MACQUARIE TELECOM ANNUAL REPORT 2008 MACQUARIE TELECO MACQUARIE macquarietelecom.com Clear Sydney Melbourne Brisbane Perth Level 20 Level 1 Level 10 Level 10 2 Market Street 441 St Kilda Road 26 Wharf Street 251 Adelaide Terrace M Sydney NSW 2000 Melbourne VIC 3004 Brisbane QLD 4000 Perth WA 6000 T (02) 8221 7777 T (03) 9206 6800 T (07) 3874 2300 T (08) 9229 0000 REPOR ANNUAL F (02) 8221 7788 F (03) 9206 6888 F (07) 3874 2388 F (08) 9229 0088 Hobart Adelaide Canberra Singapore 49 Davey Street 297 Pirie Street Level 7 150 Beach Road direction Hobart TAS 7000 Adelaide SA 5000 54 Marcus Clarke Street #35-00 T (03) 6214 0000 T (08) 8363 9700 Canberra ACT 2600 Gateway West T F (03) 6214 0888 F (08) 8363 9788 T (02) 6257 6277 Singapore 189720 2008 F (02) 6257 7188 T 0011 65 6580 7383 F 0011 65 6580 7388 Intellicentre Toll Free numbers Level 16 T 1800 653 053 477 Pitt Street F 1800 676 373 Sydney NSW 2000 T (02) 8204 5100 F (02) 8204 5188 COMPANY INFORMATION Thank you for your continued investment. CONTENTS Macquarie Telecom delivers a range of hosting, data, Company Snapshot 1 voice and mobile services specifically to the business Company Highlights 2 and government market. Over the years, we’ve listened Financial Highlights 4 to what businesses really want from their telco. As Chairman’s Message 6 you’d expect, every one is different. That’s why we DIRECTORS MACQUARIE ASSIST ENVIRONMENT NOTE Chief Executive’s Message 8 Robert Kaye T 1800 789 999 This report is printed haven’t built our business around “one size fits all”. Chairman on environmentally Board of Directors 10 David Tudehope SHARE REGISTRY responsible paper Financial Statements 12 Chief Executive stock, Life Recycled, Registries Limited Aidan Tudehope using organic inks. Level 2 Managing Director 207 Kent Street Life Recycled paper – Hosting Sydney NSW 2000 stock contains 50% Stephen Butler T 1300 737 760 post consumer waste Non-Executive Director F 1300 653 459 and 50% FSC (Forest John Palfreyman Stewardship Council) Non-Executive Director AUDITOR certified fibre sourced from sustainable, well COMPANY SECRETARIES PricewaterhouseCoopers managed forests. Life Michael Simmonds Recycled is Elemental BANKERS Albert Koolmees Chlorine Free (ECF) and Australia and New Zealand is manufactured under R EGISTERED OFFICE Banking Group Limited the Environmental Management System Level 20 SOLICITORS ISO 14001. 2 Market Street Sydney NSW 2000 Gilbert & Tobin NOTICE OF ANNUAL GENERAL MEETING INTERNET ADDRESS Notice is hereby given that the Annual macquarietelecom.com General Meeting of the members of Macquarie Telecom Group Limited will be held at the Museum of Sydney Auditorium (at the corner of Phillip and Bridge Streets) in Sydney on Friday, 28 November 2008 at 9.00am. Macquarie Telecom Group Limited ACN 056 712 228 Design by War Design Studios MACQUARIE TELECOM ANNUAL REPORT 2008 65 COMPANY SNAPSHOT Macquarie Telecom at a glance. HOstING DIVISION DATA NETWORK DIVISION Macquarie Telecom’s Hosting division focuses Macquarie Telecom’s Data Network division provides on providing secure, scalable, high-availability, reliable and secure IP data network services. We offer fully managed hosting services for our customers’ the highest level of network service availability and critical applications. For more information on optimum network solutions to support our customers’ Macquarie Telecom’s Hosting division visit business application environments. For more information macquarietelecom.com/hosting on Macquarie Telecom’s Data Network division visit macquarietelecom.com/data VOICE DIVISION MOBILES DIVISION Macquarie Telecom’s Voice division delivers secure, Macquarie Telecom’s Mobiles division provides tailored flexible and cost-effective telephony solutions mobile solutions together with a wide range of developed to meet the specific business requirements enhanced management, reporting and cost control of our customers, to maximise productive use of tools that enable our customers to effectively manage telecommunications and to control unnecessary and control their mobile fleet and its expenditure. spending. For more information on Macquarie Telecom’s For more information on Macquarie Telecom’s Mobiles Voice division visit macquarietelecom.com/voice division visit macquarietelecom.com/mobile MACQUARIE TELECOM ANNUAL REPORT 2008 1 COMPANY HIGHLIGhts $13.8M Macquarie Telecom achieved a full-year EBITDA (earnings before interest, tax, depreciation and amortisation) profit of $13.8 million for the 12 months ended 30 June 2008. Up 22% The EBITDA result was a 22% improvement on the 12 months ended 30 June 2007 (“corresponding period”). The result was within guidance given at the half year. Up 56% Data & Hosting EBITDA profit rose 56% to $9.4 million, boosted by a strong performance from the Hosting business. 