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Neteller Shocker
e-Wallet readmitted to AIM, but first quarter results
are dismal
Embattled e-wallet Neteller reentered the London AIM today (Wednesday)
immediately before the market closed, only to drop 65 percent in
value after posting a pre-tax loss of $14 million for the first
three months of 2007. The company's shares have been suspended since
January 16.
The delayed first quarter report gave an indication of the damage
which the company's run-in with America's Department of Justice
caused (see previous InfoPowa reports) Restructuring costs of more
than $12 million are reported which, with other expenses resulted
in Neteller posting a pre-tax loss of $14 million for the quarter
ended March 2007, compared to the same period in 2006 when the company
recorded a profit of $16 million.
The report reveals that the firm has undertaken a “major
exercise to realign its cost base with anticipated revenues on a
worldwide basis” and that the staff count has decreased to
425 people worldwide.
The total cash costs associated with staff restructuring are expected
to be in the region of $ 3.7 million in 2007 – approximately
$770 000 was incurred in the first quarter of 2007. Other 2007 non-cash
write downs associated with the US withdrawal are expected to total
between approximately US$ 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 is substantially less than the $ 18 million
to $ 20 million in writedowns previously estimated in the company’s
press release of 18 January 2007.
Following the recent $136 million settlement with the DoJ, the
e-wallet will have a cash balance of $74.5 million. Cash available
at 30 June was $ 210.5 million (prior to the company’s $136
million US settlement). The group continues to progress its plans
to implement the Distribution Plan for the return of approximately
$94 million in US customers’ funds by 30 July 2007.
Other disclosures show that the active customer base outside of
the United States has fallen dramatically by over two thirds, down
to 99 575. European active customers totalled 79 615 at 31 March
2007. The total customer base (including North American customers)
totalled 3 671 724 customers at 31 March 2007. Asia Pacific / Rest
of World active customers totalled 19 960 at 31 March 2007.
Average daily receipts from customers dropped significantly and
was approximately $ 1.71 million during Q1 2007 (Q4 2006: $ 5.75
million). The decrease of 70 percent was principally due to the
withdrawal from the North American market during the first quarter.
Total receipts from customers during the period totalled $ 154.3
million.
First quarter group revenues, which included a partial contribution
from US activities and a full quarter of revenues from the Candian
market from which the company withdrew recently amounted to $32.7
million from $71.8 million. Operating income was $4.5 million or
13.6 percent of revenue.
Performance during the first quarter of 2007 was clearly impacted,
to a material extent, by Neteller’s voluntary withdrawal from
the US market on 18 January 2007, and the cessation of online gaming
related transfers for Canadian residents on 26 March 2007. The group
recorded revenue of $ 32.7 million for Q1 2007, compared to $ 71.8
million in the prior quarter.
This included approximately $ 14 million in revenue from the US
market prior to Neteller’s withdrawal from that market and
a full quarter’s contribution from the Canadian business.
Interest revenue for the quarter was approximately $ 3.9 million.
Ron Martin, President and CEO of Neteller 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.”
Early analyst comments were hardly favourable. One analyst was
pessimistic over the company’s prospects, despite Neteller
still being active in Europe. “Which parts of Europe are they
going to be active in? (It) has had the living daylights scared
out of it by the USAO. It won’t want to take any more risks,”
he said
Neteller’s agm will be held on Monday 20 August 2007 in the
Isle of Man, and the firm's registered office will change to Bourne
House, 97 Woodbourne Road, Douglas, Isle of Man IM2 3AW, with effect
from 27 July 2007.
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