CEO’s Report
September 30th, 2003
To our Shareholders,
During the course of the financial year, we completed the restructuring and rationalization of the business that we started in 2002. We have now re-invented the business and are focused on executing carefully planned business strategies and enhancing earnings growth. Improved profitability in the financial year ended 30 June 2003 reflects the success of our new business direction.
EBITDA for the year was $951,183 positive (2002: $3,715,397 negative) on revenues of $10,259,954 (2002: $10,554,335). This is against the backdrop of a challenging economic climate in our largest market, the United States.
Our success to date has largely been achieved by reducing costs and using limited funds to deliver improved profitability.
We are determined to grow revenues in all areas of the business including subscriptions revenue, device sales and licensing revenues. We are on track and confident of delivering an improved performance this financial year.
Business strategy
Following our restructuring and rationalization of the business, our strategy is:
- expand distribution channels and sales for PocketMail;
- cost effectively grow subscriber base;
- continue to develop & enhance existing PocketMail service;
- increase value-add to core mobile e-mail service; and
- grow licensing revenues.
Expand distribution channels & sales
In late 2002, we increased our focus on building new revenue streams by recruiting an experienced VP Sales in the US. We also set ourselves the objective of exhibiting at a number of trade shows with a view to generating leads and building a sales pipeline.
Expand distribution channels & sales (cont)
Some of the shows at which we exhibited included the Consumer Electronics Show (Los Vegas, January 2003), Workamper Recruitment Fairs (Florida, Texas and Arizona – January 2003), National Association of Truck Stops (Orlando, February 2003), Mid-America Truck Show (Kentucky, March 2003), Coast Distribution RV & Marine Show (Las Vegas, March 2003), CeBIT (Hanover, Germany, March 2003), Oakland Sailboat Expo (Oakland, April 2003), Great America RV Rally (Kentucky, June 2003), The International Truck Show (Las Vegas, June 2003) and Great America Trucking Show (Dallas, September 2003)
Following these shows, and other activities, we now have a pipeline of sales, distribution and licensing opportunities at various stages of development.
US sales
We have continued to focus on our key vertical markets of Recreational Vehicle (“RV”) owners, over-the-road truckers and cruising boaters.
Whilst PocketMail is distributed in the United States through Camping World, the world's largest retail supplier of RV parts, supplies and accessories, the RV retail industry is fragmented with a large number of small and independent players.
We are pleased to report that in June 2003, The Coast Distribution System Inc added PocketMail to the line of products that it supplies to its 15,000 RV and marine customers through its 17 distribution centers located throughout the United States and Canada. This will significantly increase the retail availability of PocketMail within the RV and boating communities, but will take time to have impact.
We are also pleased to report that we have now established our first retail distribution in the all important truck stop and travel plaza industry. With some 4,500 travel plazas and truck stops throughout the US, and each averaging annual sales of US$7.8 million (source: NATSO), this is a crucial market for us in order to reach our key trucking and RV demographics. Our retail partner in this industry is Interstate Connections (“IC”). IC has quickly become the leading supplier of mobile electronics in the over-the-road freight industry through its 65 (and rapidly growing) retail stores that it operates in Petro Truck Stops and TA Travel Centers of America.
At the June 2003 International Truck Show in Las Vegas, we announced a partnership with The Internet Truckstop, the first and largest freight matching service on the Internet, to provide mobile load-matching services for North American truckers, without using a laptop or a PC.
US sales (cont)
Using a PocketMail, and their Internet Truckstop account, truckers can now quickly and easily search The Internet Truckstop’s large database of truck loads. It typically takes less than a minute to interrogate the database and receive available loads on their PocketMail.
Marketing of this service to the 300,000+ users of the Internet Truckstop will begin in October 2003. This continues our strategy of providing added value (and need) to our customers and prospective customers over and above our core mobile e-mail service.
We have also recently partnered with Truckers Home Office, a US professional services organization specializing in providing bookkeeping and tax services to truckers, to equip and provide mobile e-mail services to their trucking clients.
Canada sales
Whilst we have always offered local PocketMail access in Canada, we have never distributed PocketMail nor marketed the service there. In September 2003, we began selling PocketMail through RadioShack Canada, the leading national electronics retailer in Canada (800 store locations coast to coast). This is an exciting opportunity for PocketMail as we believe that RadioShack Canada, with its Canada-wide distribution and reputation for quality service and knowledgeable staff, makes for an ideal retail partner.
Australia sales
Due to the working capital constraints that we were under for much of the period, we were forced to allocate our scarce working capital to support our efforts in other more profitable markets (in real terms, the Australian market is characterized by lower per subscriber revenues and higher per subscriber telecommunication costs). This meant we were unable to supply product to the Australian market, and have effectively had to withdraw from most of our Australian retail channels, and temporarily from the Australian market.
Other overseas markets
In May 2003, we announced the availability of local PocketMail mobile e-mail access in 12 countries in Europe. Local access is now available in Austria, Belgium, Denmark, France, Germany, Ireland, Italy, the Netherlands, Spain, Sweden, Switzerland, and the UK. This adds to the existing local markets of USA, Canada and Australia.
