Axia Releases Results for Q3FY09Axia Releases Results for Q3FY09
- Increased revenues by 11 percent to $17.8 million for the third quarter of fiscal 2009 compared to $16.0 million in the same period for fiscal 2008. - Net income of $0.7 million ($0.01 per fully diluted common share) for the third quarter of fiscal 2009 reflects start-up and commissioning costs in France and Singapore and increased business development expenses. - Won DSP for Dunkerque in France. - OpenNet received FBO licence and began construction phase. CALGARY, May 13 /CNW/ - Axia NetMedia Corporation ("Axia" or the"Corporation") today announced the results for the third quarter of fiscal2009 for the period ended March 31, 2009. Art Price, Chairman and CEO commented, "The fundamentals of Axia'sbusiness are solid and we expect that our in hand Open Access Next GenerationNetworks ("OAN NextGen") in France and Singapore will contribute profitablyover the medium and longer term. In addition, the compelling cost/benefit andperformance characteristics of the three main drivers of the ICT sector,"advanced wireless services", "computing in the cloud" and "software as aservice" each depend on access to OAN NextGen solutions of the nature deployedby Axia and, accordingly the market opportunity is growing." Mr. Price added, "Earnings in this quarter of $0.7 million reflectstart-up and commissioning costs in France and Singapore and businessdevelopment expenses for additional OAN NextGen opportunities. These costshave caused a negative contribution to Axia's net income of $3.2 million thisquarter. Also, Axia incurs significant ongoing corporate costs as a result ofbeing a publicly traded company. Axia's Management and Board believe that thecurrent price of Axia's shares is negatively affected by these costs and doesnot reflect the value of our current or future growth opportunities." Operational Highlights Alberta The Alberta SuperNet continued with steady growth despite the deepeningeconomic pressures associated with an extended period of low commodity pricesand increased cost pressures. Bandwidth sales grew to 67 Gbps at the end ofMarch 2009 compared to 63 Gbps at the end of December 2008. The AlbertaSuperNet value proposition of high performance for low cost is aligned withbusinesses that focus on cost efficiency and productivity. To date, Axia hasnot experienced a slowdown in the growth in bandwidth and operating results ofthe Alberta SuperNet. However, recent adverse economic conditions may cause adelay or postponement of incremental network growth opportunities. Axia is seeing increasing opportunity for high availability networkservices through the replacement or augmentation of its clients' existingnon-SuperNet services. This is driving greater consideration of the AlbertaSuperNet as a cost competitive and capable network alternative to support thedelivery of Axia's clients' significant investments in new and planned networkcentric business and public safety systems. France During the third quarter, Covage was awarded the Delegation de ServicePublic ("DSP") for Dunkerque Grand Littoral Networks ("DGL Networks") locatedin northern France. Construction is scheduled to begin in June 2009 and isexpected to be completed by June 2010. Subsequent to the end of the quarter,Covage was awarded the A75 DSP to light and operate an existing dark fibrecorridor along the 340 kilometre highway that runs from Clermont-Ferrand inthe centre of France to Béziers in the Département of Hérault in the south ofFrance. Covage is on schedule to complete its national fibre backbone network bymid-calendar year 2009. On completion, this project will connect most ofCovage's existing networks to each other and to the main interconnect pointsin Paris with an available bandwidth of 400 Gbps (expandable to 800 Gbps).Covage is actively seeking out new customers for the backbone and in the thirdquarter of fiscal 2009, secured a new bandwidth customer for 2 Gbps. As at March 31, 2009, Covage had 39 RSPs with 294 bandwidth connections.Bandwidth sales have grown to 16.6 Gbps at the end of March 2009 as comparedto 15.9 Gbps at the end of December 2008. Covage's addressable market isapproximately 34,000 sites as at March 31, 2009. At the end of March 31, 2009,the Corporation estimates that Covage's market penetration was approximately 1percent. As of today, Covage has submitted three new bids and decisions areexpected within calendar 2009. Covage continues to review all potentialopportunities in light of current market conditions and the degree that theopportunity complements Covage's existing assets. Singapore In Singapore, Axia was successful in leading the OpenNet Consortiumduring the bid/award phase. Through Axia NGNetworks Asia, Axia has a 30percent ownership in OpenNet. Subsequent to the end of the quarter, on May 4, 2009, OpenNet completedthe necessary steps in order to proceed with the construction of its passivefibre grid. This includes OpenNet being granted its Facilities-Based Operator(FBO) Licence from the Infocomm Development Authority of Singapore ("IDA") toprovide passive fibre-based services for an initial standard term of 25 years.Construction to 60 percent of premises in Singapore is expected to be completein 2010 and to 95 percent of premises in 2012. OpenNet is expected to beginoffering commercial services incrementally, as the grid is rolled out, withthe first services being available by the first half of 2010. During fiscal2009 and 2010, the activities of OpenNet will be focused on the constructionof the passive fibre grid. OpenNet will own the only Fibre to the Premise ("FTTP") grid thatprovides passive fibre-based services to essentially every residential andcommercial premise in Singapore. OpenNet's business is providing these passiveservices on an open access level playing field basis to all telecom