iiNet stake boosts Amcom H1 profit

Perth-based Amcom Telecommunications has benefitted from its major shareholding in internet service provider iiNet as it today boosted its half year net profit by 38 per cent.

The company booked a net profit of $6.1 million, including the $2.6 million equity contribution from its 22 per cent stake in iiNet.

However, the result did not include the buy back and sell down costs after tax of $1.5 million related to Futuris Corporation's selling its 50.1 per cent stake in Amcom.

Including that item net profit after tax was $3.5 million, up 48 per cent on the previous corresponding period.

Revenue increased from 15 per cent to $25 million while earnings before interest, tax, depreciation and amortisation rose 35 per cent to $8.5 million.

Operating cash flow was up 49 per cent to $9.5 million.

Amcom has maintained its earnings guidance for the 2009 financial year of at least 25 per cent growth or $7.1 million in net profit after tax, excluding equity accounted earnings of associates and before significant items.

The board has declared an interim, fully franked dividend of 0.3 cents per share.

The announcement is below:

Amcom Telecommunications Limited ("Amcom'') (ASX: AMM), a leading fibre network provider, today announced a 38% increase in net profit after tax of $6.1m including equity accounted earnings of associates but prior to significant item for the six months ended 31 December 2008.

The strong result was based on an increase in revenue of 15%, higher margins and an increase in EBITDA of 35% driven by new sales in the period and the momentum of growth in new customer connections experienced in the 2008 financial year.

The reported net profit after tax for the six months ended 31 December 2008 including the significant item was up 3% to $4.6m compared to the previous corresponding period of $4.4m.

Financial Highlights

- Revenue increased 15% to $25.0m
- EBITDA increased 35% to $8.5m
- EBITDA margin expanded from 29% to 34%
- EBIT increased 49% to $5.7m
- Operating cash flow increased 49% to $9.5m
- Net profit after tax including equity accounted earnings prior to significant item increased 38% to $6.1m
- Net profit after tax before equity accounted earnings and before significant item increased 48% to $3.5m
- Net debt remained low at $15.6m with a low gearing ratio of 13%
- Interim fully franked dividend declared of 0.3 cents per share

Amcom Chief Executive Officer, Mr Clive Stein, said, "the strong financial performance in the business reflects our unique strategic position in the market. The continuing demand for fibre networks, across a diverse range of businesses and government departments, to provide internet and IT solutions, has seen our business become an essential service provider. The demand for fibre networks is refected in the growth of our annual recurring billing base and has positioned the company for sustained growth as we connect more businesses and buildings to our fibre networks".

Amcom's Fibre Division increased EBIT 35% to $5.8m while its Amnet Division increased EBIT 57% to $1.3m. The group benefited from its 22 % stake in iiNet Ltd with an equity accounted contribution of $2.6m versus $2.0m previously.

Amcom increased its annual recurring billing base by 9% in the half to $46.7m at 31 December 2008, up from $43m at 30 June 2008. Sales of $5.5m in annualised revenues were generated over the six months from the Fibre Division.

"Our EBITDA margin improvement is pleasing, with margins expanding to 34% for the six month period," Mr Stein said.

"The key driver behind this improvement is the continuing growth of our Fibre Division revenues combined with our relatively flat cost base. With $5.5m of new annualised sales in the first six months of this year, we are well placed to continue our revenue growth and margin improvement into the second half," he said.

The business retains a strong balance sheet with net debt of $15.6m, a gearing ratio of 13%, and interest cover of 11 times on an EBITDA/interest basis. The operating cash flow improved by 49% over the previous corresponding period to $9.5m.

"The ability of our business to produce healthy operating cash flows has enabled us to invest in our business to generate revenue and earnings growth whilst maintaining a conservatively geared balance sheet."

Significant item

The significant item included in these half yearly results to 31 December 2009 are the buy back and sell down costs after tax of $1.5m associated with the exit of Futuris Corporation Limited, the former 50.1% shareholder from the share register.

Interim Dividend

The Board have declared a fully franked interim dividend of 0.3 cents per share to be paid on 29 April 2009 to all shareholders on the registry as at 7 April 2009.

Outlook

Amcom re-affirms its earnings guidance for FY09 of at least 25% growth or $7.1m in net profit after tax excluding equity accounted earnings of associates and before significant items. The Company has a high level of confidence in the guidance given the 48% increase in first half profit to $3.5m.

The strong forecast for growth in FY09 continues a positive growth trend over recent years. EBIT has risen by a compound annual growth rate of 26% over the past 3 years. EBITDA has risen by a compound annual growth rate of 19% over the same period.

Commenting on the outlook for Amcom, Mr Stein said: "We are confident that the strong demand for our fibre based products will continue to play an important role in driving Amcom's future growth. We are well positioned to take advantage of this strong demand through our extensive network coverage, our innovative products and our excellent customer service.

Data networks are now an essential service to business and in the coming year we will look to leverage our strong market position and expertise as we expand into new products and markets. We remain focused on delivering strong organic growth and creating long term value for our shareholders."