Media Centre
Chairman and CEO Addresses to Shareholders
UECOMM LIMITED
ANNUAL GENERAL MEETING
11AM, 23 APRIL 2003
In 2002, Uecomm demonstrated strong growth in sales and a significant improvement in earnings performance.
- a 42% growth in revenue from operations to $43 million dollars;
- a $52 million dollar turnaround to a positive Earnings before Interest, Tax, Depreciation and Amortisation or EBITDA result of $3.6 million dollars; and
- securing $86 million dollars in sales contracts during the year.
These results reflect positively on Peter McGrath, his fellow executive team and all Uecomm employees. Under Peter’s leadership, the difficult organisational restructure that began in 2001 is now complete and has resulted in a significantly improved business.
In recent times, world events have impacted the global economy resulting in cautious decision making by many organisations. In particular, the past year has continued to challenge telecommunications and technology companies globally. The Australian market has not been immune to this. These events have impacted Australian businesses and market confidence across the board. However, despite these tougher market conditions, Uecomm continues to secure new business.
Last week Uecomm announced that it had signed almost $15 million dollars of new contracts for the first quarter of 2003. And, while global events make the market tougher, we remain confident that the business will continue to improve and will result in increased revenue and earnings.
Much has been said about the take up of broadband services in Australia and how Australian businesses have not been as quick to embrace this technology as other countries. Uecomm’s performance to date has gone against this trend and we believe the market for fibre broadband services is continuing to grow. Australian businesses are increasingly recognising the benefits of broadband and many are choosing Uecomm to provide their data communications services. The data services industry in Australia is reported to be a $2.5 billion dollar market and demand in this sector is growing consistently as organisations recognise the importance of fibre broadband in today’s business environment.
Uecomm’s operational and financial performance over the past 15 months has been encouraging. This is a result of having implemented a new strategic direction for the Company. We are well placed to build on our improved performance of last year.
The Company believes its strong commercial and strategic focus will see the momentum gained in 2002 continuing in 2003. As a Company we are optimistic about the future and will continue to focus on building on our 2002 achievements to enable us to deliver results to you, our shareholders.
We believe the market will recognise the continuing improvement in our performance and that this will in turn be reflected in the share price. But the sharemarket, perhaps understandably, wants to see the performance delivered before it translates into the share price.
Earlier today we notified the Australian Stock Exchange that Uecomm’s major shareholder, United Energy, had notified us this morning that it has reached an agreement with AlintaGas Limited, AMP Henderson Global Investors Limited and Power Partnership Proprietary Limited to pursue a proposal for United Energy to be acquired by Power Partnership, an unlisted Australian company.
If the proposal is approved by United Energy’s shareholders and the Supreme Court of Victoria, and if certain other conditions are satisfied, United Energy will become a wholly owned subsidiary of Power Partnership.
We have been informed by United Energy that if the deal proceeds, Power Partnership intends to transfer the shareholding in Uecomm to AlintaGas.
United Energy and AlintaGas also made releases to the Australian Stock Exchange earlier this morning.
Having only received notification from United Energy this morning the Board has not yet had an opportunity to consider the detail of the announcements made by United Energy and AlintaGas earlier today.
As you know, Uecomm has an $80 million funding facility provided by United Energy that is not required to be repaid until 29 June 2007. This funding facility is provided under contract and, while we will be discussing various options with regards to this facility, the terms under which it is provided cannot be altered without our consent.
When the Board has had an opportunity to review the details of the announcement, we will provide further information to the market on the implications of this transaction as it relates to the interests of Uecomm shareholders.
I wish to thank the management and staff for their efficiency, dedication and loyalty in re-energising the business over the past twelve months.
In recognition of Uecomm’s improved performance in 2002, a total of 333,300 shares were issued in January 2003, to a majority of Uecomm employees under the terms of the Company’s General Share Plan. In addition, the Company intends to implement other employee share arrangements to reward and retain key staff. These schemes will include a combination of share options and rights to shares.
In accordance with the recently released ASX Corporate Governance Council principles of good corporate governance and best practice recommendations, these incentives aim to link remuneration with company performance.
The ability for employees to benefit from these incentives is subject to the Company’s financial performance and growth in shareholder value.
Our commitment is to you, our shareholders, to our customers and to our employees as we continue to leverage our strengths and build long-term shareholder value.
We look forward to the future with confidence.
I would now like to introduce our Chief Executive Officer, Mr Peter McGrath. He will provide further information regarding Uecomm’s operations and performance during the year 2002 and discuss the year ahead.
Thank you, Peter
CEO’S ADDRESS
Thank you, Peter.
Good morning ladies and gentlemen.
Reviewing my first full year as Chief Executive Officer of Uecomm, I am pleased with the significant improvement in the performance of the business.
The strategy implemented towards the end of 2001 has resulted in some important achievements and the establishment of a solid foundation to guide the future performance of the Company. Central to our improved result has been the refocusing of the Company’s vision.
