Ann: Full Year Statutory Accounts , page-16

Gee you guys are hard taskmasters. Whilst another exciting share of mine is doing things in order to relieve my nerves I redid the model as requested.

These are the questions it raised:

The Gross margin increased to almost 60%. That could be a permanent move or it could because they were running the UWS pilot which was income but not on the same basis as the normal work undertaken. 2009 it was around 50%. This makes a huge difference to valuation if you use PE and you project forward at 60% and not 50%.

There has been no real improvement in expenses. The improvement is all in the turnover and margin. You have to exclude abnormal items which were:
2010 ($1000's) 2009 ($1000's)
Impairment of fin assets 1442 2224
Impairment of goodwill 0 2309
Total 1442 4533

By excluding this this years improvement is $1,6m and the improved margin was $1,55m

If I then run my model forward with turnover of $9.2m 2011 going up to 30m by 2014.

The mean suggests 1.8c price for next 12 months @ 66pe and growing to 6c in 2014 on a 19PE

The low ball suggests that current pricing is fair @0.8c and this grows to 3c in 2014 on a PE of 10.

The high suggests ( This I have increased the turnover by a further 25% and capped the PE at 20) this suggests that a price of 2.5c is a 26pe growing in 2014 to 10c at 20pe.

So in summary: We need to understand why the margin has gone up to 60% and why they are not making inroads in expenses outside of reductions in abnormal expenses.

In addition cashflow looked very very tight if they are to repay the Belgravia note.

The problem here is that a lot of people will see this as failure as they bought much higher up. The reality is that with almost 2billion shares its always going to be hard to get back quickly to 5c. If I offered you a share that would grow from 0.8c today to say 4c in 2014 you would be over the moon. Thats not the case with most holders here they see this as just recovering their losses.

Hope this helps.

I also cannot predict or project any extraordinary contract that could change the playing field nor any impact the NBN would have on the business.