ATM operator GRG International does not expect to pay half of the deferred instalment on its purchase of eFunds Pty Ltd because of the disappointing performance of a fleet of Suncorp-branded ATMs owned by the group.
Financial statements for GRG for the year to June 2011 show the recently listed company recognised an impairment of A$3.95 million on the goodwill in connection with the takeover of eFunds, as accounted in late 2010. GRG will reduce the estimated liability under an earn-out agreed with the vendors of eFunds.
GRG had said it would pay up to $13 million in cash and shares for eFunds. The up-front payment was $6.4 million, with the balance being payable by June 2012 and subject to performance hurdles.
One disappointment is that eFunds, or its client Suncorp, has been unable to commit to rolling out an additional 70 ATMs (on top of its present fleet of 240), which was projected at the time of the takeover nine months ago.
This development makes it a trifecta for impaired ATM fleet valuations for the trio of boutique operators of automatic teller machines listed on the Australian Securities Exchange.
Two other firms, iCash Payments and MyATM, have confirmed write-downs as the 2011 profit season draws to a close.
eFunds is otherwise not such a bad business for GRG, which is incurring losses on the remainder of its Australian ATM operations and also on its international operations.
eFunds produced a pre-tax profit in its shortened year of ownership of $700,000. GRG reported a pre-tax loss of $2.9 million for the year.
The Australian business reported a pre-tax loss of $1.5 million and the offshore business a loss of $1.1 million.
GRG raised $4.5 million in new capital in a listing on the ASX in October 2010 and sold a further $2.9 million in shares in a secondary offering in February 2011.
Note: see the
letter published 6 September 2011 from Jeff Barrow, executive chair of GRG International, rebutting this article.