new announcement, page-4

Letter to Shareholders by Domenic Carosa, CEO of Destra Corporation
Regarding: AEM acquisition of Rajon delivering value to Destra

4 October, 2005

Dear Destra Shareholder,
Artist & Entertainment Group (ASX:AEM) announced this morning that it will acquire the
Rajon Group. The Rajon Group comprises Rajon Music, Rajon Vision and BIG Records. This
is exciting news for Destra Shareholders because pending approval of the transactions
associated with this announcement both Destra Hosting and your Destra Media interests will
be profitable and poised for further growth.
Following from my previous letter to you dated 15 September, 2005 I want to explain some
details around the new structure of your Company which has been architected to maximise
the growth of Shareholder value. Destra Corporation has always operated in two distinct
markets: Hosting and Media. Earlier this year, your Board set about better architecting our
approach to those markets in order to maximise our capital efficiency so that we could best
execute on the various opportunities presented to Destra Corporation.
By maintaining separate capital structures for our Hosting and Media assets it is considered
that Destra Shareholders can enjoy the historical performance and growth of Destra Hosting
with an expanded commitment to Destra Media and exposure to that upside through Destra
Corporation 50% shareholding in AEM. For clarity, a share in Destra continues to be a
share in the expansion of both Destra Hosting and Destra Media.
First, Destra Hosting is profitable and growing rapidly. This year Destra Hosting announced
EBITDA of $1.3m (up 562% year-on-year) on revenues of $15.79m (up 73% year-on-year).
This pleasing increase in profitability has been driven by your Company’s ability to execute
acquisitions on strict value criteria and efficiently unlock the synergies with Destra’s core
business. Your Company has contracted in excess of $16m recurring revenue and Destra is
strongly cash-flow positive ensuring the continued profitable growth of Destra Hosting.
Our expectation is that Destra Hosting will produce EBIT Profit of $1.2m for the Financial Year
ending June 30, 2006. Additionally, DES has in excess of $2.5m cash at bank to fund further
expansion of Destra Hosting.
Second, your Company has undertaken to participate in an exciting new phase of growth in
the value of Destra’s Media interests by partnering with AEM. Conditional on the terms set out
by the announcement dated 15 September, 2005, particularly the approval by AEM
Shareholders, Destra will hold approximately 50% shares of AEM’s duly expanded capital
base of around 100million shares.
At AEM’s closing price yesterday of $0.077, Destra Corporation Limited’s shareholding
in AEM would be valued at $3.85m. Conditional on the terms set out by todays
announcement made by AEM, the acquisition of the Rajon Group boosts the strategic and
financial performance that we can expect from the Destra Digital Media assets and the
entertainment assets of AEM.
The Rajon Music Group is budgeting for EBIT exceeding $1m on revenues exceeding $21m
for the financial year ending June 30 2006. With the acquisition of Rajon in conjunction with
the Destra Digital Media assets AEM now represents a fully integrated model for products and
services relating to music and video. AEM will continue its strategy by expanding through
other media and digital media services. The value of the Rajon to AEM naturally flows through
to accrete value in DES.
As yesterday’s closing price of $0.105, the Market Capitalisation of Destra Corporation
Limited was $11.55million. Accounting for cash at bank and Destra’s 50% shareholding in
AEM together equal $6.35m, hence the Enterprise Value of Destra Hosting at current market
prices for DES and AEM is therefore around $5.2m and the Price/Earnings ratio of Destra’s
hosting business is 4.33. Companies comparable to Destra Hosting listed on the ASX trade at
a P/E ratio of well above 10. Your company is therefore making all efforts to more effectively
communicate the intrinsic value flowing to Destra Shareholders proposed by the corporate
structure given effect by our recent transaction with AEM.
Thankyou for your support of Destra as we aim to ensure that 2006 is a year of expanded
profitability across the Hosting and Media divisions of the business and in the context of a
corporate structure that ensure we are able to execute upon opportunity that accrete
Shareholder value in DES across the markets in which we operate.
Warm Regards,
Domenic Carosa.
CEO
Destra Corporation