iHug sale hides iiNet's 15% first half profit downturn

The sale of iiNet's New Zealand operations, iHug, has helped the Perth internet services company post a 447.4 per cent jump in net profit.

However, excluding the sale of iHug, the company's net profit from continuing operations fell 15 per cent to $1.7 million, down from $2 million.

iiNet booked a $5 million profit on the sale of iHug, helping lift iiNet's net profit for the six months to December 31 to $7.1 million.

iiNet sold iHug to Vodafone New Zealand on October 9 with iiNet booking all profits from the business up until September 30.

iiNet posted a 9.9 per cent increase in revenue to $113 million while earnings before, interest, tax, depreciation and amortisation were 4.8 per cent higher at $13.9 million.

iiNet managing director Michael Malone said that the result was fantastic and that the company would have booked a profit of $2.1 million, or a gain of 5 per cent, if it had been able to book the $422,000 profit made by iHug during the three months to September 30.

Mr Malone said that because the business had been sold during the half iiNet could not include the $422,000 in its headline net profit of $1.7 million.

He said he was pleased that the company had been able to improve its earnings amid higher charges forced upon it from Telstra.

iiNet's earnings before interest, tax and depreciation for the six months to December 31 was $13.9 million, up from $8.2 million in the previous half.

iiNet also declared a fully franked dividend of 1 cent per share.

Its shares closed 1.6 per cent higher, or 2 cents, to $1.27.

iiNet's shares have jumped more than 25 per cent this year on the back of speculation that Telecom New Zealand will mount a takeover bid for the group.

The speculation has been fuelled by the New Zealand Telco's move on two of iiNet's biggest shareholders, PowerTel and Amcom Telecommunications.

Telecom NZ has mounted a $320 million bid to buy PowerTel while it has been speculated the group has also held preliminary takeover talks with Amcom.

In a briefing to the Australian Stock Exchange today Mr Malone said the iiNet was yet to book the benefit of the Australian Consumer and Competition Commission's decision late last year lower the price wholesalers like iiNet have to pay Telstra to use national carrier's broadband network.

He said the company had booked charges to Telstra at $9 per subscriber per month but, using the $3.20 per subscriber per month as determined by the ACCC, iiNet's operating cash flow would jump from $8.4 million to $21 million.