AGC Networks Ltd Management Discussions.

GLOBAL ECONOMY OVERVIEW

The Calendar Year 2019 started off with rising tensions between two of the worlds largest economies US and China. US and China together account for 40% of the global GDP and the trade disputes between them had an adverse effect on the global economy and overall sentiment. This impact was not only seen in the commodities and financial markets (equities, bonds, currencies), but also impacted the output and profitability of firms leading to deterred investment decisions of businesses. However, as the year progressed, market sentiments were boosted by tentative signs on intermittent favourable news on US-China trade negotiations.

If the pain felt across global economies in 2019 wasnt enough, the year ended off on a worse footing with the Corona Virus or COVID-19 being first detected in December and quickly spreading across the world. COVID-19 triggered a global crisis like no other, that of a global health crisis, but also leading to the deepest global recession since the Second World War. The baseline forecast envisions a 5.2 percent contraction in global GDP in 2020 the deepest global recession in eight decades, despite unprecedented policy support. Growth forecasts for all regions have been severely downgraded, while many countries have avoided more adverse outcomes through sizable fiscal and monetary policy support measures. Other than essential commodities like Foods, Pharmaceuticals and FMCG, all other sectors across the world were impacted through reduced demand, supply chain disruptions, labour problems, creating a domino effect on the financials and working capital cycles.

INDIAN ECONOMIC OVERVIEW

The Indian economy started FY20 on a dull note due to the ongoing liquidity crisis. In order to achieve the governments vision of making India a USD 5 trillion economy by 2025, the finance ministry slashed domestic corporate tax rates to 25.17% midyear. The Current Account Deficit narrowed primarily on account of lower non-oil, non-gold imports and robust services exports supported by software, travel and financial services. Indias crude oil import bill fell by 9% Y-o-Y to $102 billion in 2019-2020 on account of price crash; though volumes remained fairly unchanged. Foreign fund outflows and the Feds grim prognosis for the US economy further weighed on the rupee as it touched 77 against US dollar in April 2020. The CPI inflation stood at 5.84% YoY in March 2020 - higher from 2.86% in March 2019. According to the Indian Budget 2020, the real GDP growth was estimated at 5.0% in the financial year 2019-2020 but the COVID-19 crisis has ensured that FY21 will be a challenging one for India and the world. As per Fitch ratings, Indias GDP growth is likely to slip to 0.8% for FY21.

UNIFIED COMMUNICATIONS AND COLLABORATION MARKET

Unified Communications and Collaboration (UCC) is the integration of various communication technologies with collaboration tools such as real-time video conferencing, e-mails, instant messaging and desktop sharing. UCC solutions enable enterprises in streamlining employee and customer interaction methods. They also facilitate easily accessible communication services for globally dispersed employees. A widespread global network of 4G connectivity and ongoing investments for early commercialization of 5G networks will contribute largely to the uptake of modern enterprise communication solutions.

UCC Market size exceeded USD 30 billion in 2019 and is estimated to grow at a CAGR of around 8% between 2020 and 2026. The growing penetration of smartphones and large-scale investments by telecom players for modernizing communication network infrastructure are expected to facilitate the consistent growth of the market.

North America held an industry share of nearly 45% in 2019 and is projected to dominate the UCC market size from 2020 to 2026 due to availability of advanced communication and IT infrastructure in the region, especially in the U.S. In addition, robust growth of enterprise mobility witnessed in the region along with the rapid proliferation of mobile devices is augmenting market revenue. North American employees are ahead of their global peers in terms of BYOD adoption, which is driving enterprises to leverage UCC-based systems for collaboration functions.

The presence of key global players, such as Microsoft and Cisco, has also propelled market growth in the region. There is a growing interest among enterprises to use third-party managed services for on-premise UCC solutions to effectively manage complex infrastructure, enable seamless integration and maintain the functioning of different communication systems. The high degree of consistency in terms of the attitude toward adopting and implementing BYOD among mid-sized companies as well as enterprises operating in this region will further strengthen market value.

The key market players operating in the UCC market are focusing on new product development strategies to strengthen their product portfolio and increase customer acquisition. For instance, in January 2020, Avaya, a leading communication enterprise, launched Avaya OneCloudTM ReadyNow. This new offering has been made available in more than 30 countries and is helping the Company offer secure on-premise unified communication services to its customers. Avayas UCC customers now have access to critical communication tools, resources and expertise designed to increase business recognition and growth.

