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The Director¡¦s of engin Limited (engin or Company), the leading Australian broadband phone company, today announced a net profit after tax of $3.94million for the year ending 30 June 2005. Over the past year, the Company has changed its core business activity from mobile telephony to broadband telephony, a form of Voice over Internet Protocol (VoIP) and this has been accompanied by a name change from Mobile Innovations Limited to engin Limited.
engin is Australia¡¦s leading broadband telephony company that is providing fixed line telephone services to any person that has a broadband internet connection, at substantial cost savings. Subscribers can use their existing fixed line telephone handsets in substantially the same manner as the ¡¥Plain Old Telephone System¡¦, at materially reduced call rates.
Financial highlights for the year to 30 June 2005 include:
„Fƒna 31.7% increase in revenue to $21.66 million
„Fƒna 38.3% increase in Net profit after tax to $3.94 million
„Fƒngeneration of operating cashflow of $5.0 million
„Fƒnpayment of a total of 9 cents in fully franked dividends to shareholders
The increase in revenue and profitability was primarily due to the receipt of proceeds from the settlement of the legal dispute with Vodafone. During the year, the directors resolved to pay back the majority of the settlement to shareholders by way of special fully franked dividends, as they had committed to do in previous years.
Subscriber Numbers, Voice Minutes and Revenue engin¡¦s strategy is clearly focussed on growing customers in its broadband telephony business in Australia.
„FƒnRecent subscriber growth has been substantial, with the Company¡¦s base now in excess of 13,000 subscriber services, 9,000 of which are paying for engin¡¦s full service broadband telephony (up from 6,000 as reported to ASX on 4 July 2005). 4,000 customers are using engin¡¦s free downloadable ¡§pc phone¡¨ service.
„FƒnDespite a modest marketing spend during August 2005, engin connected 2,000 new subscriber services, double the connection rate of July. The current increase in the run rate of customer number acquisition puts the Company well on track for its stated aims of 30,000 paying subscribers by 30 June 2006.
„Fƒnengin¡¦s subscriber growth is being driven by both: o phone users being offered a substantially improved telephone service at substantially reduced call rates; and
o the continued high growth in adoption of broadband internet services across Australia.
„FƒnThe Company is committed to offering consumers and small businesses an affordable alternative to traditional fixed line carriers. This commitment has also resulted in high levels of positive feedback as revealed in a recent engin customer survey1, which showed that 54% of respondents have made more than 40% savings on their monthly phone bills.
„FƒnVoice traffic across the engin network also continues to grow as both customer numbers and customer usage grows. In the month of August 2005, in excess of 2,700,000 minutes (June 2005: 2,000,000) of voice traffic was carried over engin¡¦s network.
„FƒnThe Company is currently generating average revenue per user (ARPU) of approximately $45 per month (GST inclusive) from its paying customers. The largest contributor to ARPU, is call charges generated by engin customers making telephone calls, even at engin¡¦s discount call rates.
Marketing Initiatives
„FƒnThe Company¡¦s telephone services are available to anyone in Australia with a broadband internet connection. Users adopting engin as their telephone service provider can make and receive telephone calls using their existing fixed line telephone handsets. Their calls are simply routed over the internet and engin¡¦s network, rather than over the ¡¥plain old telephone system¡¦, which results in substantial cost savings for users.
„FƒnOn 28 June 2005, The Australian Competition & Consumer Commissions released statistics identifying that broadband take-up in Australia has grown at over 120% in the year to 31 March 2005 and that there are now over 1.8million broadband subscribers in Australia. This results in the continued growth of the Company¡¦s addressable market of potential customers.
„Fƒnengin¡¦s retail distribution channel include Harvey Norman, Tandy, Dick Smith and Leading Edge Electronics. This channel already exceeds 1,000 retail outlets throughout Australia, resulting in engin¡¦s availability throughout the nation. The Company has also recently entered into a significant retail partnership with the Coles Myer group, which includes outlets such as Officeworks and Harris Technologies, for engin¡¦s enabling products to be sold through this retail network.
„Fƒnengin today also announced a strategic wholesale relationship with Aurora Energy in the Aurora Broadband over Powerline (BPL) project as the voice carrier for TasTel and Aurora. engin and Mitsubishi Electric engineers have worked closely together in both Australia and Japan to incorporate engin¡¦s VoIP technology in the 200 Megabit BPL product developed by Mitsubishi. The commercial trial is the first step in linking Aurora Energy¡¦s extensive electricity network ¡V which reaches 250,000 homes and businesses.
„FƒnAs announced to ASX on 23 June 2005, the Company has strategic alliance with Linksys, a division of Cisco Systems Inc, to actively promote VoIP products and services to consumers and small and medium size businesses in Australia. This will help enable engin to continue to offer the best technology products and networking features to their customers, in alliance with a global leader in technology and VoIP.
Post Balance Date Funding In August 2005, engin finalised a $5.9 million rights issue to build on the Company¡¦s current momentum and these new funds are being used for marketing and expanding the broadband telephony business. engin is focusing on the mainstream marketing of its products and services to achieve material customer growth and profitability and is expecting to reach breakeven with 30,000 customers by June 2006. Cash reserves including security deposits at 31 August 2005 totalled $7,000,000.
ENG Price at posting:
0.0¢ Sentiment: LT Buy Disclosure: Held