v2 Report - Additional Information Supplement
CTL Cadmus Technology Limited
Press releases
Cadmus Technology Limited CTL 3 Sep, 2007, 14:13GENERAL Cadmus Developments Limited - Notes Issue Series Three |
| Auckland, [3 September 2007] -
Cadmus Technology Limited (NZX: CTL) is pleased to announce that
the offer of First Secured Notes (Series Three) by its
wholly-owned subsidiary Cadmus Developments Limited closed on 28
August 2007 with subscriptions received for $5,622,700 of Notes
out of a maximum possible allocation of $7,500,000. The 5,622,700
Notes subscribed under the offer are held by 415 investors with
the maximum holding of Notes being $200,000 and the average
holding being approximately $13,549. The offer was underwritten up to $3,500,000 by FE Investments Limited. The subscriptions received exceeded the underwritten amount and therefore FE Investments Limited is not required to take any Notes under the underwrite arrangement. Cadmus retained the services of FE Securities Limited as the arranger and corporate adviser for the note issue. FE Securities Limited was also the listing sponsor for the notes to be quoted on the NZDX. Application has been made to New Zealand Exchange Limited for permission to list the Notes on the NZDX and all requirements of NZX relating thereto that can be complied with on or before the date of distribution of this announcement have been duly complied with. However, NZX accepts no responsibility for any statement in this announcement. It is expected that the Notes will be admitted to quotation and trading on NZDX on 15 October 2007. ENDS For more information please contact: Julian Beavis 021 735 770 See Cadmus website at www.cadmus.co.nz |
Chairman's report
The 2007 financial year has been one of significant challenges and change for CTL and although the financial results are disappointing, the year concluded with the addition of some very experienced and talented individuals capable of realising the company’s long-term strategic goals.
Against an industry backdrop of product price and margin decline, CTL managed to maintain its overall revenue at $26m and gained domestic market share. However the execution of our international expansion failed to reach budgeted levels of revenue and profit. This had a significant impact on the business results. These challenges did not become apparent until the later part of the financial year and resulted from both internal and external factors.
The new board has taken a pragmatic view on the current state of CTL and has acted quickly to address the issues. This has resulted in significant changes on the board and within the management team. Although this led to some significant associated one off restructuring costs, it was necessary to ensure the company has the management talent required for the future.
Whilst we continue to focus and improve on the good work to date in our domestic market, we have established a presence in Australia with a number of key accounts from which we can now leverage both sales volume and vertical market payment solutions. The new board and management team are undertaking a thorough review of our international strategy and we are confident there will be a sustainable improvement in our international business going forward.
We do acknowledge that this will take longer than previously indicated. During the course of the year the company continued to engage in discussions with Intellect Holdings Group as a means to expand our international presence and product offering. These discussions added significant unbudgeted one off costs, and at this time have not resulted in an agreement to proceed. Despite this, our view is that the use of acquisitions to rapidly scale CTL both nationally and internationally is still valid and will continue to be a key strategy for the future.
I want to assure you that we have the determination and commitment to move quickly to address the major issues facing the business and position the company to realise its potential to become a major player in the global payments industry.
Our objectives for CTL are:
• To deliver sustainable profitable growth both domestically and internationally.
• Establish and maintain world class operational and manufacturing processes to enable CTL to compete successfully in its chosen markets.
• Develop an end-to-end solution capability for high value payment solutions through an increased investment in research and development.
• Review the company’s execution into international markets to ensure that this element of the business becomes a major source of ongoing revenue and profit for the business.
• To attract and retain world class talent in every part of our business.
• Drive scale through sound organic growth and acquisitions that contribute to and enhance CTL’s market presence, skill sets, and product range.
• To implement a high level of communication with all of the company’s stakeholders, ensuring that there is a clear understanding of the company’s goals, and our progress in achieving them.
• Deliver outstanding and leading edge solutions to our customers, providing them with real competitive advantage.
As a major shareholder in the company, although disappointed in the year’s financial result, I remain confident that CTL has the potential to become a successful New Zealand company. I am particularly pleased with the quality and experience of the new executive team, led by CEO Julian Beavis. Julian has had a very successful career in the international payments industry, with his most recent role being that of Vice President Asia Pacific for Teradata.
This has given him a good working knowledge of the industry dynamics in many of CTL’s targeted global markets and growing businesses. On his team, sales and marketing is led by Stefan Lecchi, who has a background in mobile technology with Telecom New Zealand. Neil Livingston has joined from Ericsson as chief operations officer tasked with bringing best practice to the company’s operations.
Rounding out the leadership team is Peter McAuley who as chief financial officer is engaged right across the business. New Zealand has a well established and highly regarded payments industry, although it is fragmented and lacking in the scale necessary to make an impact in the international market. It is our belief that the global market for our existing and future payment solutions provides the company with significant opportunity, but we must have the best people, he best product and solutions and the size and capability to capitalise on it.
