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  1. 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

    +++++++++++++++++++++++++
    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


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