The disability services organisation is increasing its services earnings in a bid to mitigate the loss of revenue from the National Disability Insurance Scheme.
Intelife Group’s acquisition of horticultural services business Westland Works late last month is part of a broader plan to diversify its income streams, according to chief executive Steve Edgar.
Since the introduction of the National Disability Insurance Scheme, Mr Edgar said the organisation’s revenue had fallen and costs were up because of the set prices for services and administrative burdens of the scheme.
The NDIS, which gives customers control of how they spend their funding, relies on organisations to bill for services and to market their offering to prospective clients while adhering to prices set by the government.
Mr Edgar said the NDIS pricing model was unsustainable and, to enable the organisation to fund the provision of its disability service, Intelife’s management made the decision to grow its services revenue.
“We plan to do that by growing our Australian Disability Enterprise business and provide more commercial services to customers,” Mr Edgar said.
Intelife has a similar horticulture business in its commercial services offering, which provides supported employment to people with disabilities.
The company enlisted corporate advisory firm Octavian Group to search for a merger prospect to enable it to grow its commercial services.
“We engaged an adviser to help us with the search and the process because we are not really geared up for mergers and acquisition being a not-for-profit disability provider,” Mr Edgar said.
“One of the companies they identified was Westland Works.”
Mr Edgar said the acquisition of Westland Works would enable the company to tender for larger jobs, which would facilitate growth at Intelife and enable it to provide more work opportunities for people with a disability.
“It’s quite a small business, it’s got 20 employees, and probably five or six main customers, it’s not huge but it generates good cash flow, which is what we need,” Mr Edgar said.
One of Westland Works’ biggest clients was the Public Transport Authority of Western Australia.
While not quoting the amount of Westland Works’ revenue, Mr Edgar said the acquisition would increase Intelife’s commercial services by 25 per cent.
According to Intelife’s 2019 annual report, 77 per cent of the organisation’s $20.6 million income was from government grants, or the NDIS, and 20 per cent was from goods and services.
Mr Edgar said the organisation had set a target for 40 per cent of its revenue to be generated from sources other than the NDIS.
Now that Intelife had made an acquisition, Mr Edgar said the organisation did not have any immediate plans to expand.
“A large part of the strategy was to do an acquisition and grow commercial services and we have made an acquisition and we have got some growth so now we are just revisiting and refreshing the strategy for the next two, three years,” he said.
Mr Edgar, who joined the organisation in 2018 after working for Wesfarmers and Worley, said he made the move to the disability sector because he wanted the challenge of helping an organisation through the NDIS transition.
“It really is a fairly significant commercial challenge because your revenue drops and your costs increase,” Mr Edgar said.
“Largely that was a driver for me; to ensure that Intelife can transition and operate more commercially so that we can still be around in 10, 20 years, still delivering disability services to people.”
