Delay and acquisitions put Netcomm in the red

Stuart Corner
Tuesday, 16 May 2006 11:18

IT Industry - Strategy

See also:
Drive for SME market hits NetComm's profits
NetComm to buy NZ modem seller, Dynalink

Netcomm says it is likely to post a net loss of $700,000 for the year to 30 June 2006, and has cited costs associated with recent acquisitions and unspecified delays as the reasons.

The company confirmed that its "core business" had traded profitably for the second half of the current financial year but said that, after taking into account the restructuring and merger integration costs of the recently acquired operations of Askey Australia and Dynalink New Zealand, "the consolidated forecasts to June 30, 2006 indicate that NetComm is likely to post a net loss of approximately $700,000 (about 1 cent per share)".

Netcomm also reported a net loss to $0.392 million for the half year ended 31 December 2005, up from $55,000 in the previous corresponding half, saying that a number of one-off costs on initiatives to support its focus on the SME market had contributed to the higher loss. However it reported a 13.2 percent increase in revenue to $10.3 million.

In November 2005 and February 2006, NetComm advised the market that during the 2005/2006 financial year it would invest in a "progressive repositioning of its products into high value business products and solutions aimed at the small to medium business market to reduce its current exposure to low value, low margin commodity broadband products".

Managing director, David Stewart, said: "While some delays have impacted our current full year profitability, we believe that the company is well-positioned for further growth in both revenue and profitability in fiscal 2006...NetComm's new business solutions, aimed at the small to medium business market with higher average selling prices and margins, will be released in June 2006, with healthy orders forecast for the next 12 months.

"Approvals for NetComm products for the New Zealand market are also proceeding, with the first approval having just been granted. The company expects to have a broad range of its products available to be launched in the New Zealand market in July, 2006."

NetComm says the board and management remain confident that the re-positioning strategy is sound and necessary to ensure growth in shareholder returns and value.

"While some delays have impacted our current full year profitability, we believe that the company is well-positioned for further growth in both revenue and profitability in fiscal 2006," said Stewart.