33.2% Data & Hosting revenue now represents 33.2% of total revenue as the mix change towards higher margin business continues. Up 7.3% Mobile revenue rose 7.3% to $28.3 million with continued growth in sophisticated mobile data products. Mobiles recorded an EBITDA profit of $1.6 million up from $0.7 million in the previous corresponding period. $22.6M Macquarie Telecom maintains a healthy balance sheet with cash and cash equivalents of $22.6 million, having generated strong operating cash flows of $18.8 million. 2 COMPANY HIGHLIGhts Third consecutive year of EBITDA growth. 08 $13.8M 07 $11.3M 06 $4.5M 05 $0.6M MACQUARIE TELECOM ANNUAL REPORT 2008 3 FINANCIAL HIGHLIGHTS EBITDA profit improvement of 22% Operating cash flow of $18.8 million All lines of business profitable at EBITDA* Revenue mix continues to improve 2008 financial summary For the year ended 30 June 2008, in $m 2008 2007 2006 2005 Service revenue 244.9 254.6 249.0 230.5 EBITDA 13.8 11.3 4.5 0.6 EBIT (1.7) (4.1) (9.3) (10.9) Net loss after tax (1.2) (3.6) (6.4) (10.9) Operating cash flow 18.8 14.3 1.9 5.3 Gross margin % 38.6% 34.3% 33.4% 32.3% 2008 operating results by business area For the year ended 30 June 2008, in $m Revenue EBITDA Data & Hosting Services 81.2 9.4 Voice Services 125.1 8.2 Mobiles 28.3 1.6 Singapore 10.3 0.1 Corporate Office** 0.0 (5.5) Total 244.9 13.8 * Excluding Corporate Office ** The Corporate Office figure represents overhead costs associated with Macquarie Telecom’s corporate and regulatory activities. 4 FINANCIAL HIGHLIGHTS Profitable growth. EBITDA 2008 $13.8M 2007 $11.3M 2006 $4.5M 2005 $0.6M Operating cash flow 2008 $18.8M 2007 $14.3M 2006 $1.9M 2005 $5.3M Service revenue 2008 $244.9M 2007 $254.6M 2006 $249.0M 2005 $230.5M Gross margin 2008 38.6% 2007 34.3% 2006 33.4% 2005 32.3% MACQUARIE TELECOM ANNUAL REPORT 2008 5 ChAIRMAN’S MEssAGE In 2008, Macquarie Telecom continued to improve its financial performance as the benefits from our strategic investment programs in infrastructure, IP-based products, services, data and security expertise have been realised. Combined with our differentiated accountable service offering and our world-class management tools, we are confident that we have a platform for continued growth. “In 2008 we have enjoyed a Genuine momentum exists within the business and During 2008, Macquarie Telecom’s Data & Hosting continuation of the momentum built our results confirm that we are not only delivering on business continued to grow in both revenue and in previous periods, with the Hosting our strategy, but that it is successfully positioning profitability.O f particular note was the strong business firmly establishing itself as the company for sustainable profitable growth. We performance of our Hosting business, which focuses the market leader in mission critical have now achieved our third consecutive increase in on the design, sourcing and delivery of dedicated application hosting.” year-on-year EBITDA profit which reflects the translation hosting solutions for critical online applications. of these investment programs into increased profitability, In 2008, we have enjoyed a continuation of the especially in our higher margin Data & Hosting business. momentum which has been building over previous periods, with the Hosting business firmly Supporting this profitable growth has been the ongoing establishing itself as the market leader in mission progress we have made in becoming an integral part critical application hosting. of our customers’ businesses, as we assist them in adapting to change. In our continued pursuit of an Our established Voice business continues to deliver ongoing strategy of differentiation, we are committed significant profits to the Company even though the to ensuring that we provide our customers with higher voice services market again came under intense price levels of service through personal accountability, as well pressure. Our reliance on voice service revenue continues as offering them the management tools they require to to decline, as the mix in our business shifts towards manage their communication needs. higher margin businesses, in particular Data & Hosting. 6 ChAIRMAN’S MEssAGE Delivering on strategy. MOMENTUM ONLINE POSITION Genuine momentum During 2008, Macquarie Macquarie Telecom exists within the business Telecom’s Data & Hosting is positioned well for business continued to the future grow in both revenue and profitability Macquarie Telecom’s Mobiles business unit also Our focus in the year ahead remains on the execution performed well, increasing revenue and more than of the strategies we have outlined in the past few years. doubling its EBITDA contribution during 2008. Our We will continue investing in our core infrastructure and mobile operations are a key part of Macquarie Telecom’s portfolio of security, hosting and IP-based products to ability to bundle solutions to customers across all areas enhance our competitive position, whilst maintaining of telecommunications, and this gains importance as a disciplined approach to execution and operational we see more of our customers embracing mobile data efficiency.W e expect profitability in fiscal year 2009 solutions as part of their communications strategy.