Sydney, -- 26 July, 2000 -- ASX listed technology company FTR Holdings Limited ("FTR") today announced it has entered into a Sale Agreement to acquire from the founders of WebCentral Pty Ltd ("WebCentral") the remaining 50.6 percent it does not own of the national managed internet
hosting and solutions business. Completion is expected by mid-August. FTR also announced that Malcolm Turnbull has stepped down as Chairman and will be succeeded by Lucy Turnbull who held the position between 1997 and 2001.
The consideration under the Sale Agreement is $19.6 million, consisting of $18 million in cash and 2 million FTR shares and 2 million FTR options.
The acquisition values WebCentral at approximately $38.7 million. The acquisition is expected to be both EBITDA and EBITDA per share positive for FTR. The cash component of the consideration will be partly debt funded and partly funded from FTR's cash reserves.
FTR's initial 49.4 percent interest was acquired in 2000 for $11 million, which valued the WebCentral business at just over $22 million. The revenue for the 2000-2001 financial year was $17.9 million, and the company was not then profitable. Audited revenue results for the 2003-4 year are $36.9 million and net profit of $2.4 million. Further financial details are attached to this statement.
WebCentral, which recently won Microsoft's global 2004 Hosting Service Provider of the Year, will remain headquartered in Brisbane. Andrew Spicer, WebCentral's Chief Operating Officer will be appointed Chief Executive Officer on completion of the transaction, taking over from Lloyd Ernst. On completion of the transaction, Andrew Spicer will also be appointed to the board of FTR and become CEO of the listed entity. Andrew Kent will be promoted to Chief Technology Officer (CTO). Steve Townsend will continue as Managing Director of the For the Record digital audio recording business and an executive director of FTR. The founders and principals of WebCentral, Lloyd Ernst, Byron Newton and Joe Altoff, will continue to be involved as consultants to WebCentral, and also as shareholders and optionholders in FTR.
In a joint statement, FTR Chairman, Lucy Turnbull, and WebCentral Chairman, Sean Howard, also a Director of FTR said this was a logical step and a great outcome for all parties.
"For FTR, it delivers an exciting opportunity for earnings and dividend growth. The WebCentral business is a market leader with excellent growth prospects and strong cashflows, which we will be able to consolidate.
"For WebCentral, as part of a listed entity, it provides improved access to capital to underpin business and product development, in particular growing the WebCentral Complex business which has been embraced by the market and is a key growth and profit driver," they said.
Lucy Turnbull said: "This is a further step in FTR's strategy to take a leading position in the provision of internet-based corporate, government, business to business and enterprise solutions, complementing the group's leadership in the global court recording sector on which FTR was founded.
"WebCentral is now a well established and growing business. Andrew Spicer has proved to be a very capable Chief Operating Officer. I have no doubt Andrew and his Chief Technology Officer, Andrew Kent will prove together with their colleagues to be an equally capable management team moving forward.
Mr Howard said: "WebCentral is Australia's largest managed internet hosting and solutions service, operating nationally in Sydney, Melbourne, and Brisbane and is the first hosting provider outside of the United States to receive Microsoft's Hosting Service Provider of the year award.
"Over the last three years WebCentral has experienced strong and continuing growth, and we are able to confirm WebCentral's audited revenue for Financial Year 2004 was $36.9 million, an increase of 28 percent over the last financial year. This is in line with the revenue growth trajectory reported at the half-year.
"As foreshadowed earlier this year, much of the increased momentum in the business has come from our WebCentral Complex division which provides customised solutions to larger enterprises and major corporates. Other major growth areas include the company's wholesale customers and a re-emergence of the ASP market, where WebCentral has been first to market with its version of the Microsoft hosted exchange product, called Managed Exchange.which permits remote access to Outlook from anywhere in the world.
"The market for managed internet hosting generally is expanding rapidly. Clearly this move will give WebCentral the added substance to reinforce its position as a major supplier and solutions provider, particularly in the corporate and government sectors.
Ms Turnbull said: "FTR has been very pleased with WebCentral since acquiring the initial stake in 2000. It is one the few profitable operators in the managed internet hosting space with an impressive roster of customers and partners.
"Consolidation of WebCentral will provide access to its cashflows, enable us to leverage the balance sheet and reduce FTR's cost of capital, which together should lead to a positive re-rating of FTR.
"WebCentral has a great business model and a brilliant team based in Brisbane and we have a great deal of confidence in the business and its capacity to grow the earnings and distribution profile of FTR, in the coming years.
"I am confident it will deliver long-term shareholder value for FTR's investors while broadening the scope of opportunities for all the loyal staff who have helped make it a leader in its field.
"As an acknowledgement of appreciation to all existing FTR employees, and as a gesture of welcome to WebCentral employees as new members of the consolidated FTR family, the board has resolved to seek shareholder approval at the next Annual General Meeting of the company for the issue of up to 1000 shares per employee at no cost to employees based on their length of employment."
Lloyd Ernst, current Chief Executive and one of the founders of WebCentral said that bringing the business to where it is now had been a great experience and one that he had enjoyed.
"However, it is now an appropriate time in WebCentral's development, particularly in securing business in the major corporate and government arena, where clients seek the comfort provided by the reporting requirements of wholly listed companies.
"I will continue to have an advisory role with WebCentral. Importantly, having worked with Andrew Spicer as COO for many years, and more recently Andrew Kent who was formerly CTO for OzEmail, I am sure WebCentral will go on from strength to strength under their capable and disciplined approach," said Mr Ernst.
FTR Preliminary FY04 Profit
Commenting on FTR's preliminary profit for the 2003-2004 financial year, Ms Turnbull said: "I am also pleased to report FTR's unaudited results for 2003-2004 that show revenues for the business of $11.1 million, and pre-tax profit of $1.6 million after equity accounting for FTR's share of WebCentral's profit amounting to $0.4 million. This compares favourably with last year's revenue of $10.4 million and profit of $0.6 million."
