Monday, 03 June 2013 11:21

NetComm cashes up for M2M assault Featured

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NetComm Wireless has raised $5 million from a new share placement, and has flagged substantial new orders in the growing M2M space.

Three weeks ago NetComm was selected by SP AusNet, through its integration partner Ericsson, to supply the 3G communications component for the Victorian Government’s mandatory statewide rollout of smart meters. The company has also landed other M2M deals, but needs working capital to fund the product development these contracts require.

NetComm Wireless Chairman Justin Milne said: "We are delighted with the demand we received for this raising both from existing and new shareholders. It is a clear recognition of the potential for success that exists for NetComm Wireless in the global M2M space."

The placement comprised 19.8 million fully paid ordinary shares at an issue price of $0.255, which represents an 8.9% discount NetComm’s last closing price of $0.280 on 29 May 2013.

At that time the company requested and was granted a temporary halt in trading on the ASX. It is also an 8.6% discount to the volume weighted average price of NTC ordinary shares during the five trading days before the announcement.

Milne said the placement was substantially oversubscribed by existing shareholders and new institutions and ‘sophisticated investors’. As a result of the demand, the placement size was increased from $4 million to $5 million.

All new placement shares will rank equally with existing shares. The new shares issued under the placement comprise two tranches:

  • 15.8 million shares, representing 15% of the ordinary shares on issue, which do not require shareholder approval (‘unconditional shares’).
  • 4 million shares where issue is subject to share-holder approval at an Extraordinary General Meeting to be held on 15 July 2013.

NetComm also announced a Share Purchase Plan (SPP) to raise up to $700,000. The SPP is intended to allow existing shareholders the opportunity to increase their equity participation. They can each apply for up to $15,000 of fully paid ordinary shares in NetComm Wireless, without brokerage or other transactional costs.

The issue price of shares under the SPP will be the placement price of $0.255. The SPP will be open to Australian and New Zealand resident shareholders that were on the register at the end of May 2013 and who are eligible to participate under the terms of the SPP.

Milne said NetComm intend to use the proceeds of the placement and the SPP to support its M2M strategy, including to fund engineering development under existing and new contracts, acquiring additional engineering and sales capability to support global growth, working capital requirements and offer costs.

Announcing the placement and the SPP, NetComm said that it expects to generate substantial growth in the 2014 financial year and beyond as it delivers further M2M contracts in line with its strategic plan to grow market share in the rapidly expanding global M2M market.  “In addition to revenue from a smart metering contract announced to the market on 13 May 2013, NetComm Wireless expects growth in FY14 from early orders from Vodafone Global and additional volume in NBN, Cubic and other M2M contracts,” said Milne.

“The volumes from these contracts and others in the pipeline are expected to build substantially in FY15 and beyond, with a lag between contract and delivery, spreading some of the benefit to later reporting periods.”

Milne said NetComm expects FY14 revenue in the $58-63 million range, with an EBITDA of between $4.6million and $5.1 million. “The forecast EBITDA for FY14 reflects the increased investment into sales and engineering resources, made or planned, to grow the business from FY14. Next year represents an inflection point in NetComm Wireless' product revenue mix with the combination of M2M, smart metering and NBN anticipated to increase from 20% of FY13 revenue to around 55% in FY14, in line with the strategic direction of the company.”

NetComm Wireless is in discussions and trials in relation to a number of new M2M and smart metering opportunities in a range of geographies including Australia, US, Japan and the Middle East. If these opportunities translate into orders, they will result in additional revenue and earnings growth from FY15.

Commenting on the company’s growth and outlook, NetComm Wireless’ CEO and Managing Director, David Stewart, said: "NetComm Wireless is entering a very exciting period of growth that leverages our superior product and technology capabilities across a global market opportunity. With a number of contracts in place with global partners and a strong sales pipeline, we expect to see strong growth in revenues and earnings over the coming years."

NetComm will release its annual results on 23 August 2013. It is providing revised guidance for revenues, now estimated to be $42 million with an EBITDA of $1.2 million. This represents a substantial decrease in expected EBITDA of $$600,000, with approximately half of this decrease because of the recent fall of in the value of the Australian dollar.


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Graeme Philipson

Graeme Philipson sadly passed away in Jan 2021 and a much valued senior associate editor at iTWire. He was one of Australia’s longest serving and most experienced IT journalists. He is the author of the only definitive history of the Australian IT industry, ‘A Vision Splendid: The History of Australian Computing.’He was in the high tech industry for more than 30 years, most of that time as a market researcher, analyst and journalist. He was founding editor of MIS magazine, and is a former editor of Computerworld Australia. He was a research director for Gartner Asia Pacific and research manager for the Yankee Group Australia. He was a long time weekly IT columnist in The Age and The Sydney Morning Herald, and is a recipient of the Kester Award for lifetime achievement in IT journalism. Graeme will be sadly missed by the iTWire Family, Readers, Customers and PR firms.

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