half yearly--not bad

Half Yearly Report & Half Year Accounts

Document date: Thu 13 Mar 2003 Published: Thu 13 Mar 2003 19:19:44
Document No: 290471 Document part: A
Market Flag: Y
Classification: Half Yearly Report , Half Year Audit Review , Half Year Directors' Statement , Half Year Accounts
COMMSECURE LIMITED 2003-03-13 ASX-SIGNAL-G

HOMEX - Sydney

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MANAGING DIRECTOR'S OVERVIEW

INTRODUCTION

In the six months to 31 December 2002, CommSecure Limited derived
74 per cent of revenue from recurring client transactions and the
Company made significant progress in building its business in the
area of Electronic Bill Presentment and Payment (EBPP).

The development of such automated, recurring income and expansion
into electronic billing were key strategic goals for CommSecure in
2002.

With new deals to provide EBPP services to a number of major local
councils, marketing alliances with Westpac and GEAC, and the general
rise in electronic commerce activity, the Company is well positioned
for continued growth in these areas during 2003.

However, notwithstanding the Company's strong pipeline of sales
opportunities and ongoing conversion into sales, the ability of the
Company to succeed is dependent on the timing and level of takeup of
the EBPP services by the new customers.

OPERATING HIGHLIGHTS

In the second half of the calendar year 2002, CommSecure successfully
continued its evolution from product development to
commercialisation, and from fee-for-service to recurring transaction
based revenue streams.

A key focus for the Company was the implementation of electronic
billing and payments solutions at organisations with high volume
billing requirements, including local councils and telecommunications
carriers.

Highlights of the period and the start of the 2003 calendar year
include:

LOCAL GOVERNMENT E-BILLING SALES: Three local government
organisations appointed CommSecure to provide Electronic Bill
Presentment and Payment solutions on their websites and via BPAY
View. Under these deals CommSecure will receive set-up and monthly
maintenance fees as well as a share of every payment processed via
its systems.

ALLIANCE WITH WESTPAC BANKING CORPORATION: CommSecure formed an
alliance with Westpac to deliver EBPP solutions wherein Westpac will
market the product direct to their substantial local government
customer base. The first customer was signed under the alliance in
December 2002.

GEAC ALLIANCE: The Company joined forces with the country's largest
supplier of software to local councils, GEAC, to deliver cost-saving
electronic commerce solutions to local government customers. Under
the alliance, GEAC is actively promoting CommSecure's e-commerce
solutions and the two companies are working together to service a
number of local government customers.

FIRST NATIONAL BILLER: CommSecure assisted Primus Telecom Australia
to become the first national biller to enable customers to access and
pay their telephone bills online via BPAY View. The new facility was
implemented in August.

PAYMENT GATEWAY UPGRADE: CommSecure's electronic payments gateway,
which underpins its PaySecure service, was upgraded to become the
most functional in the Australian marketplace with direct electronic
links into Australia's top five banks and American Express.

BPAY MASTER BILLER STATUS: The Company was appointed as a BPAY Master
Biller by Westpac, enabling it to aggregate clients under its BPAY
Merchant Number. This is attractive to smaller organisations that
want to accept electronic payments but are deterred by the process of
securing their own BPAY Merchant Number.

FINANCIAL PERFORMANCE

Revenue from transaction fees on electronic payments made via
CommSecure's systems increased 29 per cent across the comparable
half-year periods. Revenue from secure Web hosting was up 61 per cent
for the same period. BillSecure, the Company's new EBPP solution
launched in 2002, also began to contribute revenue towards the end of
the first half of the financial year.

For the six months to 31 December 2002 CommSecure reported revenues
of $0.82 million and a net operating loss of $2.6 million. This
compared to $1.1 million revenue and a loss of $1.0 million for the
comparable period in 2001.

The slight decline in overall revenue was attributable to the
cessation of income from the Company's legacy mining assets.
Consulting fees were also lower in line with CommSecure's strategy to
move from fee-for-service to recurring transaction based income.

There were several additional factors contributing to the change in
the result: an increase in labour related costs mainly due to the
development of sales and marketing personnel to assist in the
commercialisation of the BillSecure product ($214K); the effect of
the decision to expense product development costs in the current
period as opposed to the comparative period where they were
capitalised ($846K); and an increase in the amount of other
intangibles expensed in the current period relative to the
comparative period ($119K).

The expensing of the intangibles reflects the Company's current
conservative policy of not capitalising such expenditures and is in
keeping with trends in the Information Technology industry. The
intangible amount of $883K expensed in the current period comprises:
acquisition of the remaining external interest in Commsecure
Australia Pty Limited - $349K expensed as goodwill; acquisition of
the distribution arrangements from one of the Company's distributors
- $145K expensed as goodwill; and as mentioned above the expensing of
$389K relating to previously capitalised development costs.

It should be noted that when depreciation is included with
intangibles the amount of non-cash items included in the current
period result totals $1.1 million.

The cash reserves declined from $5.2 million as at 30 June 2002 to
$3.6 million at 31 December 2002. However, the Company is confident
that with the development of it's major products now complete and the
current emphasis on sales and marketing it will achieve it's
objectives. Additionally the Company continues to look at ways that
the operating costs can be trimmed back and greater operational
efficiencies achieved. The second half of the financial year will see
the benefits of actions taken to change the balance between sales and
technical staff with the completion of certain product development
projects.

OUTLOOK

In the period ahead, CommSecure will continue to focus on building up
its recurring transaction based revenue streams in the areas of
electronic payments and bill presentment solutions.

With a well-established technology platform, an expanding number of
key reference accounts and the support of partners such as GEAC and
Westpac, the Company is beginning to enjoy substantial momentum in
these markets.

The Company is also encouraged by the overall growth of electronic
commerce. According to the Australian Bankers Association the number
of households with Internet access now exceeds 50% and the number of
people with Internet banking accounts is estimated at approximately
5.5 million.

In the specific area of electronic billing, there are now more than
9,000 organisations that accept BPAY payments and in a typical month
Australians use BPAY to pay 8 million bills with a value of more than
$3.8 billion. More than 57 per cent of these transactions are
processed through Internet banking services and made possible by
CommSecure and other technology organisations.

R Loyzaga
MANAGING DIRECTOR