The acquisition of the ISMC Group on 1 June 2005 brought to...

The acquisition of the ISMC Group on 1 June 2005 brought to Hyro’s operation the required management rigour, process and delivery capabilities the Company needed at this juncture. The result of the aggregated business is an end to end Online Services Company, where Hyro:

· Defines the online strategy;
· Uses online services to reach and automate customer servicing;
· Defines channel strategies and leverages all digital channels;
· Implements, operates and supports technology, campaigns, and supporting processes; and
· Implements Government Online frameworks and digital infrastructure using proprietary products.

Prior to the acquisition, components of these services had previously been provided by the different segments of the since consolidated business.

The acquisition of HotMagna in September 2005 brought to Hyro’s operation the required High End technical skills that are in great demand by our clients. This acquisition was accretive to Hyro’s results and value. HotMagna brought with it clients that could be serviced by the broader aggregated service offering, and provides a deeper level of technical skills to fulfil the market demands and growth targets. The founding members of the HotMagna business augment and compliment the Hyro executive team.

With both of these acquisitions the Company has created the required scale and delivery capabilities to commence and deliver on its commercial objectives and achieve the growth that it has predicted for the next three years.

The International operations of the Company have been rationalised with the closure of the Singapore, Hong Kong and China offices. Hyro Thailand operation was a cash drain for most of the year, however a restructure of the services offering and refocus of the business from a resources provider to a full system integrator, as well as the abandonment of the proposed Ring Zero Merger
has turned this business around.

The Hyro Thailand business is projecting to increase revenues by 60% and deliver the earnings and cash generation expected and projected for the Company during the coming year, 2006.

I commend our entire team on their hard work and commitment to driving the required change and
investing their energy and efforts in creating the platform for growth from 2006.


Indications and projections for 2006 will see the Company record over a 100% revenue growth, with positive earnings and cash generation from operations.


Online Services have now emerged as a core part of business of all companies and governments. Success in Online Services implementation requires the bringing together of skills in marketing, technology and services delivery. Hyro is the only listed Online Services Company in Australia with a pure focus and extensive experience with end-to-end delivery, able to connect strategies for the growing online advertising and communications market with the technology required to support it.

Our domain knowledge in the Government services and solutions area, and the best of breed “CITR Access Point product-stack” which has been developed, implemented and maintained within our joint venture with the University of Queensland, has created a solid foundation for our Government services vertical. This has facilitated Hyro becoming a strategic partner with Federal and State Governments, jointly architecting and developing solutions to provide and support the channels that Government uses to transact, communicate and disseminate information and knowledge in these new emerging digital economies.

Continued demand for these services, both locally and
internationally, are expected to provide the projected growth in this part of the business.

The demand being experienced in the online services space reaffirms Hyro’s strategy to position itself as a “one-stop-shop” for Online Services. The company anticipates that this market trend will translate into the increased revenue expectations in line with revenues and earnings projections previously announced to the market. The company has been actively working on supporting these growth projections through increased hiring, specifically in project delivery and account management. A capital raising program was successfully concluded in March 2006 to provide the capital required for these opportunities, as well as to strengthen the Hyro Balance Sheet.

The Hyro Team has commenced the year with a number of pleasing results, including the addition of a number of new clients and commencement of several significant projects. The company is launching the real-time 3G delivery of 8 channels of mobile video content for the Commonwealth Games for Telstra in March, on top of the mobile applications already delivered. The team has
delivered a number of online campaigns for major brands such as Lion Nathan, Medibank and Canon this past year and is facing increased demand for these services.

The spread of Government engagements at all levels of government and the contracted services by our major corporate clients for our end-to-end, online services sees Hyro with a backlog of contracted engagements entering the new year, representing a significant component of our revenue targets for 2006. Finally, the previously announced contracted engagements in the Hyro Thailand subsidiary have provided the commercial turn-around of this business and the platform to capture the growth potential in Asia.

I, and my fellow directors remain confident that the company is now in an appropriate, strong position
to further build on the success and realise the market opportunity before it.