Cadmus Result Reflects Positive EBITDA Takes Lead in Move to Smartcard Compliance
Payment solutions company, Cadmus Technology Limited (NZX: CTL), today announced revenues of $5,741,000 for the six
months ended 31st December 2003. The company delivered unaudited earnings before interest, tax, and depreciation and
amortisation (EBITDA) of $1,001,000, while cashflow from operating activities for the period improved to a positive of
$38,000, compared to ($456,000) recorded for the same period last year. The net deficit after tax for the period was
($165,000), compared to the prior year of $102,000. This result includes a one-off stock write down relating to non EMV
compliant rental inventory of $234,000.
According to Cadmus Technology, Managing Director, Ian Bailey, the result leaves Cadmus well placed to take advantage of
new market opportunities with a backlog of orders due for delivery over the next 12 months.
The global adoption of the EMV standard (Europay, Mastercard, Visa) has now commenced creating a total replacement
market of 40 million units (estimated to be worth over $19 billion) – or 6.9 million units per annum.
Cadmus Technology is the sole New Zealand manufacturer and exporter of payment terminals and targets global markets as
well as replacement opportunities in its existing customer base.
“While orders for the Asia Pacific market met expectations, a number of factors impacted on revenues for the period,”
adds Bailey.
“There was a smoothing out of annualised business from customers who had taken delivery of large initial orders in the
first quarter of last year, a request from a major customer to delay delivery of confirmed orders until the second half
and delays in the receipt of some international bank and network certifications – which we are currently in the final
stages of certification and expect to announce shortly.
“The decision was also made to write off $234,000 in our rental inventory which no longer complies with the newly
introduced EMV standards. Whilst there may be a similar provision needed in the second half of the year, there is a
strong possibility that the entire amount is recoverable as we have found prospective markets which do not require EMV
compliant terminals.
In New Zealand, up to 80,000 terminals will need to be replaced over the next 4 years as the EMV standards become
mandatory. Recent reports from ETSL (New Zealand’s largest EFTPOS processor) suggested the rollout take effect from 2nd
February 2004, which will ultimately increase demand in the New Zealand market as merchants replace non-compliant
terminals.”
This follows the trend in Asian, Middle Eastern and European markets, where EMV standards are now being implemented.
“The strengthening New Zealand dollar had a small negative impact on the result. However, overall Cadmus maintains
sufficient forward exchange cover to offset any major short term consequences, and our New Zealand business remains
largely unaffected by the exchange rate,” adds Bailey.
“The Company’s export business model continues to be based around developing and proving product in New Zealand,
manufacturing domestically and distributing internationally via an in-country distribution network.”
Cadmus Technology is also currently developing new products for key growth segments such as mobile payment, taxis, bill
payment and pre-paid top-ups for mobile phones.
“Locally, we are seeing a shift in the market environment as the new EMV standard is progressively adopted,” adds
Bailey.
“The environment for the second half is an improving one: we expect to see a small increase in demand over the remainder
of the financial year, increasing substantially for the next financial year as many of New Zealand’s 75,000-80,000
merchant terminals need to be replaced with EMV compliant models. We estimate the New Zealand total replacement market
value to be approximately $150 to $200 million.”
In December 2003, a call option for 12.5 million shares in Cadmus, at 8 cents per share, was sold to Mr Mark Hotchin by
J B Were New Zealand Private Equity No.1 Fund Ltd. Mr Hotchin subsequently took up the option by way of payment to
Cadmus Technology of $1,000,000 in late December. This also required the company to convert the JB Were New Zealand
Private Equity Fund redeemable preference shares to ordinary shares.
In addition, in August 2003, CET (a wholly owned subsidiary of Singapore Technologies Electronics Limited – the
electronics arm of Singapore Technologies Engineering, the largest engineering company listed on the Singapore
Exchange), invested $1,230,000 and took up a cornerstone shareholding of 9.9%. As part of this deal, Cadmus offered a
board seat to CET which is expected to result in significant future business opportunities.
“We have received increased institutional support for our Company and a maturing share register, as evidenced by recent
investment announcements,” adds Mr Bailey.
During the period Cadmus purchased a 10% shareholding in Albany based Production Manufacturing Limited to provide
further manufacturing capability for its international business. The agreement includes a seat on PML’s board, and an
option to increase the shareholding to 100% over the next two years.
Cadmus also established bank services with the ANZ Bank within the period consolidating the Company’s debts and
debentures into a single facility, thereby strengthening its balance sheet, reducing interest costs and enabling
additional lines of credit for working capital purposes and to assist in the growth of the business.