CHAIRMAN''S ADDRESS.
ZINTEL ANNUAL MEETING, 28 SEPTEMBER 2012.
I am pleased to welcome you to the Annual General Meeting of Zintel Group
Limited.
In addition to resolutions to re-elect Paul Connell as a director of the
Company and to authorise the Board to fix the remuneration of the Company''s
auditors, resolutions will also be put to shareholders to:
o first, permit the Board to, at its discretion, apply to delist the Company
from the New Zealand stock exchange (in particular, from the NZAX market
operated by NZX Limited, on which the Company''s shares are currently listed);
and
o second, to amend the Company''s constitution to permit the board to, at its
discretion, appoint a liquidator to the Company.
I refer to these resolutions are the "Winding-Up Resolutions". I set out
below the background to these resolutions as well as their rationale and the
recommendations of your directors.
Background
The past financial year and developments since the Company''s March 31 balance
date have been quite extraordinary for the Company and have brought about a
major change in strategy. In prior years our ambitions have been to grow the
Company with the view that the share price would ultimately follow suit. In
January 2009 we entered the EFTPOS payment terminal distribution market, and
in October of the same year acquired the business of Cogent Communications.
In October 2011 we acquired Commit Services Limited, a cabling and
infrastructure business.
The first event that forced a move away from this growth strategy was the
merger of VeriFone and Hypercom in the USA, which began as a hostile
takeover, and resulted in VeriFone terminating Zintel''s exclusive
distribution agreement for New Zealand in September 2011. This was
devastating for Zintel''s EFTPOS business, which was growing market share and
had enjoyed revenue of $3.8m and profit of $472,000 to the year ended 31
March 2011. I am delighted to now advise that late last night we reached an
amicable settlement with VeriFone Australia (HAPL) Pty Ltd, with regard the
termination of our distribution agreement for payment terminals in New
Zealand.
Secondly, we were approached by j2 Global, Inc., an American corporation,
with regard to it acquiring Zintel Communications Pty Limited (ZCPL), our
(now former) Australian subsidiary. Initially we rejected j2''s approach but
were subsequently offered a price that exceeded the total market
capitalisation of the Company, a price that we believed was in the best
interests of our shareholders. The sale of ZCPL to j2 settled on 1 March
2012.
The Cogent business had been acquired by Zintel with the aim of cross selling
and bundling telecommunication products and services across a wider customer
base. Cogent had been loss making under its previous ownership and our own
strategy for business was not particularly successful, with the result that
we were unable to achieve consistent profitability across Zintel Cogent.
Hence the decision was made to divest Cogent, which occurred as of 2 July
this year.
The Company was now at a cross roads, as the Board became concerned that the
Company was too small to justify continuing to be a public company, with the
associated costs and governance requirements. We considered both undertaking
acquisitions, consistent with our previous growth strategy, and/or further
divestments. During this period j2, the purchaser of our Australian
subsidiary, expressed interest in acquiring our New Zealand communications
business and this sale settled on 23 August.
Following this most recent sale, the Company''s only remaining trading
business was Commit Services Limited, a cabling and infrastructure company.
Given this, on 31 August the Board resolved to progress towards selling
Commit and returning funds to shareholders. The Board determined to take
this course because it believes that returning funds to shareholders is the
correct and proper decision for the Company, given that it is now effectively
a cashbox. Shareholders will be free to make their own investment decisions
with respect to the proceeds they receive. As advised to the market
yesterday, we have now reached agreement to sell Commit to a private investor
for the sum of $1.13m.
The Company''s cash reserves are in excess of $19 million, or approximately 43
cents per share. Earlier this year the Company distributed the equivalent of
approximately 20 cents per share to shareholders via a special dividend and
share buyback. Having made the strategic decision to pursue a winding up,
the Board considers that the most effective method to distribute further
funds to shareholders is to de-list and/or liquidate the Company.
Overall the Board believes the Company has achieved good value for
shareholders, certainly well in excess of the share price of 22 cents prior
to the sale of our Australian business earlier this year. At this stage we
believe that it is best to return funds to shareholders so they can make
their own investment decisions in future. We have now sold our remaining
business, Commit Services Limited, and reached an amicable settlement with
VeriFone Australia (HAPL) Pty Ltd, with regard the termination of the
distribution agreement for payment terminals in New Zealand.
Whilst the terms of that agreement are confidential, Zintel anticipates that
by early November once it has received settlement funds and together with the
sale of Commit Services Ltd, cash in bank will be in excess of $22m, with all
subsidiaries either sold or no longer trading.
The Winding-Up Resolutions are now being put to shareholders to give the
Board the ability to put into practice the strategy outlined above, without
the need to convene a costly special meeting of shareholders in the near
future. It is the Board''s current intention that the Company will not
de-list until it is ready to put the Group in liquidation and begin the
winding up process. The Board intends to wind down the remaining activities
of the Zintel group in an orderly manner, reduce costs and seek to minimise
the expenses of the eventual liquidation.
The Board understands the importance to shareholders of the liquidity offered
by the Company''s NZAX listing. As the Company has prepaid its listing fees
until June 2013, it will not be necessary to bring forward de-listing in
order to avoid the need to pay further listing fees.
As more fully discussed in the Notice of Meeting, the resolutions to be put
to shareholders give the Board flexibility, acting in the best interests of
the Company and its shareholders, around the timing of de-listing and
liquidation.
The Board, including independent director Paul Connell, unanimously
recommends that shareholders vote in favour of the Winding-Up Resolutions.
In closing I would like to publicly thank my fellow Directors and our Group
CFO Alf Wallis, for the extensive work and hours they have put in which have
resulted in more than doubling shareholders funds in the last year, and
significant pay-outs in the form of dividends and the recent share buyback.
Nick Gordon
Chairman
End CA:00227882 For:ZIN Type:ADDRESS Time:2012-09-28 12:00:19