ETR`s Ann:ANZ increases stake in ETR to 26%
Wed 04 Apr 2001
Published: Wed 04 Apr 2001 11:10:58
Document No: 232455
Document part: A
Market Flag: N
Classification: Change in substantial holding , Security holder details - Other , Placement
ETRADE AUSTRALIA LIMITED 2001-04-04 ASX-SIGNAL-G HOMEX - Sydney +++++++++++++++++++++++++ E*TRADE Australia (ASX: ETR, www.etrade.com.au), today announced the issue of 5,209,879 shares to ANZ Bank (ASX: ANZ), taking ANZ's holding to 26.07%. This issue is made in accordance with the alliance approved by shareholders in August 1999. The agreement provides E*TRADE Australia with access to ANZ's four million strong customer base in Australia and New Zealand, while giving ANZ the opportunity to earn up to 40 per cent equity in E*TRADE Australia. ANZ's shareholding is in line with the contribution to revenue made by ANZ-introduced customers in the third six-month "milestone period" to the end of March 2001. Under the alliance, ANZ is responsible for all marketing costs incurred to encourage its customers to open accounts and trade through E*TRADE. ANZ currently markets directly to its online banking customers, staff, shareholders and all other general account and card holders. Milestone shares issued to ANZ in the three-year period ending 29 September 2002 are for non-cash consideration. E*TRADE Australia's accounting policy is to write off the deemed value of these shares, which is $0.843 per share, being $4,391,928 for the current milestone issue, as a non-cash marketing expense. This non-cash expense represents the deemed value of marketing services provided by ANZ to E*TRADE Australia. The value of this share issue to the ANZ is calculated by taking the average closing price for ETR shares on the ASX over the 20 trading days prior to the relevant milestone date. "We have reached the half-way point of a deal structured to allow E*TRADE to preserve cash reserves while continuing to build its customer base. ANZ's continued commitment to driving customers to E*TRADE is a key driver that will help our business achieve scale and volume-based operational efficiencies," said Michael Deleray, CEO, E*TRADE Australia. "E*TRADE Australia is an important part of ANZ's wealth management strategy which covers a diverse range of activities. As a key partner in online trading, E*TRADE Australia and ANZ are working together on a number of initiatives to benefit our respective and shared customers," said ANZ Managing Director, Wealth Management, Craig Coleman. The increase in ANZ's holding comes at a time when E*TRADE is continuing to record success in the active trader segment. According to www.consult, 29% of those who trade shares over the Internet more than once a week hold an E*TRADE account. E*TRADE is also leveraging its core technology platform, being the first and only broker to offer "Visitor Trade" to non-account holders via a growing number of web sites and achieving early success in the lucrative financial intermediary market. E*TRADE Australia has signed agreements with a number of service providers and financial planning groups including FloatNews, Datatech Financial Services, MDRN Financial Planning, Dowling and Associates and Professional Investment Services. A recent agreement also placed E*TRADE Australia as the preferred online trader for online investor adviser group daytraderHQ. These strategies have resulted in E*TRADE maintaining its position as the second most active online securities firm in Australia at a time when market conditions and trading volumes continue to be subdued. E*TRADE executed 180,912 trades on the ASX in the March quarter, up 11.4% on the December quarter. Revenue diversification is important for the medium-to-long-term success of the company. E*TRADE has continued to develop its competencies in the distribution of managed funds and margin loans to complement ASX transactional driven revenue. OTHER KEY HIGHLIGHTS INCLUDE: * At March 30, 2001, E*TRADE had 75,640 customer accounts with aggregate balances of $1.9bn. * Of those customers, 30% were introduced through ANZ, which represents a 30% increase in co-branded customers since the last milestone date (September 29, 2000). * Current quarter's gross brokerage revenue increased by 13.6% when compared with the December quarter. * Cash and cash deposits at February 28, 2001 amounted to $13.8 million. Based upon current results and trading expectations, cash reserves are not expected to fall below approximately $10 million during the quarter ending June 30, 2001. * Whilst the operating cash loss in the second half should be less than the first, the full year's cash loss is not anticipated to significantly differ from last year. "Compared with the same quarter last year, we have seen ASX trades down 35%. In addition these past 12 months brought a number of new entrants in the online market and this gave rise to intense price competition. In these conditions, E*TRADE has been able to maintain its number two position in the Australian online securities market. In this period, we have substantially improved our systems and online offering, we have put in place the foundations for increasing non-transaction revenue and management is introducing significant changes in our cost structure. We are continuing with this strategy to conserve our cash reserves until our business model becomes cash positive," said Kerry Roxburgh, Chairman, E*TRADE Australia. For more information: Investors, Shareholders and Analysts: Please contact Mark Zworestine COMPANY SECRETARY/CHIEF FINANCIAL OFFICER on (02) 9432 5224 Media: Please contact Bill Wileman GENERAL MANAGER MARKETING on 9253 5429 or Michael Deleray GROUP CHIEF EXECUTIVE OFFICER on (02) 9253 5414.