NewSat finances improve, but survival questioned

Stuart Corner
Tuesday, 24 February 2009 05:01

IT Industry - Market

Satellite service provider, NewSat (ASX: NWT) has reported "much improved" performance for the six months to 31st December 2008, but its auditors have questioned its ability to continue as a going concern.

Revenue from ordinary activities increased 53 percent from $6.4m to $9.8m and losses from continuing operations before depreciation, amortisation, finance costs and tax decreased by 82 percent from a loss of $3.4m in H1 2007 to a loss of $600k. The company turned in a positive cashflow for the half year of $122k compared to negative cashflow of $2.8m in the half year to 31 December 2007. NPAT was a loss of $1.75m compared to a loss of$4.43m in the half year to December 2007. The company ended the year with cash reserves of $1.63m, down from $4.82m a year ago.

The continuing global recession will impact the mining and resources sectors in the near term, both key markets for NewSat, and the company says it will "continue to focus on high end solutions for high end customers and reduce the gestation period for closure as we work to build on the achievements of the past six months." NewSat said it had "significantly increased its annuity revenue streams during the half year period" and was "working hard in a difficult economic climate to achieve a strong second six month of operations for the 2009 financial year."

The company's auditor, Ernst & Young, said: "there is significant uncertainty whether the company and the consolidated entity will continue as a going concern." Notwithstanding this statement, the directors said they believed that "budgeted sales, profits and forecast positive cash flows of the company's operating entities will be achieved in the expected timeframes, and based on the existence of the equity line of credit agreement with YA Global Investments LP ( formerly Cornell Capital Partners), that the company will be able to raise adequate capital if necessary within the next 12 months to meet its debts as and when they fall due."