TRANSCRIPTION OF FINANCE NEWS NETWORK INTERVIEW WITH MANAGING DIRECTOR OF KORDZ PTY. LTD. DAVID MEYER
Clive Tompkins: Hello Clive Tompkins reporting for the Finance News Network. Joining me for the first time from Kordz, an Australian manufacturer of audio visual cables and accessories is Managing Director, David Meyer. David welcome to FNN, can you start by introducing Kordz.
David Meyer: Kordz is a specialist home theatre peripheral and essentially interconnect cable provider predominantly into the specialist AV sector so - as opposed to mass retail channel. It’s a private unlisted company and a fairly small operation based in - just south east of Melbourne.
Clive Tompkins: What’s your turnover and are you profitable?
David Meyer: Turnover currently is based just on Australia New Zealand. We do operate in a very specific niche, turning over about $2.5 million a year and have been profitable every year since inception.
Clive Tompkins: Can you tell us about the market for audio visual cables and accessories?
David Meyer: The one thing that is needed with AV systems is some form of connectivity to make it all work. But it is the accessory, it is the peripheral and it is hence driven by the sales of hardware and the hardware is what we don’t sell. So we are essentially riding the back of the market but fortunately it is a buoyant market.
Clive Tompkins: How big is it in Australia and what’s the growth?
David Meyer: There’s been enormous growth. I believe latest sales figures for digital TV’s is upwards of 2.5 million per annum and that’s the types of figures that we tend to focus on rather than how many interconnects are being sold, because it would be fair to say that there would be at least one cable required for every digital TV sold. They have an inbuilt tuner but people invariably want to connect a DVD player or a Blu-ray or a PVR or all three, in which case they need more than one cable. So even if we were to say that there was one cable per display sold, that’s still 2.5 million per annum, the reality is it’s more than that.
Clive Tompkins: So what are your biggest sellers and who do you supply?
David Meyer: Our biggest sellers are HDMI Cables in particular but we do have a whole range of home theatre cables, but HDMI peripherals and particular cables are by far the most popular and what we are famous for. We’ve won many awards for our HDMI cables and we do sell to the specialty retail channel, the smaller independent that services the mid to higher end market and also the custom installation channel.
Clive Tompkins: David for people not familiar with high definition multimedia interfaces or HDMI, what do they do and where are they used?
David Meyer: It’s a single cable standard which replaces the need for a whole range of other cables just to hook up your DVD player, Blue-ray player etc. It carries high definition video content, multi channel audio all in just one simple cable. It was actually developed by Silicon Image in Sunnyvale, California in conjunction with a number of other global giants. So very, very successful, it now enjoys a 100% adoption rate in digital TV’s which means that every digital TV sold has HDMI connectivity. Kordz Pty. Ltd. is in fact a direct licensee of HDMI Licensing. Most brands on the market aren’t and that’s our first point of difference. But what is particularly appealing to the specialty retail and installation channel, because they are so driven by standards, by performance reliability and certification, is that the driving force of Kordz HDMI Cables is total conformity to standards and transparency of our conformist nature.
Clive Tompkins: And is there a danger that your products could be superseded or circumvented by the manufacturers of AV equipment?
David Meyer: That’s a very good question. As mentioned there are many of those big CE brands - are in fact co-founders of HDMI and they do in many cases actually have a range of their own in terms of cables, but that’s not a big focus for them, fortunately for us. But again in the specialty and custom installation markets and the need for commercial etc, it’s not just about hooking up one Blu-ray player, one DVD’s and one digital TV. It’s about hooking up a whole – in many cases – a house wide solution or about a projector installation where a long cable is required and we actually do service that market very, very well and I really don’t see that’s about to change.
Clive Tompkins: At this stage you are looking to raise capital. How much are you looking for and where will the money go?
David Meyer: We are looking to raise approximately $1.2 million Australian. The operation is currently capitalised for Australia New Zealand which has been our focus to date. With the setting up of Kordz USA and the signing of some distributors already, we have customers ready to buy and some product that is already shipped into the USA. It’s sensible that being capitalised just for Australia New Zealand is simply not going to facilitate what we need to do in the United States. Of the $1.2 million raised, about half is going directly into new and expanded inventory. About one third, so about $300,000 will be used for the reallocation of existing shares which represents about 5% of existing shares, and the remaining $300,000 will partly go as a loan to Kordz USA in start up activities - even though we’ve been going there for 10 months already now. And some into the establishment of logistics in Asia which will enable us to retain in US currency the buying, warehousing and selling of goods without exposing ourselves to unnecessary currency fluctuations. And then there’s going to be some that will be retained as a cash reserve.
Clive Tompkins: For investors watching this broadcast that like the story, what sort of returns are projected?
David Meyer: We’ve projected returns based on what we feel the sophistication of the US market, the level of competition that’s there and also other market potentials as well - because we already have a distributor in the Middle East as well throughout the Arab regions. We’re anticipating that if we achieve even half the level of success in penetration into this specific market in the USA as what we’ve already achieved in Australia, in the next four years - then we will end up actually achieving all of our sales projections which would result in an investor increasing their capital in the order of 230% - 250%. So it’s in excess of 20% per year compounding – well in excess, plus dividends.