Peter Maire
Chairman
Director's Report
In his Chairman’s Review, Peter Maire has summarised the state of the business at the conclusion of FY 2007. Rather than dwelling on the past, I’d like to devote my report to commenting and expanding on progress with each of the key objectives that the chairman has outlined. These are the benchmark areas of focus that are critical to our future success. To deliver sustainable profitable growth both domestically and internationally.
During the fourth quarter of FY 2007, we began a review of existing local and international sales resources and channels. Our immediate objective is to implement effective execution of international sales opportunities. We are moving quickly to ensure that sales targets are realistic, appropriately resourced, and include rigorous reporting to ensure any problems are identified and dealt with early and sales costs are in line with sales revenue.
The company – anticipating significant revenue increases – built a cost structure to support it. Going forward we will take care to better align our cost structure to our revenues. There is also focus on how we can get our products to market more cost effectively with more streamlined and better integrated processes across manufacturing, sales, implementation and support services.
Establish and maintain world class operational and manufacturing processes to enable CTL to compete successfully in its chosen markets.
We expect continuing margin pressure as the international market for point of sale terminals becomes increasingly commoditised. During the fourth quarter we began a review and analysis of our manufacturing processes to identify new areas of efficiency and cost savings. Longer-term we anticipate exploring avenues for reducing manufacturing costs, including moving manufacturing off shore.
Enhance the existing end-to-end solution capability for high value payment solutions through an increased investment in research and development.
Th e challenge and the opportunity for Cadmus is to use the momentum and customer base of the EFTPOS business to shift focus towards higher value payment solutions. To support this evolution, Cadmus doubled its research and development staff numbers during the second half of the year, with 20 engineers now employed, plus two research and development teams under contract and further R&D recruitment underway. This is not ‘blue sky’ research and development. For example, we are already underway with a number of customer initiated projects representing vertical market payment solutions with a very large catchment of potential customers worldwide.
Review the company’s execution into international markets to ensure that this element of the business becomes a major source of on going revenue and profit for the business.
As part of the review of our existing sales channels, we are exploring new marketing partnerships and relationships. We will also place considerable emphasis on how we better execute on the relationships that are already in place. These relationships have taken considerable investment to establish and the business can provide a much better value proposition to enhance their success. The new executive team brings considerable experience in operating in international markets and an understanding of the challenges. Our strategy is to play to our strengths.
Our strengths do not necessary include high volume manufacturing, but rather our existing Chief Executive’s report intellectual property and research and development capability. Increasingly we will seek to licence manufacturing and distribution to third parties and dedicate more of our internal resources to projects and technology representing higher value point of sale solutions.
To attract and retain world class talent in every part of our business.
Cadmus will evolve as a payments technology solutions company driven by the excellence of its intellectual property, rather than as a manufacturer of commodity electronic components. With new appointments in research and development made over the last six months, as well as the additions to the board and management team, we have made solid evolutionary progress. It is our intention to continue this drive for outstanding people in every part of our business.
Drive scale through sound organic growth and acquisitions that contribute to and enhance CTL’s market presence, skill sets, and product range.
Growth through acquisition is still very much on the agenda. This is particularly important as a means of achieving efficiencies of scale in the core EFTPOS business. We do however recognise that we need to be in great shape operationally to absorb acquisitions and execute on the synergy benefits. In addition the business will be seeking potential partners that strengthen and differentiate the core offering in addition to delivering scale and cost benefits.
Deliver outstanding and leading edge solutions to our customers, providing them with real competitive advantage.
Our key differentiator is in the application of our intellectual property to solving problems for customers and opening up new ways for our customers to compete. This focus on customer solutions is critical to our strategy moving forward as we seek to create a ‘virtuous circle’ where our development of leading-edge customer solutions both increases our intellectual capital as well as driving new high value solution sales.
To implement a high level of communication with all of the company’s stakeholders, ensuring that there is a clear understanding of the company’s goals, and our progress in achieving them.
The management team supports the board’s commitment to communicate clearly, honestly and frequently with stakeholders regarding the company’s progress. As part of delivering on this promise, we will be making available a subscriber-only online ‘CEO Update’ to which shareholders can subscribe. This will be published regularly throughout the year and it will report on our progress with regard to each of the objectives above. These communications will follow NZSX disclosure and reporting rules. In conclusion, the new management team is now firmly in place and working hard.
We believe in the company and we believe we have the vision, the experience, and the track record to unlock the potential that Cadmus has to take a leadership position in the fast-growing integrated payments solutions market. I have confidence in making this commitment because at its heart our company has many great assets. We have industry leading technology, we have market momentum, we have a strong network of partners and satisfied customers. Our staff , particularly our Research and Development team, are world leading. We have all the right elements. Our challenge now is to execute efficiently and effectively.
Thank you for your continuing support.
Julian Beavis
Chief Executive Officer
