John Linton
Since Exetel “opened for business” in January 2004 it has maintained a steady growth rate from $0.00 as a ‘green fields’ start up to a company with revenues exceeding $A3,700,00 a month in the current month. September 2008 will be the 55th consecutive record month for Exetel and the 3 month period ending 30th September 2008 will be our 18th successive record quarter both in terms of revenues earned and new customers acquired. We will exceed a quarterly revenue of $A10 million for the first time.
Exetel has ten broad business offerings and nine of the ten achieved record customer growth in the quarter and two of the newer service offerings (VoIP and FAX via email) grew between 150% and 200% in the quarter. Both Exetel’s main revenue contributors (ADSL1 and ADSL2) also grew very strongly despite indications that the overall growth of these services in Australia had slowed overall over the past 3 – 6 months.
These results, as has always been the case since we started Exetel, are very encouraging in general terms as it certainly beats looking at figures that show your business is declining or even not growing at the same rate the overall marketplaces in which you operate are growing. However beyond the brief, once a month, feeling of satisfaction they don't really mean much. With the 'financial' news from around the world, and within Australia, remaining uniformly bad and almost certainly worse now than all the 'experts' had previously predicted some 15 months ago this is not a good time (assuming there ever was/is/is going to be a good time) to consider that things will continue to go smoothly without even more intensive efforts than have been necessary so far.
Sometime in the next few days we will need to decide whether we buy a floor of a building in the Sydney CBD to house both our current Sydney based personnel and a data centre to allow us to move our two rented Sydney PoPs to our own premises. Such a decision will require us to borrow money for the first time in Exetel's brief existence and my feelings are not positive about doing this at such a time as we are currently experiencing. I have no knowledge, skills or abilities in the areas of forecasting real estate movement and general financial conditions but even I can see that these are times of considerable uncertainty. Certainly Sydney CBD real estate prices have fallen, and in the case of one of the floors we were and are now again considering have fallen almost 20% in the last six months (good decision not to have bought six months ago). You have to wonder how much further the current prices might fall over the coming few months.
The other consideration is that Exetel is currently at the size were it is still relatively easy to manage (although that is becoming more difficult quite rapidly) but any serious growth will require several key changes to the current management methods to more 'conventional' management processes. While such a change isn't particularly difficult in 'normal times', assuming it's sensibly executed, in our case it may prove to be more difficult and therefore bring a possible level of 'danger' that would be made more dangerous if the Australian financial 'landscape' did change more than is currently predicted over the next 12 months. I think that there are too many 'unknowns' concerning too many aspects of our business and the wider Australian economy for 'brave' decisions to be made by small companies. However I also have a very, very clear memory that the best investment I have made in my life when I took the greatest financial risk of my life and that was at pretty near the depths of the 1988 -1991 financial slump when there were truly fantastic investment bargains to be had if you were able to take advantage of them.
One quarter certainly doesn't make a financial year and last year at this time the ' financial storm clouds' were only just appearing over the 'planning horizon'. I have no idea what is going to happen and I'm certainly not as reckless as I was some two decades a go but.............
......perhaps I'm as self delusionary as Simon Ehrenfeld whose comments I read in the Eftel 2008 annual report earlier this morning made my head spin trying to reconcile his statements (to the ASX and therefore on the public record) to any semblance of reality (or what I think is reality). If you need a laugh to start your day go to:
http://www.asx.com.au/asx/statistics/announcementSearch.do?method=searchByCode&issuerCode=eft&timeFrameSearchType=D&releasedDuringCode=W
select the announcement of the Annual Report to Shareholders and go to page 4. Among the gems of cloud cuckoo land craziness are:
"[Eftel] is now in the top 500 companies by revenue" - ?????? - with revenue of $A36 million - not in the top 5,000
"[Eftel] is now a top 10 Internet company" - ?????? - with a revenue of $A36 million it would be lucky to make the top 20
"[Eftel] had a 6% organic growth while many competitors suffered flat or shrinking revenues" - ??????? - As far as I can see ALL publicly listed ISPs reported growth much larger that 6% and Eftel's growth is barely above WA's annual inflation rate - so considering they raised their prices during 2008 they certainly suffered from "flat or shrinking". (I guess he missed the latest ABS report that showed the ADSL market growing by almost 14% in the last year too!!).
and the rest of the report reads similarly.
There really is a great deal of strange information about the state of this industry around at the moment.