Acqusitions lead iiNet to 48% revenue hike

The Perth-based ISP has posted an increase in revenue from $474 million to $699 million for the year ending 30 June 2011.

Perth-based ISP iiNet (ASX:IIN) has recorded a 48 per cent increase in revenue for the year ending 30 June 2011, citing acquisitions of both Netspace and AAPT’s consumer division as the driving factors behind the growth.

In documents released to the ASX, the ISP posted revenue of $699 million for the year, up from $474 million for the previous financial year. It attributed the growth to the $60 million acquisition of AAPT’s consumer division from Telecom New Zealand which was finalised on the 30 September 2010, and also the contribution from the acquisition of Netspace which was finalised two months prior to the beginning of FY11.

iiNet chief executive, Michael Malone, said subscriber services were also up 36 per cent to $1.3 million and indicated the ISP was delivering on its strategy to grow the business across all metrics.

“Even with increased competition in the sector, iiNet was able to lower churn, maintain [average revenue per user] ARPU, retain profitable customers and grow its customer base,” he said in a statement.

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

Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) also rose 30 per cent from $81 million to $105 million for the year ending 30 June 2011.

Reported profit fell three percent from $34 million to $33 million for the year ending 30 June 2011.

The increase in revenue, a continued focus on cost management and acquisitions were attributed to the increase of 12 per cent in underlying profits for the year, from $34 million to $39 million. This followed the exclusion of legal and acquisition costs in FY11.

The acquired business contributed revenues of $153 million and net profits after tax of $6 million for the full year to 30 June 2011.

“iiNet’s core DSL churn is down and the company was also able to grow its subscriber base by an additional 7700 customers.”

The ISP’s ongoing court battle with the Australian Federation Against Copyright Theft (AFACT), which commenced on 20 November 2008, around the alleged breach of copyright laws has incurred a total of $7 million in legal fees to date, $2 million of which has been reimbursed by the ISP’s insurers.

After a ruling in iiNet’s favour on 4 February 2010, the AFACT launched an appeal which was dismissed in February, following which the organisation lodged an appeal with the High Court which was approved this month.

According to Malone, Australian customers no longer want internet access alone but are demanding a variety of broadband services any place any time as the rollout of the National Broadband Network (NBN) ramps up. Malone also noted the release of NBN Co’s business plan earlier this year which shed some light on what an NBN environment will mean for the ISP.

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