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Wednesday, 25 July 2007 – NETELLER Plc (LSE: NLR), the independent global online payments business, today announced the restoration of trading of the Company’s ordinary shares to AIM and provides the following trading update in respect of the first quarter ended 31 March 2007.
Highlights
- 2006 annual report and audited accounts published on the Company’s website today and sent to shareholders.
- The Company’s shares will be restored to trading on AIM with immediate effect.
- Daniel Stewart & Co Plc is appointed as the Company’s nominated adviser and broker with immediate effect.
- The Group continues to progress its plans to implement the Distribution Plan for the return of US customers’ funds by 30 July 2007.
- Trading update for Q1 2007 demonstrates resilience of European and Asia Pacific business.
- Cash available at 30 June was US$ 210.5 million (prior to the Company’s US$ 136 million US settlement).
- The Company’s AGM will be held on 20 August 2007.
Ron Martin, President and CEO said: “The restoration of trading in the Company’s shares marks the first step in a new chapter for the NETELLER Group following our resolution with the US authorities announced last week. With our vision to provide innovative payment solutions for e-commerce communities, our initial focus will be to dominate payments in our chosen online gaming markets.
Online payments in many market sectors are growing rapidly and we believe that the e-wallet will continue to grow in popularity due to its convenience and safety as more and more people source goods and services through e-commerce communities. While there is much work to do and many challenges lie ahead, we believe that the Company is well positioned to benefit from these trends. I look forward to being able to provide you with further updates on our progress in due course.”
Update on Recent Developments
The Company today published its 2006 annual report and accounts on the Company’s corporate website and the 2006 annual report is also being sent to the Company’s shareholders today. The Company’s shares will be restored to trading with immediate effect. The Company’s shares have been suspended from trading on AIM since 16 January 2007. The Company is pleased to announce that with immediate effect it has appointed Daniel Stewart & Co Plc as its nominated adviser and broker. The Board is looking forward to working with Daniel Stewart in the future.
The Group continues to progress its plans to implement the Distribution Plan for the return of approximately US$ 94 million of US customers’ funds by 30 July 2007. A further announcement will be made as soon as the Company has further information for its US customers.
Trading Update
Operational Highlights
Average daily receipts from customers was approximately US$ 1.71 million during Q1 2007 (Q4 2006: US$ 5.75 million). The decrease of 70% was principally due to the withdrawal from the North American market during the first quarter. Total receipts from customers during the period totalled US$ 154.3 million. Our total customer base (including North American customers) totalled 3,671,724 customers at 31 March 2007, an increase of 5% from the figure at 31 December 2006.
During Q1 2007, our active customer base totalled 385,781, which included 286,206 active customers from North America. Excluding North America, our active customer base was 99,575, a small increase from 91,381 at 31 December 2006. However, this represented an increase of 50% from the total number of non-North American customers of 66,342 at the end of Q1 2006.
European active customers totalled 79,615 at 31 March 2007, an increase from 71,493 at 31 December, and a 55% increase from the 51,435 active customers in Q1 2006.
Asia Pacific / Rest of World active customers totalled 19,960 at 31 March 2007, a marginal decrease from 20,410 at 31 December 2006, and a 34% increase from the 14,907 active customers in Q1 2006.
Average daily sign-ups of new customers was 1,797 during Q1 2007 (Q4 2006: 3,493) - representing a decrease of 49%. Again, this decrease was almost entirely attributable to the withdrawal from servicing the North American market during Q1 2007. Throughout Q2 2007, approximately 850 to 950 new customers per day signed up for the Group’s e-wallet.
Financial Highlights
Performance during the first quarter of 2007 was clearly impacted, to a material extent, by the Company’s voluntary withdrawal from the US market on 18 January 2007. The Company also announced the cessation of online gaming related transfers for Canadian residents on 26 March 2007. The Group recorded revenue of US$ 32.7 million for Q1 2007, compared to US$ 71.8m in the prior quarter. This included approximately US$ 14 million in revenue from the US market prior to the Group’s withdrawal from that market and a full quarter’s contribution from the Canadian business. Interest revenue for the quarter was approximately US$ 3.9 million. Transaction revenue from outside the USA and Canada was approximately US$ 14.7 million.
