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Operational Performance
The financial results for the year ended 30 June 2006 demonstrate
Engin’s accelerated growth in both subscriber lines
and revenues during the year. Engin’s paying subscriber
base grew from 5,800 as at June 2005 to 39,000 as at June
2006. Voice traffic across the Engin network reached in excess
of 13 million minutes in the month of June 2006, an increase
of over 550% compared to June 2005. As a result revenues were
up to $8.6 million for the year ended 30 June 2006, a 460%
increase from $1.5 million for the previous year. This performance
can be analysed into the half year results as follows:
| |
Half Year
Jun 06 |
Half Year
Dec 05 |
Half Year
Jun 05 |
| Revenue |
$5.6m |
$3.0m |
$1.2m |
 |
Paying Subscriber
base |
39,000 |
18,100 |
5,800 |
|
| Employee and advertising expenses make up approximately 75% of Engin’s operational costs for the financial year to June 2006. We are pleased how the company has tracked to-date in these key expense areas. Advertising spend per new customer is reducing and paying subscriber lines per employee are increasing. Productivity improvements are illustrated by the following half year statistics: |
| |
Half Year
Jun 06 |
Half Year
Dec 05 |
Half Year
Jun 05 |
| Marketing spend |
$2.2m |
$1.4m |
$1.6m |
|
Marketing spend per
new line |
$85 |
$95 |
$245 |
|
| Paying subscriber base |
39,000 |
18,100 |
5,800 |
|
| Subscriber lines per employee |
375 |
241 |
111 |
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As has been communicated to the market, the
company has accelerated growth in subscribers during the financial
year ended 30 June 2006 and has established itself as the
market leader. Faster growth impacts short-term profitability
due to related expenditure in marketing and employee costs.
This however provides the opportunity to maximize shareholder
wealth in the longer term by building a larger subscriber
base which generates on-going revenues. With a measured growth
plan, the underlying business would have crossed the monthly
operational break-even point in the first quarter of the 2006-07
financial year but, with the accelerated growth plan, reaching
a monthly operational break-even is currently expected to
be achieved in the second half of the financial year.
The company reports a net loss after tax of $7.32 million
(EBITDA loss of $9.99 million), in the financial year to 30
June 2006. This is analysed as follows:
| |
Half Year
Jun 06 |
Half Year
Dec 05 |
Half Year
Jun 05 |
| EBITDA |
($4.8m) |
($5.1m) |
($3.8m) |
|
| Net Loss After Tax |
($3.6m) |
($3.7m) |
($3.5m) |
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Capital Raising
During the financial year, the company issued new capital
totalling $9.4 million (net of raising costs), by way of a
rights issue in August 2005 raising $5.6 million at 7 cents
per new share, and a private placement in January 2006 raising
$3.8 million at 14 cents per new share.
Future Capital Raising
On 25 July 2006 approval was granted at a meeting of shareholders
to issue up to 50,000,000 new shares. The purpose of the capital
to be raised is to continue to accelerate growth by expanding
infrastructure and working capital, and to diversify the company’s
product offerings.
On September 14, 2006 the company unveiled plans
for a strategic partnership with Seven Network Limited. A
key element in this partnership is Seven’s commitment
to acquire a 33 per cent shareholding in Engin through a placement
of shares. Under the terms of the placement agreement, Seven
Network will invest $26 million in Engin at an average share
price of 22 cents for 119 million fully paid ordinary shares.
An initial tranche of 10 million shares was completed on 14
September 2006, the balance of the share placement is subject
to Engin Limited shareholder approval at a meeting of shareholders
to be held on 30 October 2006.
Vodafone Bond Release
The company confirms that the cash bond of $2.0million relating
to the Vodafone settlement and being held in trust was released
in April 2006, bringing to an end all matters relating to
that dispute.
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