senetas profitable completes 14m turnaround

Well here it is., Ladies and Gentlemen. Definitely on the improve.









Full year results to 30 June 2008:
„h Turnaround of $14M to a before tax profit of $231,000.
„h Total Operating Revenue up 52%
o Consulting up 18%
o Direct Product & Channel revenue up 143%
„h Expenses further reduced
„h Senetas remains Debt-Free
MELBOURNE August 26, 2008:
The Board of Senetas Corporation Limited (ASX: SEN), the world¡¦s leading
developer and supplier of high speed network encryption hardware today announced a
$14 Million turnaround in revenues for the year ended June 30, 2008, earning a profit
before tax of $231,000.
Senetas said that its return to profitability over the past year was a result of a 143%
improvement over 2007 direct product sales and channel revenue for its key
encryption product lines, ¡§CypherNet¡¨, an 18% increase in consulting revenue, plus
ongoing cost reductions.
Significant in the product sales improvement was a 258% increase in SafeNet
royalties. Last year, Senetas initiated re-negotiation of its agreement with SafeNet to
introduce provisions guaranteeing Senetas minimum quarterly revenues from its US
OEM manufacturing partner. This incentive, plus a better working relationship built
by John Dubois and the SafeNet CEO, Chris Fedde, resulted in SafeNet lifting its
performance so that the actual royalties exceeded the minimum contracted level.
Senetas¡¦ Board and management believe that the ongoing excellent relationship with
SafeNet is a major resource for the company.
¡§Senetas¡¦ direct sales and maintenance revenues have also increased 196% and 239%
respectively, indicating the company is becoming less reliant on SafeNet and both
revenue sources and risk are being diversified,¡¨ Senetas Chairman, Alan Stockdale
said.
He said the company had healthy sales pipelines and management had worked to
further improve visibility of international channel partner sales and sales forecasting
to ensure timelines for manufacturing and delivery continue to be met.
Senetas Chairman Alan Stockdale said the $14 M turnaround over last year was a
direct result of the strategic focus by Senetas management and staff to boost sales.
Nonetheless, even in existing mature markets for high speed encryption hardware, the
company¡¦s core business involves a sales cycle typically around 18-24 months, and,
accordingly, Senetas has still not seen full benefit from the enhanced focus on sales.
Senetas CEO John DuBois said efforts to reduce the sales lead-time were part of the
strategy to grow the company¡¦s world-wide sales channels.
¡§We are already seeing positive signals, particularly in Europe and Asia, where
targeted activities have resulted in a higher level of sales inquiry for CypherNet and
we are confident these will result in new Government and commercial sales through
the current fiscal year,¡¨ Mr DuBois said.
¡¨We have also engaged a consultant to work with management on a review of our
sales and marketing strategy and activities, to assist in opening new opportunities and
to further improve Senetas¡¦ relationships with major corporate, public sector and
defense customers in our domestic market,¡¨ he said
CONSULTING
Despite a tightening of the overall market for consulting services over the past year,
Senetas had continued to grow this business unit, recording 35% growth in its
business intelligence group and 56% growth in the relatively new financial solutions
group.
Senetas enjoys one of the highest utilization rates in Australia for its consultants and
is strongly represented in both private and public sectors where it continues long-term
projects in telecommunications and has won re-engagement in retail, banking,
insurance and the not-for-profit sectors.
Mr. Dubois said that the significance of the company¡¦s consulting business is often
overlooked but it remains a substantial contributor to overall performance. During the
past year Senetas Consulting has won major new clients in banking and finance, retail,
construction, energy, and government, plus a financial services project in the Middle
East.
NEW PRODUCT DEVELOPMENT
Senetas CEO, Mr DuBois said ¡§While we have been focused on sales growth and cost
control, we dare not lose sight of the need to continually reinvest in product
development to ensure we maintain global leadership in information security through
high speed network encryption.
¡§Our R&D efforts resulted in the release of three new products last year, two of which
have received strong regional and international interest,¡¨ he said.
Mr DuBois said CypherNet Fibre Channel encryptors, used to secure data
transmission between storage area networks (SANs), and ultra high-speed Ethernet
encryptors running at 10 Gigabits per second (Gbps) featured strongly in new sales
pipelines.
He said the company continued development of a new range of hardware encryptors
specifically designed to secure online communications in Australia and designated
foreign markets for the SME, professions, education and pro-sumer markets at
appropriate price points.
Senetas continues to investigate development of a high-assurance encryptor for use
within designated Government agencies by Australia and its allies.
PROFIT RESULT
The Board said that while Senetas had achieved an unprecedented turnaround in its
performance over the previous fiscal year, it recognised that the result fell below its
market forecast.
Mr Stockdale said that in the prevailing economic circumstances of the past year
forecasting $1.5M to $2.5M profit was possibly too aggressive. Explaining the
shortfall, he said sales were delayed due to changes to timelines on a major tender in
the Middle East and, whilst the budget anticipated significant sales via UK-based
reseller nCipher, a change of management at nCipher resulted in that company
making no sales of Senetas¡¦ CypherNet products.
Once these risks to the sales forecast were identified, management moved quickly to
improve its visibility of global sales through a combination of new sales channel
management and direct sales leadership in a number of international markets.
Overall Mr Stockdale said Senetas was in a healthy position with no debt and
qualified pipelines within Australasia, Europe and Asia.
ENDS