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Strathmore announces $2.7 million full year result

Media Release
For Immediate Distribution

Strathmore announces $2.7 million
after tax full year result

Auckland, October 13, 2000: Internet and technology investment company, Strathmore Group Limited (NZSE: SMR) today reported a $2.7 million profit after tax for the year to July 31 and released its preliminary full year announcement to the New Zealand Stock Exchange.

This compared with a $2.0 million loss in the previous year.

In making this announcement, Executive Chairman Phil Norman said the result was particularly pleasing given the early stage in the development of Strathmore’s investments.

“Strathmore has made nine investments since September last year, all of which are at different steps in their maturity to globally scaleable, IT businesses. At this stage our venture capital business is still predominantly in an investment phase which would typically be profit-neutral or loss making. We are therefore especially pleased to be reporting a $2.7 million profit in our first report to shareholders,” Mr Norman said.

This early profitability can be attributed to the trading performance of CommSoft Group, the partial sale of Strathmore’s investment in CommSoft and the sale of Wellington Drive Technologies.

Mr Norman noted that “In preparing the accounts, we have taken a conservative approach to valuing our investments, based on observed fair values in public markets where they exist or otherwise at the lesser of cost or recoverable value. However, investors who will want to estimate the market value of the total portfolio will need considerably more information than is contained in the traditional financial statements.”

Strathmore recognizes the difficulty investors face in understanding all of its businesses and is committed to providing substantially more information on its investment portfolio through the Annual Report, which is to be released in late October, and through release of detailed research to the market and investors in subsequent months.

Mr Norman said the holding in CommSoft was typical of Strathmore’s business model; to secure promising New Zealand and Australian IT businesses with the potential through financial and intellectual capital to drive growth internationally. Strathmore’s core skills revolve around stimulating value in technology companies with the potential to deliver products to a global market.

Strathmore ended the year a significantly more substantial company than it began, with total equity growing nearly ten-fold from $3.5 million to $33.2 million, said Strathmore Chief Financial Officer Peter Saunders.

“The Company is an order of magnitude bigger and this growth has been due as much to the growth in the value of its investments as it has been to the capital raising we undertook,” Mr Saunders said.

“This is an excellent result for shareholders, Mr Saunders said, “ We raised $16 million during the year, returned $12.5 million by way of the share buyback and still have a $33 million company at the end of the year.”

After completion of the buyback, half of that $33 million value is represented by Strathmore’s most mature investment, the 16 per cent holding in CommSoft. This investment had been acquired at a cost of $2.9 million.
Strathmore also secured for its investors the lion’s share of the public stock offered in the CommSoft listing.

While continuing to work with its investee companies, Strathmore is continuing to assess new investment opportunities within its market focus. “Much of our current success has been from the quality of the early investments and rigorously following and refining through experience our business model,” Mr Norman said.

“We started life equally interested to be an inbound and outbound investor. That is to say the company would invest both in Australasian companies that had potential to grow into other regions, and in companies based in other areas that would seek to create businesses to sell their products in our part of the world.”

“We have refined our business model to concentrate our resources on outbound investment – a decision vindicated by the success of the CommSoft listing in September, and a decision we believe offers the greatest potential to enhance shareholder value,” Mr Norman said. “Fortunately, our specialisation means we continue to see strong deal flow”.

The company also reported earnings per share of 2 cents, compared with a loss of 9 cents per share the previous year. Current reported net asset per share are 16 cents.

About Strathmore Group Limited

Strathmore Group Limited is a technology investment company with approximately $NZ30 million of shareholders’ funds. It targets Internet, e-Commerce and information technology companies with potential to deliver accelerated growth in shareholder value by competing in global markets. It provides strategic advice, capital support, operational assistance, industry expertise and a network of relationships to assist technology companies to migrate internally.


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