Dialogue loses goodwill

By Paul Vecchiatto, ITWeb Cape Town correspondent

Johannesburg, 18 Dec 2008

The loss of goodwill has led to some bad feeling at contact centre company, The Dialogue Group, which has led to CEO Jason Drew stepping down, as of the end of the month.

Illustrating the general ill feeling towards the JSE AltX-listed company was its share-price that hit a new annual low yesterday of 11 cents, one cent lower than its previous yearly low. This contrasts with the share`s all-time high of 250 cents that was touched on 5 September 2007, shortly after the company listed.

Financial news wire Inet-Bridge reports the share price was last seen trading at 13.3 cents in light pre-holiday trade.

Stated loss

Late last week, The Dialogue Group, seen by many as one of the darlings of the flourishing call centre industry, issued two Johannesburg Stock Exchange News Service announcements indicating all was not well.

The first said Drew would step down as CEO from 31 December, which is also the financial year end. The day-to-day running would be in the hands of the executive team until his replacement is appointed. Drew will remain as a board member.

The second statement said The Dialogue Group expects a headline loss per share to be between 4 cents and 3.4 cents and a loss per share to be between 14.4 cents and 12 cents.

"The loss per share is greater than headline loss mainly due to impairment losses recognised on goodwill," the statement said.

It also said the company`s auditors have not reviewed or reported on the information contained in that statement.

What it all means

Goodwill is an accounting term used to reflect the portion of the book value of a business not directly attributed to its assets and liabilities, and is used normally during an acquisition. Wikipedia says the difference between the purchase price and the sum of the fair value of the net assets is by definition the value of the "goodwill" of the purchased company.

Last year, The Dialogue Group was carrying the value of R45 192 847 on its books, following the announced plans to buy a 50% stake in Sibize, a contact centre company owned by The Atio Corporation. The acquisition was consummated in January.

However, the exact relation between that purchase and the goodwill that has been impaired is not certain, as The Dialogue Group is in a closed period ahead of the release of its annual results due early next year.

No JSE analysts officially track The Dialogue Group, as its market capitalisation is only R38.8 million, making it too small for their radar screens.

"Obviously something was wrong with that purchase; it has not turned out to be what it should have," one analyst said.