Optimism and caution for stung IT Capital

By PETER GRIFFIN IT writer

Investment decisions made in the heady days of dotcom fever have caught up with technology investor IT Capital.

The company has posted a loss for the year ended in March of just under $5 million, most of which came from a writedown of its investment in web developer Terabyte.

IT Capital picked up Terabyte for $8.4 million in November 1999, when the earning potential of web development companies seemed to be riding high.

According to IT Capital, the subsequent "slowdown in the New Zealand multimedia market" has had a significant impact on Terabyte, which is now valued at just over $2 million, based on revenue forecasts.

Revenue for IT Capital for the period was $13.4 million, compared with $2.3 million generated in the previous financial year.

But the figure was boosted by IT Capital's successful exit from an investment in Auckland company Exo-net, for which it banked $9.6 million.

But despite the writedown, IT Capital remains confident that Terabyte, which had revenues of around $3.5 million for the past year, will increase its revenue in the next eight to 12 months.

"The outlook for Terabyte is positive, with strong revenue forecast from the growing interactive learning market, complementing revenue streams from business solutions such as intranet and website development," said IT Capital's chief executive officer, Jeff Dittus.

This year the company claimed it had more than $15 million in the bank ready for new investments, but acquisition plans have largely been put on hold as it takes a more cautious approach to the market.

In April, it invested in Australian electronic procurement company Streamlink, paying $2 million for a 23.5 per cent stake.

IT Capital's chief financial officer, John Dakin, said that investment - a further injection of $1 million into the successful animation firm Virtual Spectator and the continued funding of Deep Video Imaging - still left the investment company with $8 million in the bank.

The subsequent tech-sector crash has seen a number of promising Australasian internet companies disappear while others have struggled to stay afloat.

In February, TelstraSaturn bought web development company Zivo for around $2 million, a fraction of the $10 million the now-defunct Liberty One paid for the company in August 1999.

This month, technology company Advantage shrank its e-services division, shedding the Wellington-based operations of Glazier Systems, the web development company Advantage acquired for $7.1 million in August 1999.

The shining stars in IT Capital's portfolio are Virtual Spectator, which has a deal to supply live internet coverage of the World Rally Championship, and Digital Video Imaging.

IT Capital's earnings per share fell to minus 2.9c, compared with 3c for the half-year to September. The shares closed on Friday at 18c, but reached a high of 90c early last year.