Nothing virtual about IT profits

The state’s leading information technology firms have reported solid growth despite difficult market conditions during the past year.

Across the listed companies founded in Perth – Amcom Telecommunications, ASG Group, Empired, and iiNet – revenue increased by an average of 16 per cent in the year to June 30 2014.

That figure is skewed somewhat by Empired’s 44 per cent increase in turnover, to $67 million for the year. The company’s increase in profit before tax was even more noteworthy; its $4.3 million profit represented a 119 per cent increase on the previous corresponding period.

While Empired’s smaller revenue and profit base need to be taken into account, as does the revenue boost from two companies bought during the year, the company claimed its strategy was reflected in the numbers. 

Managing director Russell Baskerville said organic growth was coming from both public and private sectors, exemplified by two contracts with high-profile clients resulting in forward-revenue of $96 million.

One contract was a $46 million deal with Main Roads WA for managed infrastructure services.

“The ability to reference these and the increased profile these have delivered provides an exceptional opportunity to continue our success in securing these large contracts,” Mr Baskerville said.

Empired bought two east coast companies during the year and Mr Baskerville highlighted the likelihood of further acquisitions to accommodate growing demand for services.

“The east coast is going to be a growth opportunity for us and in that market we’re seeing the finance sector and the telecommunications sector as two that are looking very strong for us,” Mr Baskerville told Business News.

ASG Group also reported a positive result last week, returning to profit after a strategic review and heavy investment in cloud-based services – what it calls ‘new world’ services.

The 2014 financial year was ASG’s first under the realigned strategic focus and brought with it growth in business for the cloud-based services from 1 per cent to 13 per cent of overall revenue.

As a result, the company said, revenue grew 7 per cent to $160 million and before-tax profit was positive at $9 million (up from a loss of nearly $30 million in the 2012-13 financial year).

“Leveraging our investment in ‘new world’ and capitalising on efficiencies across the business, we are now realising the return of our investment over the past few years,” chief executive Geoff Lewis said.

Chairman Ron Baxter said the results reflected the fact that large, progressive government and commercial organisations understood the need for new technology.

But he said that change wasn’t necessarily reflected in activity among ASG’s competitors.

“On the one hand there are the [IT providers] which are embracing and benefitting from the new wave of change, while on the other, some industry players are in denial, being either unwilling or unable to change,” Mr Baxter said.

“The latter group will find that their businesses will stall and disintegrate over the next few years.”

ASG this month sold its Bentley data centre for $11.7m, with the funds to go towards reducing debt to below $10 million by the end of June 2015.

The adoption of cloud technology is also occurring in the telecommunications sphere, where Amcom has invested in specific technology of its own – Amcom cloud collaboration.

That investment resulted in a partnership with Australia’s Academic and Research Network, which led to Melbourne University signing up as Amcom’s largest unified communications customer.

Meanwhile in the internet space, iiNet achieved a significant milestone in the 2013-14 financial year by breaking through the $1 billion revenue mark, while turnover grew 7 per cent to just over $1billion.

In announcing the results, chief executive David Buckingham said the period had marked a return to organic growth, led by the addition of 40,000 new broadband customers, following an acquisitive period.

“Having successfully acquired and integrated a number of complementary businesses over the past few years the company is now focused on growing organically and maximising its operational performance,” he said.

iiNet has also been working with state governments to build free wireless internet networks.

Its subsidiary, Internode, which iiNet acquired in 2011, was responsible for building the AdelaideFree network.

iiNet has now started working with the ACT government to build the nation’s largest WiFi network, which will cover 12 business districts in Canberra.

Such government contracts are among a plethora being awarded, which ASG chief executive Geoff Lewis said was indicative of the public sector’s thirst for new service delivery models.

“Increasingly, this take up is being driven by the public sector as cost and value for money pressures increase on all levels of service delivery,” Mr Lewis said.

Other firms are also taking advantage of emerging business with the public sector in WA.

The Birchman Group was recently successful in winning a contract over six competitors with MainRoads WA.

Birchman became part of Melbourne-based SMS Technology following a $25 million acquisition in September last year.

It won the $35,000 million contract with Main Roads WA to deliver new software and systems enhancements as well as ongoing support.

Meanwhile Perth-based Ajilon has had its contract with the WA Police extended for another five-year term in a deal worth more than $33 million and involving 70 Ajilon staff.