Our goal is to be a leading provider of high-quality broadband data services to Australian businesses.
Our strategy to focus on selling our services to large corporations, government bodies and other telecommunications service providers is proving successful. Our customer base aligns closely with our extensive CBD and metropolitan network and our ability to offer innovative solutions at competitive prices.
In 2002, Uecomm enjoyed some key wins, particularly in the corporate and government sectors. Our customer base has expanded significantly and now includes 14 of the Top 100 ASX companies and 5 of the Standard and Poor’s Global 100 companies. Customers that signed with us in 2002 include:
- the Sydney Basin universities;
- the New South Wales Department of Education and Training;
- AdStream (formerly known as DigiDUBs);
- the Queensland Health Department; and
- the University of Queensland.
The New South Wales Department of Education and Training contract is particularly notable. This contract is a major achievement for Uecomm and affirms the success of our strategy to focus on selling broadband data services to large corporations, government bodies and other telecommunications service providers. This contract clearly demonstrates that Uecomm's fibre broadband network is a leader in the Australian marketplace and has the capacity to deliver the latest applications essential to world class business and educational requirements
Over the past year we have delivered a large number of services. In 2002, we signed some 450 sales contracts valued at over $86 million dollars. This is over twice the value of sales contracts sold in 2001 and is a major achievement, particularly in this time of economic uncertainty.
It is also pleasing that we continue to secure repeat business from our established customer base.
Uecomm is Australia’s only specialist fibre broadband provider with an extensive network that covers the major capital cities and surrounding metropolitan areas. Our competitive advantages in this market are the key to our future success:
- the extensive reach of our carrier grade network is located where our target customers need it to be;
- the quality of our network delivers service levels that meet or exceed our customers’ requirements;
- we specialise in the delivery of data solutions;
- we deliver excellent customer service levels and offer flexibility in providing customer solutions; and
- we continue to demonstrate technical leadership in our products.
Throughout 2002 we maintained our customer-led network build strategy.
Our prime focus this year is to strengthen our relationship with existing customers and develop relationships with new ones to continue the sales momentum of 2002.
Expansion of our strategic asset, our network, will continue to be customer driven and the stringent cost control measures introduced in 2002 will remain in place throughout the year.
The Uecomm product suite is showing good growth, particularly our flagship Ethernet and MetroWave products. Put simply, Uecomm Ethernet offers some clear customer benefits. It is a service that delivers very high bandwidth, which is the amount of information that can be carried in a second. Uecomm Ethernet is able to transmit information up to 1,000 times faster than a typical home computer broadband connection. Also, Uecomm Ethernet allows companies to connect all of their offices together across suburbs and states so that the entire company can communicate as if they were located in one office.
MetroWave delivers significant bandwidth and is predominantly used for storage and disaster recovery. It delivers the bandwidth required to enable instantaneous data replication to a remote site and is used by large companies with significant data requirements such as financial institutions.
Uecomm was first to market with both of these products.
Our early market entry continues to be an advantage for us. In particular, we provide the most complete technical solution for Ethernet customers and have secured a number of the top 1000 organisations in Australia as customers.
Looking to the year ahead, Uecomm is targeting revenue performance in the range of $55 to $60 million dollars, with an Earnings Before Interest, Tax, Depreciation and Amortisation, or EBITDA, result of at least $17 million dollars.
Uecomm’s current monthly recurring revenue, what we call our run rate, is $3.4 million dollars a month and is forecast to grow to over $4 million dollars a month by year end as customers with whom we signed contracts in 2002 and 2003 are connected to our network.
Our cost base, which is largely fixed and therefore grows at a rate less than revenue
growth, is predicted to increase by no more than 15% this year and this increase is primarily due to increased staffing costs needed to support the growth of the business.Based on the sales contracts signed in 2002 and revenue from existing contracts, nearly $50 million dollars of our revenue forecast of $55-60 million dollars for 2003 is locked in.
Last week we were very pleased to report earnings before interest, tax, depreciation and amortisation or EBITDA of $3.4 million dollars for the first quarter of 2003, which is in line with our full year forecast. This was on revenues of $12 million dollars, which compares favourably with the 2002 first quarter result of $8.1 million dollars revenue and $515,000 dollars EBITDA.
We secured approximately $15 million dollars in sales contracts during the first quarter. This is pleasing, as it indicates the continuation of our 2002 sales momentum.
We will continue to focus on enhancing our products to maintain our market leadership position by ensuring that we have the range and quality of products and services that our corporate and government customers demand.
We expect that our already significant strategic advantages will continue to result in positive sales results for the Company.
The management and staff of Uecomm understand that we have to continue to work hard to restore investor confidence in our company. And we know that the best way to do this is to continue to deliver positive results.
I am confident that, given the level of support and commitment of the management team and staff, we are in a strong position to deliver these results for shareholders.
Thank you Peter.
-ENDS-
