Mr Mike Veverka. “Future growth plans for our lottery business in the USA, Canada and Europe continue to be pursued with the Company attending major USA lottery industry conferences during March”, he said. “We were able to present our online lottery offering to most of the lottery states in the US and we are now following up on opportunities”. “We are also looking forward to WLA 2010 - the World Lottery Association 2010 Conference - to be hosted for the first time in Brisbane later this year in November, and the many opportunities it will present for Manaccom”, he said.  

About Manaccom Manaccom began selling lotteries online in 2000 with state based charity lotteries in Queensland. In 2005 the Company acquired TMS Global Services Pty Ltd which gave it access to national lotteries via agreements with NSW Lotteries and Tattersall’s. 2009 was a breakthrough year following the signing of a five year exclusive agreement with NSW Lotteries in December 2008. The Company has developed the popular www.ozlotteries.com website from which it sells games such as OzLotto and Powerball. This website has been developed in a way that can also be used by major lottery operators, such as NSW Lotteries, as their internet channel. In 2007 the Company acquired a software distribution and publishing business that markets popular software titles such as McAfee through large retailers and independent resellers in Australia and New Zealand. In the 2009 financial year, Manaccom reported the following results:

  • Net Profit After Tax increased 78% to $3 million.
  • Revenue grew 57% to $59 million.
  • Dividends rose 50% to 1.5c per share.
  • EBITDA increased 77% to $5.1 million.

  For further Information: Mike Veverka CEO and Executive Director Ph: 07 3831 3705


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