Tax spike dents iiNet profit

Internet service provider iiNet has launched a plan to buy back five per cent of its issued capital, after reporting a strong rise in underlying profit and a small dip in net profit.

iiNet today announced it had booked a three per cent fall in net profit, which the Perth-based company said was due to changes in its tax consolidation regime over the previous year.

iiNet reported net profit of $33.37 million for the 12 months to June 30, down from $34.55 million a year earlier.

However, revenue increased 48 per cent to $699 million and underlying profit was up 12 per cent to $39.0 million.

iiNet said the growth in revenue was driven by a full year contribution from iiNet’s acquisition of the Netspace Group, the acquisition of AAPT’s consumer division and continued organic growth.

“Scale has become increasingly critical,” iiNet chief executive Michael Malone said.

“The acquisition of AAPT’s Consumer Division in September 2010 allowed iiNet to achieve its strategic goal of becoming the leading challenger brand in Australia with the second largest number of broadband DSL subscribers.

“We have now substantially completed the integration of Netspace into iiNet, achieving significant synergies through on-net migrations and IP bandwidth savings. The integration of AAPT’s consumer division is tracking as planned, with service improvements resulting in lower churn numbers than first thought,” Mr Malone said.

The company declared a final dividend of seven cents, fully franked, taking the full year payout to 12 cents.

Mr Malone said the results reflected the strong underlying fundamentals of the business.

iiNet also announced today it would launch an on-market share buy-back to re-acquire up to 5 per cent of its issued capital.

The company will fund the buy-back, expected to commence on August 29 and continue for 12 months, through existing cash reserves.

“The board has a strong focus on capital management and growing shareholder value, and considers that iiNet’s current market price does not fully reflect the underlying value and potential of the Company as the leading challenger brand in the Australian market,” Mr Malone said.

iiNet’s interim and final dividends will not be affected by the buy-back program.