Strong dollar bites into dental software company

Dental software company Software of Excellence International issued a warning yesterday that the strong dollar would take a big slice out of its first-half earnings.

The company, which generates 77 per cent of its revenue in Britain, said a 10 per cent appreciation in the kiwi dollar against the British pound would wipe $800,000 off earnings for the six months to September 30.

The company's forecast for half-year net profit after tax ranges from break-even at best to a $500,000 loss compared with $73,000 profit for the same period last year. This comes despite a forecast revenue of between $10.9 million and $11.3 million, up from $9.5 million the previous year.

The company, which in May posted its first full-year profit since listing in 2000, said the strong currency and costs relating to the protracted roll-out of dental software into 10 countries had dented its bottom line.

Michelle Perkins, research analyst at ABN Amro Craigs, said a $500,000 six-month loss would be below expectations.

"For the full year, I was expecting net profit of around the $1 million mark," she said. "If they come in at the bottom end of forecast [for the half year], they'll need to do a lot of work to come in close to my full-year forecast for the group."

Perkins said currency rates were continuing to affect the company's bottom line.

"There's $800,000 sitting right there that would prop up the net tax."

The company said its professional division, which supplies practices in Britain, Australia and New Zealand, would exceed budget for the half year. British sales rose 28 per cent in British pounds during the half year and the division is expected to contribute $9 million in revenue and $1.5 million in earnings before interest, tax, depreciation and amortisation during the period.

However, the enterprise division, which supplies multi-site software for dental chains, public health institutions and dental schools, will fall short of budget.

"While SOE has developed market-leading products, its enterprise revenues have not as yet grown to the levels required to bring the division into profitability," the company said.

The division is expected to contribute between $1.9 million and $2.3 million in revenue during the half year, but post an ebitda loss of between $300,000 and $800,000.

Shares in Software of Excellence slipped 2c yesterday to finish at $1.20, against a year high of $1.68 and a low of 92c.