KEY POINTS:
NZX-listed takeover target Software of Excellence International has turned loss into profit and is predicting future growth.
The Auckland dental software company's net profit for the year ending March 31 was $4.4 million, compared with a $5.4 million loss the previous year.
Last week, the company said an overseas rival had made a conditional takeover proposal and would undertake due diligence.
Profit from continuing activities was $3.9 million - nearly double the previous year, during which the company had $6.6 million of one-off costs for restructuring and writedown.
Chief executive Brian Weatherly said the result was a milestone for the company "in that it delivers a financial performance that reflects the benefits of the change in strategic direction that we have been driving over the past 18 months".
The share price closed down 3c yesterday at $2.67.
ABN Amro Craigs analyst Brett Orsler said the result was unlikely to surprise a potential bidder.
"I don't think the market will be pricing in 100 per cent [for the] takeover offer, given that we haven't had one yet and one's not guaranteed."
Revenue in Britain - which accounted for 80 per cent of turnover - was boosted by a Government programme.
British sales were up 8.9 per cent, while a weaker New Zealand dollar against the pound in the second half, compared with last year, also contributed $2.2 million.
Revenue was supplemented from a digital imaging initiative to sell hardware and integration software, as practice-management product sales returned to previous levels.
The company's Australian Oasis operation, bought in 2005, contributed $2 million of revenue and $200,000 of trading profit. A final payment of A$561,000 was made to vendors in February.
"Whilst we have no doubt benefited from the spike in activity surrounding the UK Options for Change programme, we are confident that we have the product strategies in place to deliver growth in line with our longer-term targets," Weatherly said.
Revenue in the current year would grow towards $30 million and then by about 15 per cent a year in 2009 and 2010, while ebitda [trading profit] margins would remain at about 23 per cent before rising towards 25 per cent in 2009.
The company recommend not paying a final dividend as the potential takeover was under way.
Chief financial officer Bryce Donnell said the unsolicited takeover could ultimately settle possible plans for European expansion.
The board had yet to express an opinion on the merits of any offer.
The Business Herald understands the offer would be about $2.60 a share from a prospective buyer in the Northern Hemisphere.
