Stream must be the only biz ever to be peeved about good weather in NZ
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Stream Group is a bit nervous that good weather in New Zealand is hurting its chance of making money on the sale of its Kiwi insurance claims management business Symetri.
Stream (ASX:SGO) had a poor start to the year because of “benign weather conditions” in New Zealand, the group reported last week.
Stream sold Symetri on a part cash, part earn-out basis last year under a plan to exit insurance claims management and focus instead on providing workflow management software to the insurance and construction industries.
Symetri was sold on the basis of 10 times earnings with a down payment of $NZ7 million plus earn-out payments of 10 times the business’s 2018 profit above $NZ7 million.
Unfortunately for Stream shareholders — but fortunately for New Zealand residents — there hasn’t been much call for insurance claims management over the ditch because the weather there has been pretty nice.
Cyclones Hola and Linda in March barely tickled the country. Cyclone Gita did cause a state of emergency in several regions across the South Island — but apparently that hasn’t been enough to keep insurance claims assessors busy.
“We are hopeful that the business will recover over the next nine months so that there will be some earn-out, but at this stage without significant improvements it is likely that the earn-out payment will be modest,” the company said.
An earn-out payment is a financing arrangement which is based on a predetermined level of future earnings.
The earnout payment will be capped at $NZ18 million.
Stream Groups’ shares rose 12.5 per cent on Friday to 4.5c.
This was the company’s eighth announcement to the market in 2018, with four of those being changes of directors’ interest notices for Mr Case.