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Cadmus Writes down Goodwill and other non-cash



Cadmus Writes down Goodwill

and other non-cash items

Payment solutions company, Cadmus Technology Limited (NZSE: CTL), today announced that it had written down goodwill (a non-cash item) and reviewed all other non-cash expenses for the twelve months ended 30 June, 2002, in order to better align its balance sheet with international trends as part of its international export focus. The write-downs do not impact on the overall trading position of the company.

The Company also reported an audited EBITDA profit (earnings before interest, tax, depreciation, share of associate company losses and amortisation) of $4,000 for the year.

The final end year result was impacted by a number of one-off costs, including the costs of the First Secured Note issue, capital raising and international marketing costs, combined with delays in the establishment of suitable manufacturing capacity to meet the demand for the Cadmus products in both the domestic and international markets.

“Over the 2002 reporting period Cadmus adjusted its business focus to concentrate on export opportunities,” said Cadmus Chairman, Keith Phillips. “While the company moved swiftly to address the emerging opportunities, the rapid growth of export orders resulted in manufacturing delays. It also incurred higher than anticipated costs in developing, testing and certifying new products for international markets.

“However, the Company has now successfully transitioned through that interim phase and with new manufacturing arrangements in place, bank certification completed and orders ready to ship, it is poised to benefit from that activity during the 2003 year - current international orders total over $7,000,000, in addition to domestic sales.”

Cadmus Technology Limited

Condensed statement of financial performance (unaudited) (NZ$000)

2002 2001

Revenues 6,152 7,508

Earnings before interest, tax, depreciation & amortisation of goodwill 4 1,416

Stock and other adjustments 588 -

R&D expense (Note: previously capitalised) 726 -

Capital raising expenses 505 -

Interest 233 3

Depreciation and loss on sale 476 178

Operating deficit before abnormal items, tax & share of associate company profit (losses) (2,524) 1,235

Goodwill/investment writedown (15,661) -

Deficit before tax (18,185) -

“The Board has taken the view that the worldwide slump in the technology sector makes it no longer appropriate for the company to continue to carry on its books the value of goodwill and investments that no longer relate to the company’s forward business,” said Phillips.

“Accordingly, we have written down goodwill by $15,600,000 for the year ended 30 June 2002. Reviewing all non-cash items and aggressively writing down writing goodwill and inventories has allowed us to rationalise the Company’s balance sheet, establishing a sound base for the 2003 year.”

The result includes a one-off write-off of $726,000 in research and development expenses (previously capitalised), representing the full costs of developing, bank-certifying 16 new terminal and printer products and readying them for market during the period. Also R&D costs will now be expensed through the P & L statement on a monthly basis.

“While the result fell short of listing expectations, the underlying business remains strong and international demand continues to grow. As we indicated in July, we are already beginning to realise the benefits of our export focus in the first quarter - evidenced with sales for the months of July/August being over 275% up on last years equivalent sales revenues,” said Cadmus Managing Director, Ian Bailey.

“We have now concluded arrangements with three separate manufacturing facilities which will enable us to meet the levels of demand we are experiencing from international markets.”

Recent highlights and milestones for Cadmus include:

- Securing the company’s largest international order to date - worth over NZ$4,000,000 and to be delivered over the next 12 months (new Cadmus AC4500G terminal).

- Appointing the company’s first Singaporean distributor - Mobile EFTPOS (Asia) Pte Ltd - and also securing an agreement to supply an initial 200 units of the new Cadmus CP02CR terminal.

- Obtaining an order from PaySys (M) SDN BHD for over 1,000 units of the new Cadmus payment terminals and to be delivered over the next 12 months.

- Achieving bank certification for the company’s payment terminals in Malaysia with two of Malaysia’s leading banks - Bumiputra Commerce Bank and May Bank.

- Signing an exclusive heads of agreement to supply Cadmus EFTPOS terminals and pinpads to Bartercard Australia’s growing base of over 20,000 merchants across Australia. Anticipated first year sales are expected to reach approximately 1,000 units - with the potential to exceed this further in the second year.

- Attaining Electronic Transaction Services (ETSL) EFTPOS network certification for the entire range of Cadmus terminals.


About Cadmus

Cadmus Technology Limited (NZSE: CTL) designs, develops and implements innovative point-of-sale payment solutions for merchant businesses worldwide. The company is moving towards being New Zealand’s largest manufacturer and exporter of payment terminals, which it sells into rapidly growing markets internationally. The company offers payment and data management solutions, including EFTPOS and data capture terminals, loyalty programmes and customer relationship management solutions. Cadmus also provides end-to-end payment solution and data management services for retail, business payment and transactional processing requirements. Clients include Bank of New Zealand, WestPacTrust, TAB, Wellington Combined Taxis, Bartercard Australia Pty Ltd, OnQ Business Systems Pty Ltd and PaySys Malaysia.

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