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AQUA ONLINE
(Registration number 1971/005628/06)
Share code AQU ISIN ZAE000024360
("Aqua")
ANNOUNCEMENT REGARDING:
* THE APPOINTMENT OF AN AQUA SUBSIDIARY AS A WORLWIDE DISTRIBUTOR OF A
PREMIER ONLINE CASINO SOFTWARE PACKAGE;
* EFFECT OF APPOINTMENT ON TRADING;
* WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
1. Introduction
Further to the cautionary announcement dated 17 August 2001, Corpcapital
Corporate Finance is authorised to announce that Aqua Distributors Limited
("Aqua Distributors"), a wholly-owned subsidiary of Aqua, has concluded a
worldwide software distribution agreement (the "distribution agreement")
with International Merchant Services Limited ("IMS") pursuant to which Aqua
Distributors has been appointed as the first worldwide distributor of IMS'
online casino software (the "IMS software").
2. Rationale
The IMS software is a leading online casino software package which can be
distributed at a significant price advantage over competitive products. This
is expected to ensure product penetration into the market and should result
in sustainable revenue growth for Aqua. Since its recent launch the IMS
software has been adopted as the operating platform of two of the world's
larger online casino operators. The appointment is expected to enable Aqua
to significantly expand its value-add solutions offering in the online
gaming sector augmenting existing enablement, back office administration and
support services. Aqua will continue to support clients operating off other
casino platforms.
Aqua will participate in both the upfront and ongoing licence fees
generated by the IMS software distributed by Aqua. Aqua is ideally
positioned to provide the high volume transaction support services required
by the online gaming and leisure industries and particularly to service the
increasing migration online of the formal gaming sector.
Aqua's activities in the gaming industry are aimed at delivering
sustainable returns to Aqua's shareholders in the medium and long term.
3. Salient terms of the distribution agreement
- Aqua Distributors has been appointed as a worldwide distributor of the
IMS software.
- In the absence of notice by either party (which notice cannot be given so
as to terminate the agreement within the first seven years of its operation)
the agreement will endure in perpetuity.
- Aqua Distributors will participate in any upfront license fees and any
ongoing license and royalty fees paid by the licensee pursuant to the
relevant license agreement.
- The distribution agreement contains such other terms, warranties and
indemnities as are usual for an agreement of this nature.
4. Effect of appointment on trading
The conclusion of the distribution agreement is a deliberate re-alignment
of Aqua's online gaming activities with the consequence that short-term
earnings have temporarily been sacrificed in favour of anticipated higher,
more predictable and sustainable medium to long-term earnings.
Extensive resources have been invested in the conclusion of the
distribution agreement and establishing the required supporting
infrastructure.
To facilitate the move of certain of Aqua's existing clients to the new
IMS software platform, trading volumes of their online gaming businesses
were scaled down. This temporarily impacts on Aqua's revenue linked services
fees generated from these businesses. The migration has been successfully
implemented and all indications are that in the medium term Aqua's revenue
contribution from these businesses will be restored and exceeded.
As a result preliminary indications are that Aqua will suffer short term
temporary earnings decline with marginal profit expected for the financial
year ending 30 June 2002. Aqua's cash balances are more than sufficient to
support the expected decline.
The full financial benefits of the appointment and investment in
infrastructure are anticipated to materialise in the financial year ending
30 June 2003.
Aqua's board of directors is of the opinion that the anticipated
temporary effect on earnings is justified in order to extend Aqua's annuity
earnings to enhance significantly medium and long-term profitability.
5. Withdrawal of cautionary
Following the successful conclusion of the distribution agreement, the
cautionary announcement extended on 31 October 2001 is hereby withdrawn
16 November 2001
Corporate advisor and Sponsor
Corpcapital Corporate Finance
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