re: ssb forecast downgrade The brokerage report to which...

re: ssb forecast downgrade The brokerage report to which OzEquities referred earlier this afternoon was issued by SSB.

In that report, a profit downgrade was reported from an SSB coverage perspective.

Key to the SSB downgrade were the following changes in forecast:
1)
Revenue for FY03 was downgraded by 8% to $164.5m (previously, est @$179m);
2)
Revenue for FY04, reduced even further by 12.2%, from $207m, to $181.5m;
3)
NPAT reduced in FY03 by 29% to $11.4m (previously, $16.0m);
4)
NPAT reduced in FY04 by 36% to $12.6m (previously $19.6m);
5)
EPS (pre goodwill) reduced for FY03 by 27%, to 10c (previously 13.6c);
6)
EPS (pre goodwill) reduced for FY04 by 33%, to 10.8c (previously 16.2c).

The report cites "reputational damage" as the main risk to future sales, and the primary driver for the cuts in forecasts.

A range of other matters are also discussed in the report, including the possibility of any chanage in the future financing approach adopted for financing of customer systems. Currently, this is done off-Balance Sheet through external financiers.

If, however, NTG is in the future required to take on this burden directly, the impact of this will be felt on both:
1)
the Balance Sheet (increased debt burden through immediately absorbing the assets, higher debt to equity ratios, etc); and
2)
on the P&L Statement (reduced revenue /profit recognition as the sales' impact is spread over a 3 -5 year useful life /contract life cycle).


The report goes into a number of other matters, as well, including:
1)
current ACCC inquiry;
2)
future access to finance (as above);
3)
risk to revenue (as above);
4)
business execution risk (ie: the aggressive sales approach used by NTG sales staff);
4)
governance (ie: changing of Chairs from Kennett to Ron Nissen, former CEO of Motorola in Australia)