Chairman's Statement
Macroeconomic conditions continue to create a challenging environment for telecommunications in Europe. Budget constraints evident in both enterprise and wholesale markets through 2009 slowed down and lengthened the sales cycle, and competition has generally become more intense. We have however been seeing growing demand for our bandwidth intensive networking solutions. We delivered total revenues of €30.1 million in 2009, compared to €23.9 million in 2008, with an increase of 25% in recurring revenue year-over-year after excluding one-offs. We targeted long-term recurring revenue contracts and gained 74 new customers over the course of the year. Improved control and management of direct costs associated with servicing new revenues led to further improvement in gross margin, reaching 45% in 2009.
The Group reported a net loss of €9.9 million for the financial year, compared with a net loss of €18.2 million a year ago. This reduction was mainly due to an exceptional gain arising on the repurchase of convertible bonds of €6.9 million and a resulting reduction in finance costs. Selling, General and Administrative expenses increased by 11% due to the establishment of the London office as our European headquarters, and the strengthening of the management team.
The company took a number of steps to strengthen its financial position in 2009. We successfully completed a fund-raising exercise in April 2009, raising S$92 million from a share subscription and rights issue. In conjunction with this, the company announced it had entered into a subscription agreement in February 2009 with EUN Partners V, LLC - a controlled by subsidiary of Columbia Capital V, LLC. On 6 April 2010, the Company completed a renounceable partially underwritten rights issue of approximately S$86.5 million in aggregate principal amount of zero coupon convertible bonds due 2013 in the denomination of S$1 on the basis of one convertible bond for every 100 existing ordinary shares at an issue price of S$0.97 for each convertible bond. The net proceeds raised will be used to repay the convertible bonds due in 2012 and to fund capital expenditure and working capital.
The management team was significantly strengthened in 2009. Following my announcement that I would concentrate on my Executive Chairman role in March, we appointed Brady Rafuse as Chief Executive Officer. Since that time Brady has been developing his management team. We appointed Richard Taylor as our General Counsel, Uwe Nickl as Chief Marketing Officer and Claire Leake as Vice President of Human Resources. These appointments are important to the transformation underway and focus going forward. With this team now in place, I have taken the decision to step down from the position of Executive Chairman at the AGM.
After establishing London as our European headquarters, it was appropriate for the business to have our Chief Financial Officer function based in London. Our Finance Director, Brenda O'Keefe, chose not to relocate to London and left the business in February 2010. We thank her for her service and wish her well. James Brodie was appointed interim Chief Financial Officer and is ensuring a smooth day-to-day running of the business until a permanent candidate is identified.
We also experienced change in the Board of Directors in 2009. In April, David Dey and Peter Manning resigned as Independent Non-Executive Directors. Brady Rafuse was welcomed to the Board during the same month as an Executive Director. In May, we welcomed Nicholas George and Greg Mesch as Independent Non-Executive Directors. Nick will take on the role of Non- Executive Chairman following the AGM. John Siegel joined as a Non-Independent, Non-Executive Director in August 2009. I am also delighted to inform you that Daniel Aegerter joined the Board as a Non-Independent, Non-Executive Director on 12 April 2010 and Kai-Uwe Ricke has joined as an Independent, Non-Executive Director. I step down feeling confident that I leave the company in very capable hands.
Great opportunities lie ahead and I am optimistic about the future for euNetworks. There is a good deal to do, but changes made in 2009 and the business plan being implemented to leverage growth opportunities are setting the right path for the company. Thank you for your ongoing commitment, which is key to executing this plan. I wish the team all the best for the year ahead.
NOEL MEANEY
Executive Chairman