partieslicensed to do so by the IDA. OpenNet's price structure is designed to beattractive for adoption and promote end-users choice of active serviceproviders. StarHub, as the IDA-selected Operating Company ("OpCo"), will beone of the authorized customers of OpenNet to provide active services overOpenNet's fibre. Subsequent to quarter end, the Corporation announced that Axia NGNetworksAsia's IntelliNet consortium was unsuccessful in its bid to become Singapore'sOpCo and the contract was awarded to StarHub, Singapore's incumbent cablecompany. Axia expects that Axia NGNetworks Asia will have OAN NextGenopportunities that leverage both Axia NGNetworks Asia's position in Singaporeand Axia's experience and track record elsewhere. New OAN NextGens The Government of Australia announced that it would be proceeding with aFibre to the Premise ("FTTP") National Broadband Network ("NBN") for Australiaand committed up to $43.0 billion (Australian) of government funds in a PublicPrivate Partnership ("PPP") structure to ensure it would be completed. Thegovernment made this decision when it concluded that the responses to the NBNRequest for Proposal ("RFP") were not value for money and the change fromFibre to the Node ("FTTN") to FTTP was in the Government of Australia'sinterest. Axia was a qualified respondent to the initial Government of AustraliaRFP that contemplated a FTTN approach and $4.7 billion of Government support.Axia proposed a PPP structure community interconnect grid combined with phasedFTTP and wireless local access. The proposal depended on funding by both theCommonwealth and the capital markets. The Government of Australia is now organizing to implement the announcedNBN and is beginning the process of acquiring services from the privatesector. Axia will evaluate the opportunities that may be available to it asthe Government's plans develop. Bought Deal Financing of Subscription Receipts On March 24, 2009, Axia closed the bought deal financing announced onMarch 4, 2009 for 11.5 million subscription receipts at $1.65 per subscriptionreceipt for gross proceeds of $19.0 million. This included 1.5 millionsubscription receipts sold pursuant to the exercise in full of theover-allotment option. The issuance of common stock from treasury for thistransaction was conditional on the Corporation being successful in itsIntellinet consortium bid for the Singapore OpCo opportunity, which it wasnot. Accordingly, the gross proceeds were returned to the subscribers and thetreasury issuance of additional common shares did not occur. During thecurrent quarter, Axia expensed all of the costs incurred in this financing,which totalled $0.8 million, and were allocated to the Business Developmentexpense for the Asia business segment. Q3FY09 Consolidated Financial Information Consolidated revenue for the quarter was $17.8 million, a decrease of$1.1 million from $18.9 million for the prior quarter of fiscal 2009. Revenuesincreased by 11 percent to $17.8 million for the third quarter of fiscal 2009compared to $16.0 million in the same period for fiscal 2008. Revenues for thefirst nine months of fiscal 2009 were $52.6 million, an increase of $5.0million from $47.6 million for the first nine months of fiscal 2008.Consolidated gross profit for the quarter was $6.4 million or 36 percent ofrevenue which is a decrease of $1.6 million from the $8.0 million or 42percent of revenue reported for the prior quarter. As compared to the firstnine months of fiscal 2008, gross profit decreased by $0.2 million from $22.0million. Net income for the current quarter was $0.7 million ($0.01 per fullydiluted share), and $5.6 million for the nine month period of fiscal 2009($0.08 per fully diluted share), a decrease of $1.8 million from $2.5 million($0.04 per fully diluted share) for the previous quarter and a decrease of$1.0 million compared to the same nine month period of fiscal 2008. The decrease in the Corporation's net income results for the currentquarter and nine months of fiscal 2009 are due to: i) losses incurred inCovage's largest DSP, Sem@for77, which is typical for a network in the earlystages of activation. The early stages of activation involve operating lossesand a higher depreciation expense as the assets are initially activated; andii) increased business development expense associated with the bought dealfinancing and proposals being pursued during the quarter. As at March 31, 2009, Axia's working capital was $22.1 million ascompared to $32.2 million for the prior quarter. This decrease was anticipatedas the Corporation is currently investing funds in network construction andacquisitions for Axia's expanding operations in both France and Singapore. Asat March 31, 2009, Axia had $28.8 million in cash and unrestricted short-terminvestments. Outlook Axia's business is based on next generation digital networks that areincreasingly seen as critical infrastructure to enable end users to improvetheir productivity and efficiency. Most of the digital based technology beingdeveloped depends on next generation network connectivity. Thesecharacteristics are becoming better understood by progressive governments andas a consequence, next generation network investments are being considered insome jurisdictions as economic stimulus initiatives. Axia will continue to invest business development funds to investigateand assess the best available opportunities. Axia's Management and Boardassesses the attractiveness of each new opportunity, including the value ofmomentum and market position, and considers the need for any additionalcapital required and the cost of such capital from available sources. TheCorporation intends to maintain its strong balance sheet approach. Axia'smanagement and the Board considers all these factors as we seek the path thatwe believe will maximize longer-term shareholder value.