Administrators appointed to Manaccom

ASX-listed Jumbo Interactive has appointed Deloitte to shut down Manaccom, the group's retail software distribution business, which has failed to maintain profits in a booming online software market.  

Administrator Deloitte has put a hold on the company's operations until it determines the next step. 

Jumbo’s decision to withdraw financial support for the business it acquired in 2007 led to the distributor's downfall. It has instead increased focus on its core internet lottery business which it stated was unaffected by this announcement.

Manaccom had incurred a trading loss before tax of $3.8 million in the last financial year before one off expenses and write-downs led to a $7.3 million total group loss after tax. 

Despite the assurances last year that the software business was "improving steadily", Jumbo Interactive chief executive Mike Veverka told CRN "the business would be shut down”.

"There are no guarantees from the parent company to the subsidiary. It has been supporting the subsidiary for a year and half now while it tried to work through Manaccom’s problems.

“And, while it got better over the last year, it’s still largely far from reaching profitability. The parent company has every right to stop pouring money in. It’s already put in $6 million or $7 million into it," Veverka said. 

Creditors

In a statement to the ASX, Jumbo Interactive said the group intended to put forward a proposal for a deed of company arrangement in order to provide a substantial return to all creditors.

Veverka said the administrators would reveal the impacted creditors "in the next couple of days". A glance at Manaccom's website showed its vendor partners included McAfee, Logitech, Net Nanny and Acronis. Whether they’ll be listed as creditors was unknown.  

Soft sales

Manaccom's downfall almost certainly ended Jumbo’s short stint in the IT software business. In 2008 it acquired accounting software maker Star Systems Solutions but sold it for $1.7 million last November. 

When buying Manaccom in 2007, Veverka said that Manaccom represented a positive move by Jumbo to further develop its ecommerce and IT division.

Speaking to CRN, Veverka blamed “adverse market conditions”, namely the growth of online software sales, for its decision. The subsidiary’s core product  was the distribution of over-the-counter consumer-grade software, sales of which Veverka said were flattening. 

"Sales were the problem," Veverka said. “The type of products that Manaccom sold were smallish software products sold through retailers and the sales got flatter and flatter.

“People seem to be buying that type of software online. Apple has opened their App Store so they’re completely bypassing distributors and retailers."

He said the trend was likely to have impacted the entire industry. 

“I can’t speak for other disties but it is something that’s been brewing for sometime. It is a bit of a trend, I don’t think it’s just isolated to us. I think a lot of disties will be under pressure."

Manaccom history

 Manaccom was a Mackay-family owned company which started in Ian Mackay’s bedroom in 1986 and once listed as a BRW Fast 100 Growth company in 2006.

 His son James Mackay stepped into the chief executive position about a year after the Jumbo’s acquisition until he eventually left in 2009.

A creditor’s meeting was planned for next week.