Commsoft Group have provided their results for the half year ended 31/12/00.
Operating revenue for the 6 months to 31/12/00 is A$3.865m with an operating loss of A$6.256m.
This disappointing result is primarily a consequence of the specific experience with debtor collections during the last 6 months and a desire by the Directors to portray a realistic and conservative picture of the Company’s debtor position.
The Directors are conscious of the increasing scrutiny and concern by capital markets of the ability of companies to achieve satisfactory cash collections in this difficult economic environment.
All outstanding debtors have been reviewed and where payment has not been made within the company’s trading terms, aggressive and conservative provisioning has been made.
This provision totals A$4.208m and accounts for a significant proportion of the Company’s operating loss.
This adjustment has been made with the benefit of the Company’s trading experience since listing in September 2000.
In the Prospectus, Directors highlighted that only a small proportion of cash had been collected on revenue recognised in the 6 month period immediately prior to the IPO as a result of the Company’s strategy of offering extended payment terms to its resellers as a competitive strategy against smaller, less well capitalised competitors and the fact that sales normally occurred late in each quarter.
It was further noted that these factors made it difficult for the Directors to assess the requirement for a provision for doubtful debts or to assess the impact of any returned goods.
At that time, Directors relied on the contractual obligation set out in the Company’s trade terms (which provide for payment on the shipment of software) and the positive responses to requests for key debtors for confirmation that the debts were owed to the company.
While these debts are still acknowledged as being due to the Company, some debtors are paying slowly.
As such the Directors have adopted a conservative approach in making the provision set out above to ensure that shareholders can have confidence in the Company’s balance sheet.