Volante Profits As Bad As Flagged
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Volante reached the revised earning forecasts it made in November last year which precipitated a free fall in share price and its ultimate takeover by Commander Communications.

The merged entity formed when Volante and system builder Ipex joined forces in early 2004 lasted only two years as it raced to restructure its business in the face of diminishing hardware margins.

Erstwhile Compaq country manager and now head of Volante, Ian Penman tried hard to cut costs and gain a bigger share of the corporate and Government market for systems supply and maintenance, but the company’s shift to a services focus was just not fast enough to appease a market tempted when the unwelcome suitor came knocking.

Commander Communications acquired its first tranche of Volante shares yesterday after the Volante board gave in to an improved offer for the company’s shares.

With time ticking before the company would have to reveal the extent of its 2005 woes, Commander increased the pressure on Volante Board members seeking to force the company to reveal more detail about future contract business, but theASX Takeover’s board sided with Volante saying thecommercially sensitive information should remain secret.

In response, Commander increased its offer and the Volante Board accepted the better deal nad told its shareholders to do the same.

Now as the off-market acquisition progresses, Volante has revealed its profit for the second half of 2005 fell by nearly 70 per cent as the margin squeeze on hardware took bite and the company tried to stem loses by cutting costs. Earnings for the first half of this fiscal year came in at $12.6 million (EBITDA) down on 2004’s result of $17.0 million for the same period.

Restructuring costs came to $1.9 million, but a loss in revenue for the period down from $203.8 million the year before to just $194.4 million didn’t help.

The results clearly indicate the sense in what Volante was trying to do as it shifted from product to services. Product revenue were $139.1 million realising a $4.6 million profit, while the company’s services arm made $55.3 million in revenues with a profit of $7.9 million.

Overall the company’s After Tax Profit came in at only $2.0 million for the six months to 31 December 2005 compared to $5.5 million the year before. The directors have declared an interim dividend of 2.0 cents fully franked (2004: 4.0 cents), payable on 7 April 2006 to shareholders on the register at 24 March 2006.

Ian Penman, group managing director, said: `While within previous guidance, the results reflect the significant challenges we faced in taking tough actions to realign the company, and position ourselves for future growth. The first half was negatively impacted by one-off restructuring costs of $1.9 million, tendering costs of $1 million, lower-than-anticipated revenue from Product sales and a higher than acceptable cost structure.”