Baycorp chief defends merger as price plunges

By SIMON HENDERY

As Baycorp Advantage's share price tumbled 37 per cent to an all-time low yesterday, managing director Keith McLaughlin remained staunch about the 2001 merger that created the transtasman credit services firm.

"In hindsight I believe the merging of Baycorp Holdings and Data Advantage was the right thing to do," he said in Sydney.

As he spoke, investors on both side of the Tasman were dumping Baycorp stock after the company's interim result announcement: an A$11.9 million ($12.9 million) loss accompanied by a warning that full-year revenue would be below market expectations.

"I think what has happened to the wider economy and the wider sharemarket has impacted some people's perspective on the merger," McLaughlin said.

"But there is no doubt in my mind that we are a far stronger organisation with far greater growth potential and far better capability to deliver to our customers as a result of the merger than we would ever have been as two standalone organisations."

Yesterday was the second time in four months that former market darling Baycorp has been been thumped for disappointing the market.

The company's share price has plummeted from $7.70 soon after the December 2001 merger to $1.15 at the close of trading yesterday.

McLaughlin's line yesterday was that while the company had revised down already disappointing earnings forecasts it issued in November, the revision was small in percentage terms and related only to "some areas" of the business.

"What we have signalled is that our original [November] forecasts in some areas - based on trading performance over the last couple of months - may be at risk.

"Under the continuous disclosure regime we are obliged, if there is an element of risk in previous market guidance, [to] come back and realign the market's thinking."

In a bid to add some levity to what had been a sombre press conference, McLaughlin, who moved to Australia to head the merged company, said that while it had been a tough year of operating in a climate of change and uncertainty for the firm, "on a personal note I love Sydney".

Baycorp's group revenue for the six months to the end of December rose 96 per cent to A$86.2 million as a result of the merger.

The company said that on a post-merger pro forma comparison basis, revenue had increased 14 per cent over the half-year.

Four business units - business information services, receivables management, marketing solutions and decision solutions - had double-digit growth over the half-year.

But when the company considered the half-year result, January trading and the performance of its joint-venture businesses, it expected full-year revenue "to be slightly below market expectations".

McLaughlin said the company had been up-front about addressing "legacy issues" (including write-downs of over-valued assets) during the past year. Some of those issues dated back to before the merger.

He expected the business to turn around in the 2004-05 financial year.

"We are still forecasting revenue growth [this financial year], albeit at a slightly lower level than we anticipated back in November.

"Taking those factors into account we believe we will enter the '04 financial year in a very strong financial position."

Asked if the company's predicament would lead to job losses, McLaughlin said although most organisations experienced some "on-going realignment", much of the company's post-merger restructuring was complete and staff numbers had risen as a result.