NETELLER STILL FEELING IMPACT OF U.S. DEBACLE

9 November 2007

CEO reports "solid progress" as e-processor rebuilds business


Eviscerated by its clash with the U.S. Department of Justice arising from the arrest of its founding duo last year, Neteller is fighting back strongly in alternative markets and making solid progress, according to CEO Ron Martin.

Releasing the e-processor's third quarter numbers, Martin referred to the $146 million long-running legal tussle with the Americans and said that it was a year he would be unlikely to forget.

Neteller had to forfeit $136 million to the US authorities as settlement of the case, resulting in a reported operating loss of $146 million in all. Exacerbating the impact, revenue for the period fell 75 percent to $17 million ($67 million last year) as a result of the withdrawal from the US market, and average daily receipts shrank to $295 000 per day from $5.3 million in the same period last year when the American business was buoyant.

Europe accounted for approximately $8.4 million of third quarter revenue while Asia accounted for $3 million as the company diversified gepographically to address its American losses.

Excluding the huge loss of US customers, the company reported that active customer numbers grew 14 percent over the same period last year, reaching 94 925. But the positive news was dampened by comparing the numbers with with Q2 2007, which showed a 5 percent decline in Europe to 72 849. Year on year, there was a 21 percent increase in Asian clientele, which rose to 17 638.

Cash flow remained positive in the quarter, with cash available at 30 September 2007 amounting to $149.4 million, although $40 million of that was subsequently paid to US authorities on 15 October 2007 as part of the settlement.

Describing the company's fightback as solid progress Martin emphasised that geographic diversification remains the central Neteller strategy going forward. "The third quarter has demonstrated the resilience of the Neteller business and the results from our European and Asia Pacific businesses show that we are regaining the trust of customers and continuing to deliver innovative solutions to our merchants," he said.

Quarter 4 results may show improvement, based on good indications in September.

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