FOUR months after being sent to the stockmarket sin-bin, erotic e-tailer AdultShop.com returns to the boards today after reporting solid underlying earnings for the December half and promising better things to come.
Forced into suspension last October, a month after revealing that problems with credit-card billing would wipe out a projected $11.5 million profit for the half, AdultShop said yesterday it had bounded back into the black in November.
Revenues topped $56.4 million for the half, generating unaudited earnings before interest, tax, depreciation and amortisation (EBITDA) of almost $1.3 million, while cash reserves stood at $9.58 million at the end of the year, in line with its revised projections.
And while it suffered leaked cash of $5.85 million for the seven months to the end of January, AdultShop reported positive net cash flow of $857,000 for the month of January, boosting total cash reserves to $10.3 million.
AdultShop chairman Kim Heitman yesterday said the outlook for the group, led by its key online erotic entertainment division, was now "positive".
"The directors believe that the company is on track to generate a positive net operating cash flow and EBITDA for the current quarter," he said.
ONLINE porn broker AdultShop.com revealed yesterday that it is another $US500,000 ($825,000) out of pocket as a result of its failure to be paid for the blue internet services it supplies.
AdultShop said it had encountered a further round of problems with its credit card billing system and had not received the $US500,000 it was due to get last week.
Failure to get the money means AdultShop is now facing a shortfall of at least $US1.4 million on amounts supposedly paid by users of its sites but not forwarded to the company.
News of its latest credit card problems came just eight days after AdultShop shares resumed trading on the stock exchange after a four-month suspension.
The Perth company was yesterday forced to slice its expected net operating cash flow figure for February from between $1 million and $1.1 million to between $200,000 and $300,000 as a result of the latest unpaid bill.
The $US500,000 was meant to have been forwarded to the company by one of its credit card processors. The processor also owes AdultShop another $US1.5 million, This is not yet due to be paid, though the chances of it ever being handed to the company are unclear.
"The processor has since advised that the amounts due to the company will be released gradually over the next several months," AdultShop said.
"The company is seeking further clarification and is attempting to agree on a specific repayment schedule over a defined period."
News of the cash hole follows the company's revelation last week that $US1 million held in reserve by a former credit card processor had been reduced to just $US88,000 after being eroded by cancelled transactions - known as chargebacks - and processing fees.
AdultShop had expected to recoup the full $US1 million being held by next month.
Shares in the Perth-based company returned to the boards on February 18, four months after problems with credit card billing and a subsequent profit write-down forced a suspension of the stock.
At the time, AdultShop said changes to the business model meant the outlook for the key online erotic entertainment division was "positive".
AdultShop chief executive Malcolm Day yesterday refused to name the credit card processor involved in the latest incident, but said AdultShop had not had any previous problems with it. He would not comment on whether the debt related to charge-backs from AdultShop customers.
"Online adult entertainment and gambling have the highest level of charge-backs and refunds at the moment, they are the two riskiest transactions on the internet and as a result the industry is certainly under fire," he said.
Charge-backs have caused significant cash-flow problems for the online pornography industry in particular, with customers able to cancel credit card charges for viewing pornographic sites up to 180 days after the sites were accessed.
Without a signature confirming the card owner did authorise the charge, operators such as AdultShop have little recourse with no real ability to pursue customers scattered around the globe for payment.