Imarda accounts tagged by auditor ahead of $20m Telematics merger

Imarda NZ's 2013 accounts, released ahead of a proposed merger between its Australian parent and New Zealand's International Telematics Holdings, show a wider loss and were tagged by the auditor, who couldn't sign off on the value of inventories.

Imarda Pty, the GPS fleet management solutions company which is 34% owned by chief executive and founder Selwyn Pellett, plans to merge with the Marris family's International Telematics (ITH) to form a new entity, Coretex, which will target expansion in the US telematics market, forecast to more than double to 37.9 million vehicles in 2020 from the 14.7 million vehicles being monitored last year. He earlier told NBR the combined company would have revenue of $20 million.

Imarda NZ is one of five entities within the group undergoing audit as part of the due diligence process ahead of the merger with ITH, whose ibright fleet management brand targets refrigerated transport fleets in particular and is expanding in the US, while Imarda's i360 platform has mainly attracted customers in the construction industry in Australia.

Imarda NZ auditor Grant Thornton gave a qualified opinion, saying it had been unable to obtain sufficient audit evidence for the 2013 accounts regarding the quantities of inventory held by Singapore-based subsidiary, Imarda Asia Pte. As a result of not attending the stock take performed at a third-party warehouse, the auditor said it was unable to confirm the $641,371 of inventories on hand recorded in the accounts.

The audit also notes in an emphasis of matter that the 2013 loss increased to $1.3 million (from $981,000 in 2012) and that at year-end current liabilities exceeded current assets by $6.1 million, meaning it was reliant on financial support of shareholders to continue as a going concern.

Imarda NZ's accounts also show revenue dropped to $3.9 million in 2013 from $5.2 million the previous year, while spending on research and development rose by about $300,000 to about $1.2 million.

Pellett said the local unit's results reflect that most of the group's research and development expense is incurred in New Zealand while most of the revenue occurs in Australia and the US and is recognised in subsidiary accounts in those two countries.

He said Imarda had spent significantly on research and development but, unlike in some other companies, that was not capitalised on its balance sheet. Chief financial officer Tracey Herman said that was mainly because government research and development grants which Imarda NZ had received included a condition that the R&D spend not be capitalised. It was likely to be in the merged entity, she said.

Mr Pellett said the Imarda group as a whole had an unaudited loss of less than $1 million in the 2014 financial year, after spending around $3 million on R&D alone during that period.

Mr Pellett, who will be chairman of Coretex, said as part of the merger Imarda was "coming home" to New Zealand. He said the company had been largely self-funded until last year when it started cranking up the commercial activity which is front-end loaded.

"Growth in large customer acquisitions in the 2014-15 year will see Imarda grow in the 2015-16 year greater than 50 percent and probably closer to 90 percent," he said.

All tax losses will be wiped as a result of the merger, he said.

Imarda Pty's second-largest shareholder, 16% owner Neil Richardson, resigned as a director of Imarda NZ earlier this month for health reasons. He said he was shedding a number of directorships, including ones associated with his other investments, in a bid to slow down.

(BusinessDesk)

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