Ideas famine costs e-Ventures $4m

By DANIEL RIORDAN

Struggling internet investment company eVentures New Zealand has ended its first year with a $4.5 million loss and $53 million in cash it cannot find a home for.

The company says it is still looking for investments that will make its concept a winner, with a couple of candidates in mind.

In the meantime, the result has surprised no one, least of all analysts who from the outset questioned the company's business model.

"The model of bringing good ideas to the New Zealand market was suspect from the start, because why would you go down to 3.8 million people rather than going out from 3.8 million people? It seems to have changed its strategy but it doesn't seem to have resulted in any investments," said DF Mainland technology analyst Bruce McKay.

eVentures was listed last May, with founding shareholders - including Japan's Softbank, Rupert Murdoch's epartners and Craig Heatley, then Sky TV chairman- being issued shares priced at a quarter of the 60c value placed on the 20 per cent of the company that was offered to the market.

Telecom, The Warehouse and Todd Capital are among its corporate shareholders. Its timing was poor to start with - listing just as technology stocks worldwide began slumping.

Its shares, which rose as high as 70c just after listing, closed yesterday at 30c.

The company planned to make as many as eight investments. but so far has made only two - in online loan comparison service E-Loan and e-mail marketing company MessageMedia. Plans to launch local versions of international shopping site Buy.com and games site Contest2win were scrapped late last year.

E-Loan was downsized and The Warehouse brought in as a partner in December. eVentures chief executive Cindy Mitchener said at the time the new arrangement recognised that E-Loan's original plan to reach profitability in three to five years was no longer acceptable.

She said this week that the Warehouse partnership had already lowered costs considerably and increased potential customer contact, but that both parties would review the arrangement at the end of the year.

MessageMedia, in which NZ Post has a 20 per cent stake, has been more successful. It was cashflow positive in January, and directors were confident of its growth and prospects, said Ms Mitchener. Discussions to provide international software development through its New Zealand business were under way.

Chairman Dr Roderick Deane said the loss was less than originally budgeted.

The company gained an exemption from the Securities Commission allowing it to exclude profit forecasts from its prospectus and a waiver from the requirement that at least 25 per cent of its shares be publicly held.

The company said last month that evaluation of two logistics and supply chain management products, one export-oriented and one import-oriented, were in the due diligence phase, and eVentures had yet to decide whether to invest in them. Chief financial officer Craig Manning said yesterday that those evaluations were still proceeding. He said the company was being careful with its investments.

"The environment hasn't been great. The marketplace has changed. We're just being very careful with our investments - we don't want to be burned on them."

He said there had been only a minor change to the company's strategy.

"Rather than Softbank companies being pushed our way, it's really us selecting them and even going outside the Softbank portfolio, looking for the best opportunities to bring companies into New Zealand.

"We haven't been able to make as many investments as we'd have liked, or spend as much money on operations, but that doesn't mean we've stopped to put our hands in our pockets.

"We've got a couple of things on the table we hope to be tying up soon, but we won't be making any announcements until we're certain we're doing them.

"No doubt there are one or two investors getting impatient, but it's better for us to be cautious rather than rush in and burn the cash up. We're cashflow positive - that's nothing to shout about, but at least we're not going backwards."

Times have been just as tough across the Tasman, where eVentures Holdings, the Australian counterpart of eVentures New Zealand, left the e-tailing scene last November.