annual report - new info

The headline of the annual report is a reduction of around $4.5m in revenue (from $14.1m to $9.6m). Cash and equivalents have dropped from about $3.4m to $1.6m, so it looks as though the big drop in revenue hasn't quite been met by the drop in costs. More cost-cutting would seem to be in order unless there is a tick up in revenues, and the report doesn't seem to support that. Some rare information is contained in the annual report, namely a breakdown of revenues by region:

AUS: $2.2m (Down from $5.1m)
UK: $2.2m (Down from $3.5m)
USA: $5.4m (Down from $5.5m)

So, the rather surprising result that the AUS component is a lot less than the USA. The other really interesting piece of info in the report is a breakdown of revenues into licensing and services revenues:

Licensing: $2.5m (Down from $2.8m)
Services: $7.1m (Down from $11.3m)

This seems to show that the lack of new sales means that license revenues are roughly steady, but the services that go with it (upgrades, customisations, etc.) are dropping off.

This supports the view that new sales are needed to stop a decline in revenues and profitability and a need in the short term for more cost cutting. It also gives us some insight into the poor share price performance. In the absence of new sales, the intrinsic value of the company is its licensing annuities (plus some average steady state services revenues for existing sites) minus support and services costs. After stripping away some of the more expensive employee costs, what kind of steady state profit could be realised? Maybe $1m? This would value the company at around $8m, perhaps about twice the current valuation.