Several acquisitions are enabling further consolidation of the market as key players are strategically acquiring companies that can complement their existing product lines and enhance their value proposition.

DATA CENTER AND EDGE IT

Global Edge Data Center market size exceeded USD 5.5 billion in 2019 and is estimated to grow at 23% CAGR between 2020 and 2026. The edge data center market growth is attributed to factors such as the increasing adoption of smartphones and rising internet penetration in several regions. The introduction of 5G smartphones by global players is resulting in an increased demand for advanced facilities for enhancing data traffic management. Another factor leading to edge data center market growth is the rising trend of IoT devices such as sensors, actuators, self-driven cars and robots, which is compelling service providers to place facilities closer to the network edge. The growing adoption of these devices results in generating massive amounts of data, which needs to be effectively stored and accessed. SMBs and large enterprises are investing in these data centers to reduce latency and increase the speed of delivering services and data. Edge facilities provide secure data storage and aid enterprises to keep pace with real-time processing and low-latency responsiveness. The rise in data traffic and the increasing adoption of IoT technology is boosting the industry demand globally.

Based on component, the edge data center market has been segmented into solutions and services. Solutions include products such as cooling, power, UPS, IT racks & enclosures, networking equipment, and DCIM software, while services include installation & integration, managed and consulting services. The edge data center UPS market will witness growth of over 10% CAGR over the forecast timespan owing to the increasing demand for battery backup in data centers.

 

Source:https://www.gminsights.com/industry-analysis/edge-data-center-market

CYBER SECURITY

The global cyber security market size was valued at USD 156.5 billion in 2019 and is expected to expand at a compound annual growth rate (CAGR) of 10.0% from 2020 to 2027. Cyber security and defense against online threats undertake greater significance in todays changing digital landscape. It has become vital amid organizations due to rapidly increasing frauds, cybercrimes, risk, threats and vulnerabilities. Disruptive and emerging technologies in banking, retail, information technology, defense and manufacturing sectors have offered new capabilities, facilitated automation and offered ease of working in the recent past. However, these technologies have also emerged as a potent factor in the development of the global threat landscape of exploits, vulnerabilities and malware. The emerging threat landscape is observed with an increased number of cybercrime activities in the global digital era.

The services segment dominated in 2019 with a 54.7% revenue share of the cyber security market. It is also anticipated to continue its dominance over the forecast period. Cyber security vendors offer both professional and managed services to provide IT support and assistance for troubleshooting software issues and carrying out regular maintenance. Furthermore, the need for continuous event monitoring, vulnerability management and real-time dedicated security support for timely delivery of products is compelling enterprises to adopt these services. Thus, the need for timely support and professional assistance is expected to aid the growth of the cyber security market. Moreover, the rising trend of employing third-party vendors by organizations owing to their robust solutions offered at optimum costs thereby boosts the growth of Security as a Service (SaaS).

The hardware segment is expected to register the highest CAGR over the forecast period contributing to the market. The hardware comprises of next-generation equipment and devices such as encrypted USB flash drives, firewalls, and Intrusion Prevention System (IPS) equipment that secure an organizations IT networks by monitoring their networks from malicious incidents.

 

Source: Grand View Research https://www.grandviewresearch.com/industry-analysis/cyber-security-market

DIGITAL TRANSFORMATION

Digital transformation has emerged as one of the most prominent strategies for public and private organizations over the past few years. It is increasingly transforming the conventional technology landscape across all industry verticals. Although enterprise applications based on digital transformation technologies are still in their nascent stages of development, they are gradually beginning to drive innovation into business strategies and proving their significance at every step of an organization.

The digital transformation market is projected to reach $3,294 billion in 2025, growing at a CAGR of 22.7% from 2019 to 2025. The growth in this market is mainly attributed to the growing adoption of AI & robotics in manufacturing industries, lack of skilled workforce, increasing adoption of Internet of Things (IoT) in different industry verticals, and government initiatives & policies towards digitization in developing nations. Furthermore, the demand for streamlining business processes and the adoption of 5G technology is also expected to support the growth of the digital transformation market over the forecast period. However, the high cost of transformation and lack of infrastructure are the major challenges limiting the growth of this market.

