ICT players spend to lift revenue streams

RECENT acquisitions across the ICT sector have boosted local companies’ revenue, but the challenge ahead is whether continued growth can be achieved organically.

Perth-based telecommunications company Amcom this week announced its 10th consecutive year of pre-tax earnings growth in excess of 20 per cent per annum.

In the year to June 2012, the company notched up a 56 per cent increase in revenue to $136 million, while pre-tax earnings amounted to $25.1 million.

Profit after tax came in at $28.4 million, a 10 per cent increase on the previous year.

The solid results were bolstered by the company’s decision to pay $15 million for local IT firm L7 Solutions in November last year, with L7 contributing $36.5 million to overall revenue.

Amcom has also managed significant growth through fibre sales and business services, but chief executive Clive Stein said the L7 acquisition better positioned the company for future growth.

“The acquisition … adds a new IT solutions capability to Amcom,” he said.

“We are well placed to take advantage of the convergence between telecommunications and IT solutions.” 

The use of acquisitions to broaden services has benefited local internet service provider iiNet, which reported a 19 per cent increase in revenue for the 2011-12 financial year to $831 million.

But the jump in earnings before interest, tax, depreciation and amortisation was even more significant – increasing 47 per cent to a total of $144.8 million.

iiNet credited the acquisition of both TransACT and Internode as key contributors to the positive performance.

The company paid $105 million for Internode and $60 million for business-focused TransACT.

Chief executive Michael Malone said the acquisitions were part of a “transformative” year for iiNet.

“The acquisition of TransACT has significantly expanded our presence in the business segment. Five years ago we identified this segment as one we would focus on expanding,” he said.

“Integration benefits from the two acquisitions are flowing through to earnings, and we are successfully unlocking the inherent value of the acquired businesses.”

Hartleys’ analyst Peter Gray said iiNet’s results were exceptional, but the test for the company was whether it could grow organically.

“The market will be looking to see whether iiNet is able to grow and compete as a major player without the convenience of these acquisitions,” Mr Gray said.

“The NBN, mobile expansion and a focus on small and medium enterprise provide ample opportunity.”

Perth-based IT services provider Empired will be hoping its acquisition of Conducive will bring similar benefits to those achieved by Amcom and iiNet.

Empired has announced it will acquire local firm Conducive for a total purchase price of $7.95 million.

Conducive was forecast to bring in $9.5 million in revenue for the 2012-13 financial year, which would provide a welcome boost to Empired; its revenue in 2010-11 was $39.7 million.

Empired managing director Russell Baskerville said the acquisition expanded the firm’s capability and broadened the scope of contracts it could now bid for.

“It enhances our value proposition to existing clients and will allow Empired to capture a larger proportion of their planned budget,” he said.