NZSE shortcut for data company

By CHRIS BARTON

Insight Data is to list on the New Zealand Stock Exchange at the end of this month as Cadmus Technology.

It will seek $6 million in capital to expand its business from $4.2 million to $9.7 million revenue in a year.

The Eftpos and loyalty payment systems company is the second to use mining company Heritage Gold's shortcut listing method.

The shortcut avoids the need to produce a full prospectus.

The same technique was used in April to list the online education company E-cademy.

The process on this occasion involves Heritage forming a subsidiary company (High Tech Investments later changed to Cadmus) to acquire all the shares of Insight Data.

Heritage also issues free Cadmus shares to its shareholders at the rate of two Cadmus shares for every five Heritage shares.

That gives Cadmus the requisite number of shareholders to proceed with a sharemarket listing.

In the process Heritage Gold itself also receives $4.1 million in shares - plus a $450,000 cash payment for organising the whole thing.

The capital structure at 20c per share with approximately 1050 shareholders is as follows:

Insight Data - 68 million shares - valuing the company at $13.6 million .

Placement - 30 million shares to raise $6 million - $2 million of which is paid to Insight.

Heritage Gold - 20.5 million shares for free, but providing Heritage with a cornerstone shareholding worth $4.1 million.

Heritage shareholders - 29.5 million shares distributed for free, but valued at $5.9 million.

All up that is a total of 148 million shares resulting in a market capitalisation - on listing - of $29.6 million, which is not bad for a company that chartered accountants Gosling Chapman have valued at between $12 million and $18 million.

Insight Data commercial director John Nimmo said the company looked at a number of options to finance its expansion plans, but settled on the Heritage shortcut because it brought expertise in public company matters as well as a fast track to the main board.

The company employs a staff of 50 and this will increase to 70 after the listing.

About 65 per cent of its present revenue comes from sales of Keycorp Eftpos terminals and the remainder from loyalty card transaction business and database marketing services.

Mr Nimmo said the aim was to broaden offerings in website development, loyalty card and payment services to its retail merchant customers.

The new product mix promises not only to more than double revenues but also to move the company from "break-even zero cashflow" to $1.2 million profit next year.

Insight's trump card, however, is two joint ventures.

One is with an as-yet-unnamed utility company for the supply of a home charging and payment system using a phone with built-in swipecard reader. The other is with kohanga reo-associated company E-Smartcard Technologies to build an online procurement portal to supply educational supplies and consumables.

The 700 kohanga reo around New Zealand have an estimated annual budget for consumables of $50 million.

Heritage Gold's latest annual report says the move into high-tech investments aimed to reward Heritage shareholders, improve future shareholder value and provide additional money for mineral exploration in Australasia.

So far only some of the objectives have been achieved.

Shareholders have watched Heritage's share price plummet from a high of 20c at the beginning of the year to around 8c today. No shares were traded yesterday and potential buyers were offering only 7.5c.

But managing director Peter Atkinson is confident that shareholder value will improve.

"The cornerstone holding in each of the companies [E-cademy and Cadmus] is where the future benefit to Heritage is going to accrue."

Asked why Heritage would not now be asking shareholders at its annual general meeting next Monday for approval to expand its business activities to include both mining and high-tech, Mr Atkinson said Heritage had sought to put that resolution before the meeting, but was told by the Stock Exchange that it would not be necessary.