Gross margin was US$ 16.8 million, or 51.4% of revenue, which compared to 66.7% in Q4 2006. The primary factor in the reduction in margin was the higher level of bad debts incurred as a result of the US withdrawal programme implemented by the Group in January 2007. Deposit and withdrawal fees were also higher due to an increased focus on European and Asia Pacific markets where banking costs are more expensive.
Operating income was US$ 4.5 million, or 13.6% of revenue. Subsequent to the announcement of cessation of North American online gambling related transactions, the Group undertook a major exercise to realign its cost base with anticipated revenues on a worldwide basis. Following this, the Group employed approximately 425 staff across its operations in Europe, Canada and Asia Pacific.
The total cash costs associated with staff restructuring are expected to be in the region of US$ 3.7 million in 2007 – approximately US$ 770,000 was incurred in the first quarter of 2007. Other 2007 non-cash write downs associated with US withdrawal are expected to total between approximately US$ 13 million and US$ 15 million, related to impairment of assets including website development, leasehold improvements, redundant servers and unamortised portion of licenses and trademarks. This compares favourably with amount of US$ 18 million to US$ 20 million of writedowns previously estimated in the Company’s press release of 18 January 2007.
The Company took an impairment charge in the first quarter of 2007 related to the carrying amount of its intangible and other assets (including website development, leasehold improvements, redundant servers and unamortized portion of licenses and trademarks) relating to its North American business. Based upon the impairment analysis, a charge of US$ 12.0 million was recorded for the impairment of these assets.
Cash Position of the Group
The total amount of cash available to the Group totalled US$ 213.5 million at 31 March 2007. The Group purchased the building in Calgary where its principal operations are based during the first quarter of 2007 for a cost of US$ 20 million which augmented approximately US$ 12 million in improvements the Company had capitalised in 2006. The Group’s total cash available at 30 June 2007 totalled US$ 210.5 million. Both of these total cash figures are stated before allowing for the up to US$ 60 million of funds seized by the US authorities in January 2007 and thereafter. Cash available to the group is the total of cash and “Restricted Cash” which are funds held in trust for customers and merchants in excess of the relevant liabilities.
As part of the resolution with the US authorities in July 2007 the Company agreed to forfeit a total of US$ 136 million to the US. This amount included up to US$ 60 million which was seized by the US authorities and which shall be applied to satisfy a portion of NETELLER’s forfeiture obligation. NETELLER agreed that it will pay a further amount of US$ 40 million on or before 15 October 2007, with the remaining balance to be paid on or before 17 January 2008.
The Company has also agreed that it will, as part of the US resolution, implement the Distribution Plan to return approximately US$ 94 million of funds owed to US customers. This amount is currently held in trust accounts with the Group’s European bankers. The repayment of this amount will have no impact on the Group’s own cash position.
Other Information
The Company’s Annual General Meeting will be held on Monday 20 August 2007 in the Isle of Man. The notice for that meeting is contained in the Annual Report which is being posted to shareholders today.
The Company’s registered office will change to Bourne House, 97 Woodbourne Road, Douglas, Isle of Man IM2 3AW, with effect from 27 July 2007. The Company’s correspondence address will change with effect from that date to PO Box 165, Douglas, Isle of Man IM99 3NX.
The Company's website at www.netellergroup.com has been updated to reflect the additional disclosures required under the AIM Rules.
Download a PDF of Additional Financial Information prepared for information purposes only and outside of the scope of the audited financial statements.
Further information is available on the Group's website in the form of updated FAQs.
In this announcement, “NETELLER” or “the Company” refers to NETELLER Plc which together with its subsidiaries, are referred to as the “Group”. All amounts referred to in this announcement are in US dollars unless otherwise stated. |
