new cfo, page-11

afr article... Author: JAMES HALL with Tracy Lee and Ben Woodhead
Date: 26/11/2005
Words: 1099
Source: AFR

Ben Macpherson has always wanted to be known as something more than the younger brother of supermodel Elle.
Unfortunately, the spectacular demise of his talent agency Artist & Entertainment Group barely a year after listing was probably
not what he had in mind.
A&E shares were suspended from trade on Friday after it was revealed web-hosting and digital music company Destra Corporation
has pushed eject on a deal that might have rescued the earnings-challenged A&E from the ignominy of a fourth profit downgrade
since it listed last December.
In September, Destra struck a deal that would have delivered A&E a badly needed $500,000 shot in the arm in return for 50 per
cent of its shares, two board seats and a vehicle to house Destra's digital music assets.
But the due diligence process has scared off the suitor.
Destra on Friday said it had found A&E's earnings in October and November were dramatically different to representations made
to Destra in September.
On Friday, Destra said "the information recently received by Destra includes substantially revised [A&E] revenue forecasts and the
related material deterioration in profitability and cash flow".
Analysts took that to mean that A&E had probably sustained significant losses in the last quarter while A&E has asked for its
shares to be suspended from quotation pending an announcement on Wednesday outlining "swift and decisive" action.
It's management did not return calls on Friday but there are fears the absence of the $500,000 cash injection from Destra could
cause severe pain for A&E, which had cash of $734,000 at the end of the September quarter, just $58,000 of which came from its
business operations.
Its shares last traded at 7 ?, substantially down from their post-float highs of 28 ? but still up from the days before the Destra deal
when they fell as low as 3.2 ?.
A&E's woes have turned out to be Destra's windfall with the deal crystallising the value of its digital music assets (when the deal
was announced, Destra's shares slipped 2 ? while A&E shares shot up 20 per cent), prompting interest from larger media players
whom it is understood are now seeking to take a strategic stake in Destra.
Destra chief executive Domenic Carosa also confirmed his company would continue with the $3 million acquisition of
independent music distributor Rajon Group, a deal that was supposed to be done by A&E.
The $2.9 million in cash it will pay for Rajon will come close to exhausting all its cash reserves, but Carosa says Destra has almost
no debt and will use debt to fund its next media acquisition, which he says will be completed within the next quarter.
Following a 5 per cent jump in the share price prior to entering the trading halt, Destra's stock emerged from the trading halt on
Friday up 1 ? before rising further to close at 12.5 ?.