Intervid Limited
(Incorporated in the Republic of South Africa)
(Registration number 1999/011483/06)
Share code ITV ISIN ZAE000025615
("Intervid")
Profit Warning
The implementation of Intervid's internationalisation strategy has had a
greater negative effect on the company's financial results for the six
months to 31 December 2001 than was previously anticipated. The
implementation is taking longer than anticipated. The offshore operations'
results are below expectations as a result of an under-estimation of the
complexities of the markets and the time that it takes to establish and
acquire businesses.
The South African operation has significantly under-performed. This is due
to the depletion of the South African management resources, which were
redirected towards the international expansion.
Intervid's four strategic objectives were:
* to raise cash to fund expansion;
* to establish a global footprint both through strategic acquisitions and
organic growth in the USA, Europe, Middle East and Australia;
* to mature and stabilise the business model (which has typically earned
most of its revenue from capital sales) to one where sustainable,
recurring revenue predominates; and
* to strengthen management and the internal infrastructure so as to
support a fast-growing international business without negatively impacting
the stable business in South Africa.
Intervid's performance against each of these objectives has been mixed:
* US$ 50 million has been raised for expansion purposes.
* Acquisitions have been made in the USA and Australia and one has been
conditionally concluded in the UK. Operations have been established in
Dubai and Malaysia. The positive effects of this should be significant in
the years to come.
* The change in business model is proceeding according to plan. As a
result revenue will fall in the short term because annuity income will be
earned over a period compared to capital sales which are earned upfront.
However, this will give the company more predictable and sustainable
revenues in the longer term. This does not constitute a change in
accounting policy and the change in business model has not had a material
effect on the current performance of Intervid.
* Additional experienced management continues to be appointed where
appropriate. The administrative and support infrastructure are also being
addressed by both capital investment and the recruitment of additional key
staff. Although these issues are a top priority, this has taken longer
than anticipated and the benefits will take time to flow through as the
company integrates its existing acquisitions.
The financial implication of the above is that the company will report a
significant loss for the six months ending 31 December 2001. As a result of
the first 6 month's earnings a loss for the full year to 30/6/2002 is also
expected.
The Board is satisfied that the strategic objectives are still valid and
sufficient capital is available for this purpose. Final results for the 6
months will be released shortly.
Durban
8 March 2002
Sponsor
RMB
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