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Software of Excellence announces first dividend

Software of Excellence announces first dividend

Listed dental software company Software of Excellence today announced its first dividend payment since listing on the strength of a $2.276 million net profit for the six months to September 30, 2006.

The result exceeds the previous guidance for profit of between $1.8 million and $2.0 million and compares with the loss of $176,000 in the first half of the last March 2006 year.

Revenue for the period was 32.1% higher at $14.835 million.

Key factors behind the gains in revenue, net profit and EBITDA for the half year were:

Record revenues from the company's core Professional dental software business, particularly in the United Kingdom, which accounts for 78% of total turnover. Sales in the UK market for the period were partially driven by the British Government's Options for Change health IT programme. In local currency terms sales in this market were 20.4% higher at Stg4.005 million.

A weakening of the Kiwi dollar against the British pound compared to the same period last year also contributed to the gain by adding $1.342m to revenue and $0.557m in EBITDA.

A strong improvement in the company's Asia Pacific business, with Australian sales rising on the back of the acquisition of the Oasis Software business in Australia in December. This acquisition has continued to exceed the earnings milestones established at the time of its acquisition. Sales of the company's EXACT software in Australia have also shown gains following the purchase of Oasis.

A continued stabilization of the company's US dental schools business, GSD Inc, following the management buy-in in the latter part of calendar 2005.


UK Operations

During the six months to September 30, 2006, the company's Professional business in the UK continued to be positively influenced by the UK Government's "Options for Change Programme".

The March 31, 2006 cutover date under "Options for Change" meant that the company entered the current financial year with an enhanced order book.

Although UK sales activity has slowed from the peak levels established in the first quarter, sales for the second quarter continued in line with budgets set.

During the half year the company outsold its main competitor on the UK market in a ratio of 2 to 1, according to Dental Practice Board statistics for the period.

In October this year, the company's Chief Executive Officer, Brian Weatherly and its Chief Financial Officer, Bryce Donnell, transferred to the UK, placing them closer to the company's main market. They are also charged with investigating opportunities for taking the company's Professional business model into other markets.

On October 7, the company used the annual Dental Showcase in London as the launching platform for the sale of a range of digital imaging products under license. Brian Weatherly noted: "We are beginning to get traction with this exciting initiative. Although it's still early days it appears that digital radiographic equipment could become good incremental business for us."

Australia

In December 2005 SOEI acquired leading Australian dental software company Oasis, a move which saw it become market leader with more than 1400 sites in that market.

To date all financial targets established at the time of acquisition have been exceeded. The company's Australian business provided 10% of total revenue in the latest six months against 6% in the previous first half. Oasis contributed $0.891m in revenue and $0.360m in EBITDA for the reported period.

Following the acquisition, the Oasis customer support services have been centralised and re-seller and agency arrangements made in all states other than Victoria, where Oasis has its own marketing and selling activities.

Sales of EXACT, SOEI's own Professional software product, have also increased in Australia since the acquisition of Oasis and cost synergies have been realised in the areas of support, development and marketing.

GSD Inc

As part of its restructuring to focus on Professional and UK PCT dental software, SOEI retained a 49% interest in USA-based dental school software provider GSD. The financial performance of GSD has been greatly improved, contributing $1.169m in revenue and $0.089m in NPAT for the half.

Dividends

Following the strong first half result, and a continuing positive outlook for SOE, directors have elected to declare an interim fully imputed dividend of 50% of the NPAT being $1.138m or 4.38 cents per share.

The board believes that a dividend payout ratio of up to 50% of net profit after tax is appropriate given the company's growing cash reserves and undrawn banking facilities. This level of dividend payout ratio will not inhibit the company from pursuing its growth objectives.

Commentary

Chief Executive Brian Weatherly said:

"This result endorses the change of strategy nearly 12 months ago to focus on the general dentist and move away from Enterprise engagements. Although other factors such as the exchange rate and the Options for Change program have contributed, there is no doubt the company is now structured to deliver continuing profits and hence we have decided to pay a dividend. We remain committed to growth and are developing several key areas of growth:

1) Ongoing organic growth in our 4 general dental markets, UK, Ireland, New Zealand and Australia.

2) Incremental products and services for our existing 5,000 customers, most notably our current digital x-ray strategy.


3) New market entry strategies; assessing viability for a new market entry either by organic startup or by acquisition.

"Our strategic growth is based on becoming the market leader in our chosen sectors, building on the market leading positions we have established in the United Kingdom, Ireland, New Zealand and Australia.

"This maiden dividend is a milestone in the development of the company. We now have a clear focus, dependable cash flows and are addressing a range of growth opportunities."

ends

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