Last checked at 14 Jul 2010 07:00
Update on Oracle Transaction, Financial Guidance and Year End Annual Reporting Timetable
Sydney, 14 July 2010
Oracle Transaction Update
eServGlobal Limited ("eServGlobal" or the "Company"), announced to the market on 26 May 2010 the conditional sale of its USP Business and USP Products to Oracle for up to US$93.75M.
A key condition precedent to completion of the transaction was approval by the Company's shareholders. This was obtained on 30 June 2010.
Initial advice obtained by the Company indicated that the profit on sale from this transaction would be recognised for accounting purposes in the FY2010 year. However, as a result of other conditions remaining outstanding at the present time, the transaction has not completed at this time.
The Company's management continues to work with Oracle to expeditiously satisfy the remaining conditions and expects the transaction to be completed within Q1 FY2011. Accordingly, and further to consultation with the Company's auditors, the profit on sale from this transaction will now be recognised in the FY2011 year.
This is simply a financial reporting timing issue and does not represent any change in the nature of the transaction or management's completion expectations.
Guidance Update
In the 26 May 2010 announcement, the Company indicated that while FY2011 will be a year of transition, it expects to achieve operational revenue in the range of AUD$38M to AUD$45M (£22 - 26M) and generate positive EBITDA (before non-recurring restructuring charges) of up to AUD$5M(£2.9M). The Board maintains this guidance. However, due to the current expectation that the transaction will both complete and be recognised for accounting purposes in FY2011, FY2011 EBITDA will be impacted by a one-off, pre-tax profit on the sale of its USP Business and USP Products to Oracle for US$93.75M.
Based on the current USD/AUD exchange rate of 0.875 (as compared to 0.827 on 26 May 2010) and management's current assessment of purchase price adjustments and transaction fees the estimated sale proceeds from this transaction are now expected to be AUD$107.1M (USD$93.75M), generating a pre-tax profit (before goodwill impairment) on sale in excess of AUD$100M. Note the final proceeds of this sale are still exposed to foreign exchange fluctuations and purchase price adjustments as set out in the 26 May 2010 announcement.
As a consequence of not recognising the transaction in FY2010, revenue is expected to be in the range of AUD$77M to AUD$82M (unchanged) and the Company will report an EBITDA loss (before non-recurring restructuring and foreign exchange losses) of between AUD$10M and AUD$15M.
Following the expected completion of the transaction, the Board remains committed to conducting a capital management review as described in the 26 May announcement.
FY2010 Annual Financial Reporting Timeline Update
The Company will lodge its Appendix 4E (Preliminary Final Report) as required by the ASX by 31 August 2010 and its Annual Financial Report by 30 September 2010.
About eServGlobal
eServGlobal is listed on the Australian Securities Exchange (ASX:ESV) and the London Stock Exchange AIM Market (LSE:ESG).
More information is available on our website www.eservglobal.com.
| eServGlobal Limited Jason Lilienstein Company Secretary | Tel +61 73302 0194 info@eservglobal.com |
| Altium (AIM) Nominated Adviser, Mike Fletcher/Paul Lines Corporate Broking, Chloe Ponsonby | Tel +44 (0) 207 484 4040 |