Other overseas markets (cont)
We have also been developing our ability to support languages other than just English. Currently in test, we will shortly be implementing device and server changes that will allow PocketMail to display, send and receive e-mail messages in the following 26 languages: Albanian, Basque, Breton, Catalan, Danish, Dutch, English, Estonian, Faroese, Finnish, French, Frisian, Galician, German, Greenlandic, Icelandic, Irish Gaelic, Italian, Latin, Luxemburgish, Norwegian, Portuguese, Rhaeto-Romanic, Scottish Gaelic, Spanish, and Swedish.
We are working to establish distribution and expand sales in Europe, and now expect PocketMail to be available in some European markets in 2004.
Outside of Europe, North America and Australasia, we are pursuing licensing opportunities. At this time, it is the continent of Africa which is showing most promise.
Other revenues
In September 2003, we announced that through our wholly-owned US subsidiary, PocketMail Inc, we had entered into a contract with the United States Government for the use of PocketMail technology.
The initial amount contracted for and payable under this contract is approximately US$500,000.
In addition, PocketMail will provide some ongoing consulting which is not reflected in the above dollar amount.
It is expected that a substantial proportion of the initial amount contracted for will be recognized in the financial results of PocketMail Group Limited for the half year ended 31 December 2003.
Development of PocketMail product & service offerings
In February 2003, we announced that we had implemented new global networking technology so that we could service all our worldwide customers from a single Network Operations Center ("NOC") in the U.S.
This allowed us to close our NOC in Sydney, rationalize our Australian based technical staff, relocate to cheaper premises, and reduce overall costs. All this was completed during the June quarter.
Development of PocketMail product & service offerings (cont)
Besides reducing our ongoing operating costs, the new networking technology allows us to introduce the PocketMail service to new geographic markets quickly and without the need for significant capital expenditure.
It has also enabled us to extend local PocketMail access to certain overseas countries for our customers.
We continue to develop both our product and service offerings, as well as the support systems and infrastructure on which the business relies.
Examples of recent developments include dynamic SPAM analysis and blocking, new anti-SPAM tools for customers, longer message handling, additional WebMail features, upgraded versions of device software, enhanced customer service tools, improved security, and implementation of latest VPN (virtual private network) and VOIP (voice over Internet protocol) technology between Australia and the United States.
We will be announcing further enhancements to our “anti-SPAM weaponry” and some other new exciting service additions to the PocketMail service later this calendar year. These are essential if we are to remain competitive, and meet the changing needs and expectations of our customers.
Working capital
Last year I reported that “working capital limitations have restricted our ability to fund consistent stock supply, which in turn has negatively impacted both sales of PocketMail devices and our ability to grow our subscriber base.”
Regrettably, our current levels of working capital continue to remain a constraint on our ability to grow our revenues.
On 1 July 2003, we reported that we had executed a loan agreement with Silicon Valley Bank of Santa Clara, California. The loan facilities, totaling US$250,000 have been used to fund working capital and inventory acquisition.
Whilst the loan facilities are relatively modest, and do not provide the working capital the business needs to grow, this is the first time that the Company has been able to secure financing in its own right, and independent of shareholder and director guarantees. This is an indication of the Company’s increasing financial maturity.
The Board and management continue to explore alternatives for overcoming our working capital constraints.
Our people
Since acquiring the worldwide PocketMail business from Pocket.com back in May 2001, the business has gone through some major restructuring and rationalization.
The total number of employees (including outsourced staff) has decreased from 57 at time of acquisition to 26 as at 30 June 2003.
Our world-wide customer service is now provided in-house, and from Sydney, Australia. A smaller in-house customer service team is now delivering a higher grade of service over longer opening hours, and more cost effectively than before.
Of the 26 current employees, just 8 remain from the business as at 9 May 2001.
We have also taken the opportunity to introduce new people to the business and strengthen the team. Additions at executive level include a new VP Sales, Dean Hanson, a new Chief Financial Officer, Richard Shaw, and a new Operations Manager, Paul Selby.
All bring considerable experience to their roles and have been instrumental in the progress that the Company has made over the period.
We also welcome Rob Hodges who joined the Board in March 2003. Rob has a strong retail and carrier background, and has been supporting our international business development activities.
On a personal level, I relocated with my family in September 2002 to the United States, being our largest market.
I thank all of our talented staff for their on-going commitment, hard work and dedication.
Summary
We continue to make steady progress throughout the business. Our goal now is sustainable and increased profitability through revenue growth. I believe this can be achieved by continuing execution of our strategy outlined to you here.
We have invested in developing a sales pipeline that we expect to show return over the coming months.
We enter 2003/2004 with confidence and belief in our strategy and plans.
I thank you for your patience, and I look forward to updating you further on our progress.
David Marchant
Chief Executive Officer
PocketMail Corporate Backgrounder
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FOR IMMEDIATE RELEASE
Media Contacts:
David Marchant (CEO)
(408) 689-1241
San Jose, California
david.marchant@corp.
pocketmail.com
Richard Shaw (CFO)
+61 2 9955-0500
Sydney, Australia
richard.shaw@pkt.com.au
PR Contact:
Nanci Williams
Orloff/Williams
(408) 293-1791
About PocketMail:
Interactive Demo
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