KEY POINTS:
Software of Excellence said today if the high New Zealand dollar persisted at current levels, margins and raw profit would be hit 15 per cent.
Chairman Jim Syme told shareholders at the annual meeting that if current high exchange rates persisted, revenues for the current year would reduce to approximately $27 million, down from a previously projected $30m, and its ebitda margin to just under 22 per cent from 23 per cent.
The dental software company is subject to a $2.70/share takeover from United States-based Fortune 500 company Henry Schein that has been recommended by the board in the absence of a superior offer.
Mr Syme said that while first quarter operating performance remained on target in local currency terms, it seemed unlikely there would be any out-performance that may help bridge the forex gap.
SOE shares were up 1 cent to $2.65 today.
Commenting on the takeover offer by Henry Schein, he said that at the moment there was only one offer on the table.
"In an ideal world there would be another bid, but that has not been forthcoming despite our trying very hard to obtain other bids from trade buyers and private equity investors.
"Your directors have worked hard to squeeze every cent we can out of the bidder."
Strenuous efforts had been made to bring other buyers to the table.
"In my view, the offer price that we are recommending delivers tomorrow's price today for all shareholders, without the risks."
He noted the share price before the offer was $2.15 and since the bid, asset prices of export stocks had fallen significantly due to the currency move.
"If you apply that formula to our shares it is possible that they could fall significantly if the Henry Schein offer is withdrawn.
"The effect of a significant fall could be to wipe millions of dollars of value off the value of the company."
He said he acknowledged in some instances hold-out strategies by shareholders in takeovers had provided rewards.
"However, I suggest you consider that the price of seeking an additional few cents per share from Henry Schein could in fact result in the loss of significantly more for all shareholders, in the event that Henry Schein was to walk away."
Chief Executive Brian Weatherly said SOE was watching competitor Kodak in the UK where the US company had 42 per cent of the market and SOE 39 per cent.
He said Kodak's dental software division could be split off and sold.
Chairman of the Independent Directors Committee, Kerry Gleeson, said there was a possibility that Henry Schein could buy the Kodak business if its SOE bid failed.
- NZPA
