letter to shareholders

14 January 2003
Part 1/1
--------
SECURENET LIMITED
-----------------
HOMEX - Melbourne
-------------------------
Letter to Shareholders - Update for 2003
The first half of fiscal 2003 has seen SecureNet deliver a
significantly improved operational performance in all aspects of the
business. I am writing to you as a SecureNet shareholder to give you
some insight to this achievement, as it will be another month until
we complete and lodge our financial statements. These financial
statements will demonstrate significant earnings improvement in first
half of 2003 over the previous six months and the previous
corresponding period. We are currently on track to double last year's
revenues and achieve a full year EBITDA break even.
SecureNet is now consistently winning and delivering major projects,
especially in the Government sector. This includes such new business
as a secure message authentication framework to protect critical
operational communications for the Australian Defence Force, the
public key infrastructure (PKI) and services required for Australian
Customs' new online import/export system, and an Intranet and
Internet Web Portal System for the Australian Competitor and Consumer
Commission (ACCC). This improved performance reflects the enhanced
capacity and leadership in the sales and delivery teams coupled with
strong customer security requirements in their online businesses.
Also during the period, we completed the successful integration of
the June 2002 acquisition of Baltimore Technologies' Australian and
New Zealand operations. This acquisition is delivering the projected
$5 million per annum plus productivity and synergy benefit stemming
from initiatives such as staff downsizing, consolidation of
facilities, and renegotiation of supply contracts. Further, the
complementary nature of the acquisition has begun to deliver
synergistic opportunities within our existing customers.
Our quality of revenue has improved in that a significant percentage
of revenue for the period to date is now in the form of annuity-based
services, such as Trust Services and licences. This annuity revenue
will increase. In addition, we are establishing a more diverse
customer base as we gain clients from the manufacturing, retail,
transportation, utility, health and telecommunications sectors.
The now solid operational base of the business coupled with the
increased security requirements across all of our customers means
SecureNet is well placed to achieve strong growth through both
organic, technology licences and acquisition initiatives.
With cash holdings in excess of $70 million at 31 December 2002, we
will provide working capital to significantly grow the business
organically and fund further synergistic earnings positive
acquisition opportunities. At times where many technology company
valuations are low, your Board is seeking to utilise this cash for
acquisitions using a series of rigorous criteria to ensure value for
shareholders.
Your Board of Directors are very positive about our company's
prospects and look forward to an exciting period of activity.
D Greatorex AO
CHAIRMAN