Highlights for the year

Last year I reported to you under the heading “building the path to growth”. Having built that path, Engin is now at the threshold of an exciting period of accelerated growth.

Engin moved rapidly throughout the year to June 2006, achieving key business, operational and subscriber milestones. We have capitalised on distribution channels, launched into the SME segment, developed new products and acquired over 39,000 paying subscriber lines.

Subscriber growth was an astounding 573%, climbing from 5,800 paying subscriber lines at the start of the year to 39,000 at 30 June 2006. New subscriber lines are being added at a rate of 4,000 to 5,000 per month. This is driven by our high quality network, our commitment to customer service and technical support, ability to offer a compelling telecommunications alternative, with an array of features and wide geographic coverage. We now have approximately 50,000 paying subscriber services. With a market share of over 40%, Engin leads in the Australian internet telephony market.

Outstanding revenue growth of 460% from $1.5million in June 05 to $8.6million in June 06 was largely driven by marketing and public relations efforts and relatively little advertising. Over that time, costs, particularly customer management costs per subscriber, continued to fall. Financial results are dealt with in greater detail in the Finance Report.

The strong subscriber line growth achieved at the end of the financial year, resulted in some customer service challenges in June. The issues have now been addressed. We have scaled up technology and staff to cater for ever increasing volumes. The improvements have reduced our customer service handling times by 30% and seen our “call abandoned” rates drop to virtually zero. This does not mean that we have become complacent. We know there are still improvements to be made, particularly in the area of customer self service. This is something that we will be focussing on over the next 12 months.

In May 2006 we entered into a groundbreaking agreement with Intel. We worked with the company to emed the Engin phone service into Intel’s chipset and PC card. For consumers, this means that when they buy their computer from a reputable PC vendor, it will be embedded with a phone jack into which they can plug their existing handset and start using the Engin service straight away. This is cutting edge, innovative technology which opens up a whole new cost effective distribution channel for Engin. Optima was the first PC manufacturer to take on this initiative in Australia and through our relationship with Intel, we are developing opportunities with other PC manufacturers in our region.

We are continuing our work to bring internet telephony to mobile phone users. This will enable cost conscious consumers and businesses to make internet based telephone calls from their mobile handsets at home, office, hotel or any Wi-Fi enabled area, facilitating a one device solution to their telephony needs and potentially slashing their mobile spend in half. This is expected to greatly accelerate the uptake of internet telephony.

Engin’s products and services are conveniently available nationally through retail outlets, alliance partners, independent dealers, broadband providers, and directly via our self-serve website and call-centre. Engin’s strategic relationships are a key differentiator of our business. Our relationships, be they with customers, staff, suppliers, vendors, retailers or distributors are based on mutual understanding, trust, respect and above all, a common vision of the future. Without the efforts and support of all we would not have been able to achieve what we have to date. In the 12 months to 30 June 2006 we have grown our network of wholesale partners to 20, our retail outlets to 1,000 and our reseller outlets to 700. Over the last 12 months we have seen a widespread adoption of our unique co-branded supplier retailer model. Our retailers manage consumer sales with Engin acquiring a subscriber each time a product is sold, providing an incredibly cost effective channel to market.

Engin’s national distribution channel, which includes Dick Smith Electronics, Harvey Norman, Tandy, Big W, Leading Edge Electronics, Officeworks and Harris Technologies, has played a vital role in establishing and building Engin’s footprint across Australia.

Our alliance based integration means access to cutting edge technology, a better and wider service offering for our customers and effective growth opportunities for our business which open the prospect of great returns for our shareholders.