The large share of digital transformation segment is mainly attributed to the increasing need to develop efficient and effective operations to reduce expenses associated with traditional operational processes, the need for improved customer services & engagement, and the need to enhance productivity of business operations and processes with incorporation of advanced digital technologies.

 

Source: Global Newswire News https://www.globenewswire.com/news-release/2020/06/10/2046146/0/en/Digital-Transformation-Market-Worth-3-294-Billion-by-2025-Growing-at-a-CAGR-of-22-7-from-2019-Global-Market-Opportunity-Analysis-and-Industry-Forecasts-by-Meticulous-Research.html

GLOBAL TECHNOLOGY OUTLOOK

The COVID-19 crisis has reduced overall demand for many consumer and enterprise technology products and services. With consumers and businesses facing losses, IT spending has declined - as of April 2020, IT spending for the year is forecast to fall by 3 percent, revised down from a 5 percent increase in January. Declines could be coming in servers, storage, and network hardware as enterprise IT services also look to reduce costs. Software had been poised for double-digit growth in 2020, but as companies postpone enterprise upgrades and big projects to preserve cash, growth could be closer to 1 or 2 percent. For all its pain, the COVID-19 crisis can be an opportunity to make significant upgrades to infrastructure and processes that may be long overdue. Developing more transparent and dynamic supply chains, enabling higher-performing remote workforces and accelerating migration to public clouds are potential ways to recover strongly while setting up long-term strategies for success. Tech companies have the opportunity to emerge stronger, more resilient, and more innovative during the current times.

HUMAN RESOURCES MANAGEMENT

HR interventions are meant to harness a collaborative work culture, build a sense of camaraderie amongst employees and keep them meaningfully engaged.

HR policies & practices are synchronized to supplement & complement organizational strategy to drive Company values and culture. In Talent Acquisition, meticulous planning is done to attract, recruit & select exceptional talents. Accordingly, the team takes a strategic and holistic approach while building talent pool for the organization. In the year 2019-2020, the Company has hired more than 100 employees in upcoming technology quadrants.

Special emphasis is accorded towards promoting a culture of inclusivity and diversity at workplace. As candidate experience and engagement plays an all important role in forging a lasting association, employee orientation is given due weightage as well. New joinees undergo customized best-in-class in-house orientation programs to facilitate their seamless integration.

Learning and development, through its varied, customized interventions across career levels and functional domains, has played a significant role in honing and developing employee skills and competencies. Diverse behavioral and functional trainings with technical certifications are imparted round the year. In Year 2019-2020, the focus has been to create a pool of Skill-Ready Workforce, enabling preparedness and immediate deployment of resources. Employees were encouraged and enabled for achieving certifications whereby 138 certifications across practices were secured. 53% employees have undergone Training & Certifications, achieving 394 man-days of training. Extensive external and internal technical process trainings were conducted through 28 programs across four major technology quadrants such as Unified Communications, Network & Data Center, Cyber Security and Enterprise Applications.

In line with aspirations of employees and to boost their individual growth and development opportunities, Global Talent Exchange (GTEx) and Internal Job Postings (IJP) has enabled in fulfilling global resource requirements internally. This approach of ‘exploring talents from within has helped the Company in achieving cost prudence through optimized resource utilization, elimination of avoidable costs and improved levels of profitability.

Talent Management & Employee Engagement plays a pivotal role towards building & sustaining superior employee connect and a high level of employee engagement. Diverse calendared Engagement programs are scheduled round the year towards building & sustaining a superior employee connect and a high level of engagement in the organization. To connect employees with thought leaders as well as peer groups at different levels, there are multi-modal channels of communication and organizational interventions. These avenues are extensively used for sustaining free flow of communication, sharing of information, maintaining transparency, giving & receiving feedback and conferring employee rewards and recognition. The Companys Reward & Recognition Program comprises of numerous rewards categories based on diverse criterions, spread across functions & geos. These rewards are designed to recognize exceptional talents and outstanding business performances.

