Ann: Letter to Shareholders - Investor Informatio, page-22

re: Ann: Letter to Shareholders - Investor In... Hi all
Long time, no post.

I was at the Investor Day and was glad I went, if nothing to hear Tim speak and outline the direction he wants to take the business in. I agree with Kiril that Tim seems a very impressive candidate - he has come out of large organisations in very senior roles, and is keen to have flexibility and ability to direct a smaller company in a meaningful way (not something you can do in large ASX 200 companies). He is a lawyer by trade, knows Electricity industry backwards, understands finance and business development, but admits to a learning curve in the Property Development space. He also mentioned he took his last company (as MD) from $25M --> $100M in revenues, before they were bought out by a PE firm.

I don't know him, and am not spruiking for him - just seems to be the best credentialed MD we have had (no dis-respect to Ian K; no comment re anyone pre-Ian K !)

Few thoughts/observations in no particular order:
- Much more focus will be on the end-customer (developer and tenants) than has been the case previously. We were a great technical company, but not focused enough on the end consumer

- Society Apartments (350 units) is returning about $125K profit PA to INT

- We have 19 (I think it was 19) live ENs. John Evans was pushed on how many do we need to become cashflow +ve. After hesitation and "it depends" (which I understand as it does depend on what size ENs we sign up), a number of 30-40 ENs was begrudgingly given. It was also mentioned by John that our rate of take-up has been 2010 - 1 Embedded Network, 2011 - another 5 ENs, 2012 - another 13 ENs. So 30-40 ENs is achievable in the short-medium term

- There are 2 MOUs signed that will hopefully translate into contracts (will be announced when contracts sign)

- They are cognisant of the lag between holding discussions with Property Developers and signing a contract (can be up to 2 years before the building is up, wired and ready to accept INT EN technology in the basement)

- For this reason, they are pushing for a "Fiber in the Building" solution. Multi-benefits:
- $s to INT earlier as we are involved in the construction phase (laying fiber, converters in each unit etc)
- A push into the smarter meters/homes space (with a partner), that will utilise the fiber installed & data from the smart meters to generate flow-on $s for INT

- Closed the Sydney and Brisbane offices and consolidated opps to Melbourne

- Outsourcing/partnering for certain functions that were traditionally done in-house (focus on expertise of ENs, and obtain general/commodity services from the market)

- Potentially some announcements around new partners or new contracts prior to the closing of the CR

- They have a new, very senior head of Consulting Sales. This title is interesting, as it signals to me a shift from selling products to selling value-adding solutions - there is always more money in this. I also see them looking to aggregate more services into their offerings (on an as-required basis) as dictated by the developer or as targeted at the end-consumer (eg. compare a $200K student accomm, with a block of 7-figure apartments - different buyers, different expectations of what is in the building spec)

Ultimately, your belief or otherwise comes down to whether you think this new shift in direction is correct, and whether our latest (and sixth) MD is more of the same, or someone with very different thinking, strategies and most importantly methods of execution. Its four months into his role, and he was saying the right things in my opinion, but time will tell.