http://www.itwire.com/content/view/23424/1231/Engin: the VoIP...

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Engin: the VoIP loss leader
by Stuart Corner
Tuesday, 24 February 2009

!VoIP service provider Engin (ASX: ENG) says its 64,000 subscribers at 31 December "reinforce its position as the leading VoIP provider in Australia". However rival MyNetFone (ASX: MNF) claimed 65,000 at that time and posted NPAT of$40,000 against Engin's loss of $3.1m.


Engin's loss was 53.7 percent less than H1 of 2007 but it boosted revenue just 1.8 percent to $9.9m for the half year, compared to MyNetFone's 52.9 percent increase to $4.6m. Engin's greatest achievement for the quarter seems to have been reducing its operating expenses, by 45 percent from $13.2mto $7.3m. EBITDA loss for the half was $1.6m compared to $8.4m for H1 2007 (excluding the one-off profit from the sale of its stake in Unwired).

Engin raised $8.43m in a rights issue in April 2008, and has spent most of it: it ended the year with cash reserves of $4.21m, up only $0.72m on 31 December 2007. Cashflow during the half year was negative $2.37m.

Its customer numbers were up just 1.6 percent on a year ago, but the company said this had been achieved with "a much reduced marketing budget". It spent $0.48m on marketing in the half year compared to $3.0m in H1 2007. MyNetFone boosted its customer numbers 41.3 percent in the same period on marketing expenses of $0.19m, down from $0.42m in H1 2007.

ADSL2+ service launched
Since December 2007 Engin has cut staff numbers by 38 percent to 80 full time equivalents at 31 December 2008. The latest reduction, in October 2008, cost $0.4m and it expects to realise the benefits from this pruning in H2 2008. In the latest half Engin launched an ADSL2+ service which it sells bundled with its VoIP service an has booked a charge of $0.4m in the half to the launch costs of this project.

The company is maintaining its predictions, stated in the chairman's address to the 2008 AGM, that it expects to achieve cashflow and EBITDA breakeven on a monthly basis in the current financial year. In that address, the chairman also talked up the company's marketing initiatives, described in the half year report as being "much reduced". He said: "we have entered a new phase of marketing and promotion which includes substantial upgrades to our website, a greater focus on targeted online promotion and the refinement of our product and service offerings."