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Endace reports US$22.5 mln FY loss, gets letter of support from US parent

Tuesday 23rd December 2014

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The board of Endace Group, which develops technology that measures, monitors and protects high-security networks, has obtained a letter of support from its US-listed parent Emulex that it will provide any financial assistance required over at least a 12-month period from Dec.10 2014.

The company reported a net loss of US$22.5 million for the year ended June 29, which can’t be directly compared with the loss of US$7.2 million the previous year because of a change in its reporting date from March to June to match its parent.  The latest results are for a 12-month period compared to a 15-month period for the 2013 results.

It currently has US$117.5 million in total assets and US$146.3 in total liabilities, including an inter-party loan of US$127.5 million. Intangible assets lifted from US$9.5 million to US$102.4 million due to a rise in goodwill now valued at US$61.6 million compared to US$7.1 million in 2012, and internally generated development costs of US$56.6 million during the year compared to US$16.4 million as at 2013.

Endace had negative equity of US$28.8 million as at June 29, compared to positive equity of US$24.5 million a year earlier, and the directors "obtained a letter of support from its parent company which has undertaken to provide sufficient financial assistance to the company as and when it is needed to enable the company to continue its operations and fulfil all of its financial obligations," it said in a note.

Emulex made a NZ$156.6 million takeover of the company in February last year. Endace was formed in 2001 to commercialise research of University of Waikato and listed on the London Stock Exchange’s Alternative Investment Market (AIM) in 2005, the first New Zealand company to do so.

It has offices in the US, Australia and the UK and does research and development out of New Zealand. It had about 180 staff at the time of last year’s takeover, of which 117 were NZ-based. Then chief executive Mike Riley, who sold 593,953 worth of share options in the takeover, has since left the company and it is now run out of the US.

Even though company co-founder and former chief executive Selwyn Pellett sold his 5.8 percent shareholding in the takeover of the high-tech company, he said at the time the deal was not good news for kiwi taxpayers who had poured more than $10 million in R&D grants into it. The latest result included a US$1.2 million government grant.

Revenue was US$23.4 million compared to US$39.9 million in the previous 15-month period. Research and development expenses were US$11.5 million, compared to US$14.2 million for the 2013 15-month period.

During the 2014 fiscal year, Endace’s parent El Dorado Ventures Ltd was merged into the ultimate parent which resulted in a re-issuing of 100,000 shares as Endace’s new share capital.

Emulex’s share price has dropped markedly in the past year and it reported a US$719,000 loss for the first quarter of fiscal 2014 ending Sept.28 2014, a GAAP loss of US$0.01 per share.


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