RISKS

a) Geographical concentration

The world economy today is deeply interconnected with any surprises or shocks in one region quickly ricocheting to other economies. Though the Company has spread its portfolio worldwide, it still has to source for more and newer pools of clients to shield itself from the devastating impact of a downturn in connected regions.

b) Competition

The threat of competition is persistent and serious in the lucrative IT industry. The Company is motivated to stay ahead of competitors through continued research and innovation. Furthermore, it is key to stay updated on latest technology advancements to ensure the business model of the Company stays relevant with customer needs.

c) Financing Activities

There is a requirement for steady cash flow in sufficient quantum in order to support the Companys operations and operate its business model with efficiency. Thus, the Company has over the years extensively evaluated various funding options provided by the banking as well as non-banking segment. After studying the available options using updated analytical tools, the Company has successfully tapped financial resources which demand comparatively favorable servicing as well as are best suited to the Companys need from time to time.

d) Foreign Currency Fluctuation

The spread of revenues around the globe increases the Companys exposure to currency risk. The Company performs due diligence by keeping up-to-date with current affairs in the regional and global economy. This enables the Company to take steadfast measures in hedging against currency volatility and protecting its revenues.

e) Employee Retention

The Company values its employees as its key capital and asset. Skilled employees who feel valued are better engaged with the goals of the Company and will deliver better performance. The Company thus emphasizes on skills upgrading through regular trainings and certifications to align employees skill sets to keeping your Companys customers ahead of the technology curve. Furthermore, the Company monitors the Employee Engagement Score to ensure all employees are constantly motivated and delivering performance.

f) Staff Attrition:

Over the past few years, the IT Industry has particularly faced a high attrition rate mainly attributable to the highly volatile nature of this industry and the resultant demand for constant skill updation & development from the employees by companies belonging to this industry. The Company being no stranger to this risk, has over the years taken appropriate measures to facilitate cultivation of long-standing relation and loyalty amongst talented & highly competitive employees contributing majorly to the performance of the Company over the years.

g) Talent Acquisition:

The Company is engaged in such a business which highly depends on the capabilities of its workforce for its performance. Like numerous other companies engaged in the IT industry, the Company has been facing the long standing challenge of refreshing and hiring skilled and talented employees compatible with the constantly changing landscape of the IT industry and commensurate with the nature, size and global presence of the Companys business. Over the years, the Company has undertaken meticulous planning to attract, recruit & select exceptional talents and has taken strategic and holistic approach to build its talent pool. In the current year, the Company has hired employees in upcoming technology quadrants. Also, the Company has especially emphasized on promoting a culture of inclusivity and diversity at workplace, as the experience and engagement of employees plays an important role in forging a lasting association.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

AGC Networks has an adequate system of internal controls to ensure that the assets are safeguarded and protected against loss from unauthorized use or disposition and that transactions are authorized, recorded and reported correctly. The Company engages a detailed process of internal audits, reviews by management and documented policies, guidelines and procedures to ensure that the financial records are relevant and reliable.

The Company has implemented an integrated SAP and SFDC business management system for AGC entities excluding the entities acquired i.e. Black Box Corporation and COPC Holdings Inc. during January 2019, providing system-based checks and controls. This results in increased efficiency and effectiveness of AGC Networks internal control systems. Implementation of ERP project to have SAP for Black Box Corporation is currently underway and we expect to go live with SAP by end of FY21 with integration of SFDC, Oracle and Service now. This newly implemented SAP would be integrated with overall AGC SAP to have one platform as planned for FY22. The Company management assessed the effectiveness of the Companys internal control over financial reporting (as defined in Clause 17 of SEBI LODR Regulations 2015) as on March 31, 2020.

M/s. Walker Chandiok & Co LLP, the Statutory Auditors of the Company, has audited the financial statements included in this Annual Report and has issued a report on our internal control over financial reporting (as defined in section 143 of Companies Act 2013).

The Companys internal audit systems independently oversee the operations of the organization regularly. The top management and the Audit Committee of the Board review internal audit findings and recommendations. The Audit Committee is authorized by the Board to investigate any matter pertaining to the internal control and audit. The Committee also ensures compliance of internal control systems in addition to the quarterly, half-yearly and annual financial statements before submission to the Board for its review and approval.

REVENUE BREAK-UP

The break-up of the years revenue is given below:

(Rs in Crores)
Business Segments Standalone Consolidated
FY2019-2020 FY 2018-2019 FY 2019-2020 FY 2018-2019
System Integration 309.35 306.85 4,067.06 1,606.39
Technology Product Solution 0 0 820.81 227.19
Consulting 0 0 106.05 19.16
Total 309.35 306.85 4,993.92 1,852.74

Offerings under the System Integration include Unified Communication, Data Center & Edge IT, Cyber Security, Digital Solutions & Applications and Seamless Customer Support and managed services. Offerings under the Technology Product Solution include IT infrastructure, specialty networking, multimedia and keyboard/video/mouse ("KVM") switching. Consulting business is related to providing consulting services for performance improvement and customer experience.

