Staff WritersAfter a brief period in the sun ASX-listed networking and communications hardware vendor, NetComm has drifted back into a loss making position despite a 13.2 per cent increase in revenue for the half year to December 31st.
Although revenue increased by $10.3 million, the company still reported a small net loss of $392,000 due to its investments in new product categories.
“Our drive to increase market share resulted in a gratifying 13.2% growth in revenue over the previous year, although gross margins suffered during the campaign. Profitability is expected to improve in the 2nd half as supported by current data,” said David Stewart, NetComm’s Managing Director.
“The results from the Company’s previously stated initiative to progressively balance out its product offering with higher value, higher margin technologies targeted at the SME sector will see increased margins delivered over the next 12 months,” he said.
The company explained the EBITDA result was impacted by a number of one-off costs associated with the development of the company’s resources to address these new opportunities, such as developing more sophisticated products.
There were also costs associated with the establishment of strategic partnership with Octtel and the Dynalink/Askey acquisition which is designed to increase the company’s access to the
NetComm detailed where some of the money went in its Stock Exchange filing:
- $70,000 spent on M&A consultancy and legal fees for the acquisitions of Dynalink and Askey
Australia. - $200,000 spent on product development, testing and certification expenses for new SMB VoIP products developed under an alliance with Octtel Communications.
- $90,000 to redesign and relaunch product packaging, and to redesign the corporate web site with e-commerce capabilities.
- $150,000 to develop the NetComm Auto Provisioning System – a software solution that will reside on the servers of Internet Service Providers (ISPs) remotely configure their customers’ modems.
The Company also noted that its half-yearly consolidated balance sheet reflects some material changes as a result of the Dynalink and Askey acquisitions. Since the acquisition took place on December 21, 2005, no revenue from these companies has been recognised in the accounts.
However, the accounts show: A reduction in cash as NetComm absorbed the overdrafts of these two firms; An increase in receivables and inventory as the company absorbed the receivables and inventory of the acquired companies; and an increase in current liabilities which was also due to consolidating the two acquisitions into NetComm.
“These adjustments and investments are proceeding as planned,” said Stewart. “The Board and management of NetComm are confident that the company will see a return on its investments in Q3 and Q4 of this fiscal year. The company’s new product range will be released to market from the third quarter of the current fiscal year with additional revenue contribution to be reflected in the full year results.”