CommSoft staggers to get back on track

By Phil Boeyen, ShareChat Business News Editor

Tuesday 19th June 2001

Troubled telecom software company CommSoft (NZSE: CSG) is looking on the bright side despite predictions it will lose A$17 million this year.

The loss is a significant drop from the A$6.6 million pre-tax profit indicated in last year's prospectus.

After eight weeks in the job new group MD Mark Lunt has reviewed the company's beleaguered operations, and the new loss estimate includes all costs and provisions identified to date.

The company is also reviewing the carrying value of intangible assets in the company's balance sheet.

Despite the worse-than-expected result it would appear the company is making headway into sorting out its cash position and says it could become cashflow positive in a matter of months.

Net operational costs for June are predicted to be A$300,000 compared with previous outgoings of A$1.2 million a month, with further reductions expected.

"In the directors' opinion projected cash collections from current and forecast sales are such that with these reduced cost levels the business will overcome its current difficulties and achieve positive cash flows within the next two months, but this will require tight management of projected cash flows," CommSoft says in a statement.

"The directors believe it is nonetheless prudent to explore other funding options for CommSoft should this be necessary."

Actions to stem cashflow have included closing offices in Perth and Brisbane, while staff number have fallen by more than a third to eighty.

Much of CommSoft's woes have stemmed from unpaid bills, and it says the recent management review has paid particular attention to debts due in the UK market.

"The principal reason for adjustments relating to debtors and allowances for product returns is the lower than expected sell through of products by UK sales channels.

"The slow down in the worldwide market for information technology products and services is widely known. A number of the company's key resellers have been hit by a reduction in spending by their customers."

CommSoft says it is clear that sell-through expectations will have to be revised downwards and while it will enforce payment terms if necessary, it is wary of damaging potential long-term business relationships.

Most of the company's UK resellers are moving product, but at a much slower rate than expected, although sales are expected to pick up there as well as in New Zealand, Australia and South Africa following the recent management changes.

For those investors who have lost sight of - or never really understood - what CommSoft does, the company has spelled out its three major products as CallMaster, NetMaster and Brains.

CallMaster was CommSoft's first software product. It monitors telephone usage within a company and produces a wide range of reports and analysis that helps customers identify and control their telecommunications costs.

NetMaster does the same thing as CallMaster, except it monitors a company's internet usage, while Brains is a customer relationship management system.

"The directors remain of the view that CommSoft's products are competitive and have considerable potential and that the management changes and restructuring will ensure improved performance and accountability."

"Revised budgets for next year are currently being prepared. Initial indications are that the business should achieve significant growth after this year's disappointing performance and will generate sufficient cash to fund the launch of Brains and NetMaster into overseas markets."

CommSoft's stock, which reached the giddy heights of $2.00 just last November, has today been trading around 10 cents per share.

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