CEO's Opening Statement
Now we are well into the last quarter of 2009, it is a good time not only to report on our financial status, forecast and after tax results for H1, but also it is an appropriate point to reflect upon our corporate strategy embarked upon August 2008.
Summary of 2008 -2009 Strategic Pathway
To summarise qualitatively, I am pleased to report that we have achieved much of our intended financial and family-strategy in the last 14 months. However as an immediate warning to investors it is in this Q4 that a major turning point will disrupt normal trading and this is a late part of the strategy which is being implemented in record short time. In effect it is to take advatnage of opportunity in the economic environment - more on this below.
In 2008 a strategic decision was made to relocate the corporation in order to reduce costs and stablise the company with the necessitated rise in personell, this being a factor of + 36%. Inflationary pressures in the Oslo area and poor availability of premises in end Q2-startQ3 created a problem, but also presented the opportunity to relocate to an area with far lower cost basis for doing business. Costs of physically relocating were kept low but there was some orginisational stress which was unavoidable if we take any realists perspective. We consider, in balance, that the positivity outweighed down sides and counteracted this stress.
Key Gearings and Results Relating to Change in Strategy
We appreciate the maturity our stakeholders have shown in bearing with us through a radical change in the corporate missioning for 2008. However our long term goals were to reduce cost of premises and increase time in actually conducting high value interactions. So to remind our patient investors, this move is not tactical. Rather it is a key part of fulfilling a longer term strategy and we have taken the pain of relocation now rather than later. We did what we said we would be doing, just a year earlier.
On the downside, our corporate earnings form h1 2008 were reduced with the removal of one main revenue source. However we have a stable stream of income which maintains us in the black and we predict our cash burn not to exceed our operating income and thus we will avoid burning reserves as working capital. When a larger revenue stream is identified from our main income-silo, reserves will be used to purchase new capital items in the IT department. Budget is earmarked for this and aligned to expected extra revenues from this investment.
Q1 2009 was marked by a lower than anticipated revenue stream from a contract in the local area. Upon realising this, an immediate reduction in committment to the customer was taken with a 20% reduction in man hours dedicated to this contract. Not only was ordinary income lower than expected, there was actually no bonus -dividend rewards from the effort used.This was clear breach of contract which would have been costly to persue by legal means and costly in terms of '"loss of forward focus" but the experience and visibility of acting in the local market is not lost on us. We did under perform in this contract. Sometimes it is good to make mistakes, recover quickly and learn what a wrong direction means to the corporation.
Forecast q4 '09- H1 2010
In q4 we expect a major new revenue stream to come on line. This demands committment and we must take the view that it be a profitable contract otherwise be prepared to keep to our basal income levels following up with renegotiation or alternative customers. The new potential customer is a major actor in the internet surveillance and web-bot market on an international scale and becoming a supplier to them is a shinging possibility. However we must be realistic and not be a "cinderella supplier" - in other words a poorly paid servant who does not get to actually play in the real innovation and management of the company.
Strategic Appraisal 2010 H1
Looking into Q1-2 2010, I consider that we will secure either a contract with this major potential customer or take a direction in line with our corporate abilities whilst diversifying offer in our other skills base. Our current run-rate income, as stated, retains us in the black with no capital cash burn. However this limits our expansion and growth in equity. New, high value and long term contracts will be secured by end Q1. If not, then you can expect my resignation as CEO!