SHARE CAPITAL

As on March 31, 2020, the Issued, Subscribed and Paid-up Equity Share Capital of the Company was Rs 29,74,46,490/- divided into 2,97,44,649 Equity Shares having face value of Rs 10/- each. The Company has not issued any other class of shares.

OTHER EQUITY India:

Total Other Equity stands at Rs 59.20 Crores which mainly includes Capital Reserve of Rs 22.64 Crores, Security Premium Reserves of Rs 45.90 Crores, General Reserves of Rs 100.58 Crores and accumulated losses of Rs 109.92 Crores as at the end of the financial year 2019-20.

Consolidated:

Total Other Equity stands at negative Rs 77.57 Crores which mainly comprises of Capital Reserve of Rs 38.04 Crores, Security Premium Reserves of Rs 45.90 Crores, General Reserves of Rs 100.58 Crores and accumulated losses of Rs 262.09 Crores as at the end of the financial year 2019-2020. Accumulated losses are higher due to other comprehensive loss of Rs 80.49 Crores on account of re-measurement on defined pension plan of BBX Inc and its subsidiaries in the United States of America and one-time costs of Rs 99.94 Crores on account pre-payment premium and other expenses paid on debt refinancing.

BORROWINGS

India:

The Borrowings of the Company stands at Rs 93.82 Crores as on March 31, 2020. The Borrowings comprise Working Capital facility. The Term Loan facility has been fully repaid during the year ended March 31, 2020. Working capital stands at Rs 93.82 Crores as on March 31, 2020 as against Rs 98.04 Crores as on March 31, 2019 showing a reduction of 4% on account of lower business utilization of working capital limits due to term loan repayment and lower utilization of working capital.

Consolidated:

The Borrowings of the Company stands at Rs 462.38 Crores as on March 31, 2020 against Rs 803.86 Crores showing reduction of 42% on account of pre-payment of term loan by Black Box Corporation. This repayment was done through entering into a non-recourse account receivable securitization program for sale of both billed and unbilled receivables originated by Black Box Corporations subsidiaries in the United States of America and the United Kingdom to an unaffiliated third party. The securitization program allows availability upto $ 90 million to Black Box Corporation. Additionally, Black Box Corporation entered into $15 Million term loan facility that is secured by one of the tranches in the securitization program. The proceeds from the sale of receivables and term loan were used to pay off all the outstanding loans from former lenders.

Above borrowings also include borrowing by AGC Networks Pte Ltd, Singapore from AGC Parent Company, Essar Telecom Limited (ETL) of Rs 188.84 Crores, which was primarily utilized towards acquisition of Black Box Corporation.

FIXED ASSETS

India:

The fixed assets (net block including PPE and intangible) of the Company is at Rs 7.11 Crores as on March 31, 2020. In addition during the current year ended March 31, 2020, due to adoption of the Ind AS on leases 116, Company has recognized Right of use assets for Rs 17.04 Crores.

Consolidated:

The fixed assets (net block including PPE and intangible) is at Rs 105.35 Crores as on March 31, 2020. The total Goodwill stands at Rs 234.24 Crores (including Rs 137.24 Crores on account of acquisition of Black Box Corporation and COPC Holdings Inc. during January 2019). In addition, during the current year ended March 31, 2020 due to adoption of the Ind AS on leases 116, Company has recognized Right of use assets for Rs 186.52 Crores.

INVESTMENTS India:

The total investment by the Company in subsidiaries as on March 31, 2020, is at Rs 48.72 Crores.

Consolidated:

The total investment of the Company as on March 31, 2020, is NIL.

