Cadmus Growing Cash Position Proves Model
Cadmus Announces Revenue Growth And Strong Cash Flow
Cadmus Growing Cash Position Proves Model.
Auckland, 27 February 2007 – Cadmus Technology (NZX: CTL) today announced a strong six months for the year ended 31 December 2006 with operating revenues up 9.3 percent and EBIT before non-recurring items rising 12 percent to $1.6 million from $1.4 million in December 2005. Keith Phillips, Chairman of Cadmus Technology says that cash flow from operating activities for the half year also showed a marked 53 percent increase to $3.9 million (December 2005 $2.5 million).
”This proves the strength of the Cadmus ‘direct to market’ and ‘merchant ownership’ strategies put in place as part of our core planning several years ago. The improved financial position as a result of our business model, demonstrates the benefits of Cadmus owning its own products and also having its own rental business – we are the only payment solutions company in New Zealand to ‘own’ this space, and it is clearly a significant competitive advantage over those that only have a distribution model with no IP in their business,” says Phillips.
Phillips says that following the six month result Cadmus is in a very strong financial position with its business model providing ongoing and renewable revenue streams, solid cash flows, and the ability to replicate this anywhere else in the world.“
Cadmus has in excess of $7 million in cash, plus approximately $7 million of free cash flow residing in its rental division which will be released over the next 24 – 30 months and that puts us in a great position moving forward to scale the business even further.
Cadmus, says Phillips, has also positioned itself to take advantage of the significant business opportunity being presented with the replacement or upgrade of approximately 50,000 terminals in the New Zealand market, potentially worth up to $100 million in total revenue.
In addition the Australia markets are also moving towards EMV compliance which will require approx 400,000 terminals to be upgraded and/or replaced.
Overall, Cadmus’s performance in the previous 6 months has resulted in a stronger balance sheet, a company that has significant new opportunities opening in its core markets, an ongoing focus on the amalgamation of its distribution channels and significant free cash flow from its rental model.
Further, the company has undertaken additional investment in R & D, and undertaken specialist developments for large customers such as Bank of New Zealand and Lotteries.
In terms of capital raising, Cadmus has completed, prior to Xmas, a placement of 31million shares and has issued a prospectus for the Series 3 First Secured notes to replace the Series one and Series two interest bearing notes offerings.
The overall impact is a company with considerable cash resources, little debt and more free cash coming on stream over the next 12 – 30 months.
Further prospects and sales opportunities continue to be developed with a Heads of Agreement with leading forecourt petrol pump company Postec Data Systems that is potentially worth several million dollars, and will see several thousand of its UP05 EMV compliant EFTPOS units being supplied for the rapidly expanding Indian retail petrol market.
In the New Zealand market, there is an immediate need to replace and/or upgrade approximate 50,000 terminals, and the Australian markets are starting to come on stream.
Overall the business is in a good position to capitalize on these opportunities over the next 12 – 24 months.
In addition to this is the potential to complete a successful transaction with Intellect Holdings (IHG) which will add considerable market penetration into lucrative European markets that Cadmus has not yet entered. The effect would be to rapidly increase volume and scale. Due to the extensive nature of the IHG sales channels and business, both IHG and Cadmus are continuing to undertake further due diligence before advising the outcome of their latest discussions.