|
29 June 2004
OPEN BRIEFING
CEO on NYSE Delisting
corporatefile.com.au
Orbital Engine Corporation Limited recently
announced that its US listing will be moved to the OTC Bulletin
Board from the New York Stock Exchange (NYSE). How will the move
in listing impact on your current and future operating performance?
CEO Peter Cook
The move in listing won't have any impact on
our operating performance now or in the future. The underlying operating
performance of the business has improved strongly. In the year ended
June 2002 we reported a loss of $26.7 million, the following year
we reported a loss of only $1.9 million, and this fiscal year we've
provided a forecast to the market of $3 million worth of profit.
I should also stress that, with the current six-month period, we'll
have reported three successive six-month periods of profit. That's
a major achievement, which won't in any way be affected by the shift
from one exchange to another.
corporatefile.com.au
To what extent have your earnings become more
predictable following the restructuring efforts over the past two
years and what's the growth outlook?
CEO Peter Cook
The restructuring has given us three income
streams. One is our engineering services, the second is our royalty
and licence income, which historically we've always had, and the
third is our share of the profit from Synerject, our manufacturing
joint venture with Siemens-VDO. In combination, these give a more
stable base to the business than relying only on licence fees, which
is what we'd done up until two or three years ago, in spite of the
volatility of this type of income.
Each of these income streams has its own separate,
but somewhat related, growth pattern. And the combination of the
separate profit centres and lines of growth provides stability and
surety for our shareholders.
It's been disappointing for us that the market
to date, hasn't given us credit for either the major turnaround
we've achieved or for putting in place a much more stable and sustainable
earnings base.
corporatefile.com.au
What were the NYSE listing requirements you
failed to meet and by what margin did you fail to meet them?
CEO Peter Cook
Simply, the NYSE has a requirement for combined
market capitalisation and shareholders' funds of around US$100 million.
Over a period of about 18 months, we've been in the US$50 million
to US$60 million range.
corporatefile.com.au
Will the NYSE delisting impact on your access
to capital?
CEO Peter Cook
We successfully raised about $6 million 12
months ago, and the nature of that capital raising was such that
we didn't need to go to the US. Indeed the cost of going to the
US made it prohibitive. So drawing on that limited experience, I'd
suggest there's no need for us to access the US base of capital.
corporatefile.com.au
How will your US reporting requirements change
as a result of the move from NYSE listing?
CEO Peter Cook
There won't be any change whatsoever in our
reporting requirements. We report to the standards required by the
US Securities and Exchange Commission (SEC), the regulator that
controls the NYSE, and we'll continue to meet those requirements.
I should point out that companies traded on the OTC Bulletin Board
are obliged to meet their reporting obligations and indeed would
be removed if they didn't.
corporatefile.com.au
Rather than trade on the OTC Bulletin Board
have you reviewed options to list on another US based exchange?
CEO Peter Cook
We see the OTC Bulletin Board as the most appropriate
forum for our stock, and as we've indicated, that's basically driven
off size. You've got to recognise that exchanges like NYSE and even
NASDAQ and AMEX, all handle huge volumes and are hugely valuable
markets, and organisations of our size get lost in them.
There are about 3,300 companies traded on the
OTC Bulletin Board and they range from companies with market caps
as low as US$0.5 million to companies with market caps in excess
of US$500 million. We estimate there are about 400 companies with
a market cap similar to ours. The OTC Bulletin Board has a daily
dollar trading value of around US$170 million, compared with the
NYSE's daily trading of US$47 billion. That puts into perspective
the issue of size, and shows how inappropriate it would be for an
organisation of our size to remain with the goliaths on NYSE.
corporatefile.com.au
Why have a US listing at all when your market
capitalisation is relatively small at about A$57 million or US$40
million? What longer-term alternatives do you consider viable?
CEO Peter Cook
Our prime objective was to make certain the
40 percent of our shareholders that are in the US and hold American
Depositary Shares (ADS), have a local, readily accessible market.
Given our current size, there's no alternative that we'd see as
viable.
corporatefile.com.au
Orbital has about 9,500 US based shareholders
and about 12,000 Australian based shareholders. How will the change
from NYSE to OTC Bulletin Board impact shareholders in each country?
CEO Peter Cook
In a rational market there should be no impact
whatsoever. There remains an accessible and seamless market for
ADS holders in the US and as price is determined by current and
future earnings, there should be no impact. The Australian listing
remains unchanged.
corporatefile.com.au
Is Orbital part of any NYSE indices and is
the stock held by US based index tracking fund managers?
CEO Peter Cook
We know we're not part of any NYSE index. And
we're unaware of being part of any US index tracking fund, although
we can't rule that out because there could be some very selective
index tracking by certain sectors of the market such as ethical
investment funds. But we're unaware of any, so the impact would
be minimal. Almost all of our US shareholders are retail investors
only and don't hold their shares through investment funds that may
be index linked.
corporatefile.com.au
What has been the daily volume of Orbital shares
traded on the NYSE; how does that compare with daily turnover of
your shares on ASX and what would be your expectation for daily
turnover when your shares are OTC Bulletin Board traded?
CEO Peter Cook
Over the last three months, our average volume
on the NYSE has been about 5,700 ADSs, which represents about 230,000
shares per day. On the ASX, our trading has averaged around 300,000
shares per day over the same period. Our trading volumes in the
US and Australia are fairly similar, which shows how important it
is that we maintain a trading forum in the US.
We don't see any reason for the move to significantly
change our trading volumes. Our underlying business has improved,
and we feel that should dictate the level of interest in our stock,
not which particular board we're traded on.
corporatefile.com.au
Thank you Peter.
|