OPERATING RESULTS India:

The Company, for the year ended March 31, 2020, recorded a gross turnover of Rs 309.35 Crores as against Rs 306.85 Crores for the period ended March 31, 2019 on standalone basis reflecting a minimal increase of 0.81% over previous year. The muted performance on standalone basis was due to various reasons including slow down in economy and adverse market condition coupled with COVID condition during March-2020 quarter The Company recorded a Net loss (before exceptional items) of Rs 1.63 Crores for FY20 as against Net loss (before exceptional item) of Rs 4.39 Crores for FY19 on standalone basis. Employee cost has improved to 11.54% of the total income for the FY 2019-2020 as against 14.65% in the previous year. Finance Cost stood at Rs 15.50 Crores (excluding interest on lease liabilities of Rs 2.99 Crores) for the FY 2019-2020 as against Rs 17.05 Crores in the previous year showing a reduction of 9.1%

Consolidated:

On Consolidated basis, the Company for the year ended March 31, 2020, recorded gross turnover of Rs 4,993.92 Crores as against Rs 1,852.74 Crores for the period ended March 31, 2020 registering an whopping increase of 170% over previous year. This is attributable to full year impact of the revenues from Black Box Corporation and its subsidiaries.

On Consolidated basis, the Company has achieved a net profit of Rs 41.12 Crores for FY 2019-2020 against a net loss of Rs 78.77 Crores for the FY 2018-19. The total Consolidated Profits of Rs 41.12 Crore was primarily attributable to transformation initiatives towards profitability improvement including operational efficiencies, ratio-centric organization and reduction in overheads with continued focus on all the financial metrics together with better liquidity management. The Employee costs stood at Rs 1,894.51 Crore for the FY 2019-2020 constituting 37.70% of the total income as against Rs 627.53 Crore in the previous year which constituted 33.75% of the total income for that year. This rise in the employee costs is mainly attributed to acquisition of Black Box Corporation in January 2019 and full year impact of the employee cost for the year ended March 31, 2020.

Finance Cost stood at Rs 129.38 Crore for the F.Y. 2019-2020 as against Rs 44.54 Crores in the previous year. This steep rise in finance cost is mainly attributed to full year impact of borrowings in Black Box Corporation and AGC Networks Pte Ltd.

KEY RATIOS

Key Ratios Standalone % Change Consolidated % Change
FY2019- 2020 FY2018- 2019 FY 2019- 2020 FY 2018- 2019
Revenue from Operations 309.35 306.85 0.8% 4,993.92 1,852.74 169.5%
EBITDA (%) 5.84% 2.74% 3.1% 7.41% 2.51% 4.9%
EBITDA (excluding lease) (%) 2.98% 2.74% 0.2% 5.68% 2.51% 3.2%
Operating Profit Margin (%) 5.45% 5.97% -0.5% 3.55% -1.88% 5.4%
Net Profit Margin before exceptional item (%) -0.53% -1.43% 0.9% 3.33% -0.30% 3.6%
Return on Net Worth (%) -1.83% 1.38% -3.2% -85.98% -421.99% 336.0%
Return on Net worth (excluding re-measurement of defined benefit obligation) (%) -1.83% 1.38% -3.2% 113.88% -452.89% 566.8%
Interest Coverage Ratio 0.91 1.08 -15.2% 1.37 (0.78) -275.5%
Debtors Turnover 0.90 3.10 -70.8% 2.04 3.46 -41.0%
Inventory Turnover 2.30 6.26 -63.3% 2.62 6.84 -61.7%
Current Ratio 0.85 0.93 -8.8% 0.80 1.17 -31.9%
Debt Equity Ratio 1.05 1.06 -0.2% -5.37 42.51 -112.6%
Debt Equity Ratio (Excluding re-measurement of defined benefit obligation) 1.05 1.06 -0.2% 7.12 45.62 -84.4%

Details / reason of significant changes:

1. Minor Changes in standalone ratios is primarily due to marginal revenue growth of 0.8% as compared to previous year due to recession in the market coupled with CoVID-2019 situation.

2. Changes in consolidated ratios is due to full year impact of acquisition of Black Box Corporation and COPC Holdings Inc. from January 2019. Hence, the ratios are not comparable with previous year. Additionally, adverse ratios in current year is primarily due to transition impact of re-measurement of defined benefit obligation for Rs 80.49 Crores arising due to CoVID-2019 situation.

CAUTIONARY STATEMENT

This report contains forward looking statements that involve risks and uncertainties including, but not limited to, risk inherent in the Companys growth strategy, acquisition plans, dependence on certain businesses, dependence on availability of qualified and trained manpower and other factors. Actual results, performances or achievements could differ materially from those expressed or implied in such forward-looking statements. This report should be read in conjunction with the financial statements included herein and the notes thereto.