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25 th May 2007 Market Announcement for Public Release by NZX
To: Listed Company Relations
New Zealand Exchange Limited
The Directors of Finzsoft Solutions Limited are pleased to report on the results of the Group for the year ended 31st March 2007. This was another year of substantial progress for Finzsoft Solutions Ltd and with further development of our Sovereign finance and banking software.
The steady progress to positioning our Sovereign finance and banking software product as an accepted international product in our sector continues.
Growth in our Sovereign product functionality continued to be a prime activity. New market efforts have concentrated in Australia in the 2006/7 year, with a significant investment being made in achieving market presence and recognition. The desired results are commencing to flow in this current 2007/8 year.
Trading results were impacted by the increased investment, which also required a reallocation of key personnel. This growth strategy saw total revenue down slightly on the previous year, at $7,486,033 ($7,872,211in 2006).
International projects increased to give revenue of $2,397,473, now 32% of our totals.
The expansion efforts led to a reduction of profit before tax to $240,363 ($1,241,451 in 2006). Finzsoft believe this result reflects a reasonable balance between current income needs and the increased attention to the need to invest in market growth and product functionality.
The Directors consider that the investment in growth in the March 2007 year will result in March 2008 year showing good increases. It needs to be appreciated that the nature of our software industry and the business of operating into new international markets does bring challenges, with the projecting of future financial performance having a degree of uncertainty. The opportunities and rewards are available, but the timing of achieving these opportunities is not a fixed event.
The value of our Sovereign software range, including installed sites and operations, is recorded as an intangible asset and goodwill for accounting requirements. However, the principal value of Finzsoft, although not an accounting asset is the building of this investment in software which is aimed to provide the resulting increased revenues and profits.
With the desire of Finzsoft to balance shareholder returns along with the need to continue to reinvest in growth, the directors have resolved to pay a final dividend fully imputed of 2 cents per share. The record date is 11 th June 2007 for those shareholders recorded on the register, with the dividend payable on the 14 th June 2007.
Shareholders should note that the consideration of $1.30 per share payable under the current partial takeover offer, if it proceeds, will reduce to $1.28 per share adjusted for the above dividend for those shares accepted by Pi Capital Investments (FS) Ltd.
International Financial Reporting Standards The directors considered the implications of IFRS standards and felt that, by Finzsoft early adopting, the removal of the previous accounting reporting requirements to amortise the goodwill arising from the purchase of the Sovereign software and contracts to zero value, would give a truer reflection of the business operation and value.
Overall the requirements to report under IFRS have been onerous and we trust that the additional reading for shareholders provides greater value in the understanding of the Finzsoft business.
Principal Activities The Group's principal activity is computer software development, sale and support. The nature of the Group's business has not changed during the year. The main product is the Sovereign finance and banking software. This software operates the core business for finance companies, building societies, mortgage lenders, credit unions and all finance institutions that lend money or take savings and deposits.
Our team are constantly adding new abilities into our Sovereign software range which, in addition to providing those services to our clients, continues the build up in real value of the software.
Significant events during the 2006/07 year include: New Zealand Market
This market showed continued good growth with our client base of the larger non bank finance institutions increasing in size during the year. At year end there were a number of others considering implementation of our Sovereign finance and banking software.
The adaptation of our software to allow our clients to comply with international financial reporting standards (IFRS) was a significant activity.
Our client base of larger non bank finance institutions exhibited strong growth during the year. The stability and growth capacity of our Sovereign software supported this growth. The five NZ companies in the top six most profitable finance companies in New Zealand, (KPMG Finance Institutions Performance survey, Net profit after tax) all operate on our software.
The proposed new Non Bank Deposit Takers regime in New Zealand is anticipated to require enhanced compliance in this sector, and Finzsoft is committed to adopting those services for our customer base.
International Market While New Zealand continues to be our major base to date, international marketing continues. Australia is our major focus at this stage for international growth, and we recognise it is a demanding market requiring considerable effort.
We have four operating clients there now, with St George Bank equipment finance and automotive finance across Australia now operating "live" on our Sovereign software and representing a substantial project. This implementation included Australian compliances and taxation.
The Directors believe that we have additional growth opportunities for future years.
Finzsoft continues a presence at selected USA trade events. Results will depend upon our ability to invest in the follow up presence in the market. Once Australia is established to a higher level, this is seen as the next target.
The marketing of our Sovereign finance and banking software in New Zealand and especially overseas brings us up against the international software products in our specialist field. The challenge of supplying a better solution to finance organisations is constantly addressed.
The growth in our product to these levels brings benefits to our existing user base, as well as to Finzsoft, our staff and investors.
Diamond Card This is a Finzsoft product, being an ATM and EFTPOS card which is issued by our users of this service. The Diamond Card logos are starting to appear on Bank ATMs. Further promotions of this product continue. There is wider potential for this product outside of our existing client base, and opportunities are being looked into.
Staff Our staff are the main resource of the company, as it is their skills which develop and support our services. Finzsoft is fortunate having a strong team already in place, and we are actively recruiting further appropriate people.
2007/8 Year Many of our New Zealand clients have grown substantially while utilising our Sovereign software. Their requirements for solution levels have grown in proportion. This requires the equivalent growth by Finzsoft in structures and services to match those client needs.
The Directors are satisfied with the progress in developing our product to compete in New Zealand and overseas with international offerings. We remain aware of the need to continue to build those service structures that our growing client base requires in order for them to gain best advantages from our software.
The Directors anticipate maintaining our growth rate in the current year, as our investment in infrastructure, product, and people, results in increased revenues. We believe that the cautious financial approach taken to date is in the best interest of the company and shareholders.
We thank our shareholders for investing in the company, and for showing a belief in both Finzsoft Solutions Limited and in the New Zealand technology sector.
For more information on our activities, please refer to the Investor Relations section of our web site
The Directors
Finzsoft Solutions Limited
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