engin accelerates, shareholders approve fund raising

Stuart Corner
Tuesday, 25 July 2006 14:07

IT Industry - Strategy

VoIP service provider, engin, has secured shareholder approval to issue 50 million new shares representing 21.8 percent of the company that could, at its current price give it a war chest in excess of $10 million to pursue its expansion plans.

The latest move follows a $4.1million capital raising in January, since which time the company's subscriber base has more than doubled to 50,000 (43,000 of which are paying subscribers and 7,000 free softphones) Growth too has accelerated: from 4,000 additions per month just one month ago to 5,000 now. It claims that customers taking the VoIP alternative to a full telephone service spend around $30 per month, including GST and those on the free softphones, less than $10.

Addressing the EGM, chairman William Jephcott said: "We see many opportunities to consolidate engin's position as the leading broadband telephony business in Australia by accelerating the growth in subscriber numbers. This will require a modest investment in the network and systems to provide a step change in the Company's operating capacity, additional staff and significant marketing initiatives.

"The company's cash reserves of $3 million as at 30 June 2006 is sufficient to maintain the status quo. However, to take advantage of the available opportunities and change the scale of the business additional funding will be required."

After its January capital raising engin had $5.70m in cash which it said would take it past operational breakeven point. It expected to achieve this at the outset of 2006-2007 financial year. For the half year to 31 December expenses of providing its broadband telephony service were $7.4m, $4.4 million higher than revenues.

With the additional investment the company expects to be serving in excess of 100,000 subscriber lines by June 2007 and to have expanded its network capacity to over 250,000 subscribers.

The placement will be primarily to institutional and sophisticated investors. Current shareholders will be able to invest a maximum of $5000 each in the new issue.

Jephcott said: "A placement can be initiated rapidly at a time of our choosing and would broaden our investor base and market liquidity. Importantly, a placement would cause the least disruption to management's attention and be the cheapest alternative."