Amaysim reports AU$12m net profit after Vaya, AusBBS purchases

Telecommunications provider Amaysim has published its full-year results for 2015-16, revealing a net profit after tax of AU$12.31 million, down 48.7 percent from the AU$24 million reported a year ago due to its acquisitions of Vaya and Australian Broadband Services (AusBBS).

Amaysim's earnings before interest, tax, depreciation, and amortisation (EBITDA) grew substantially, however, up 79.3 percent from AU$14 million to AU$25.1 million, as did its revenue, which increased by 19.3 percent, from AU$212.6 million to AU$253.5 million.

Average revenue per user (ARPU) fell by 88 cents, from AU$26.12 last year to AU$25.24 per month as of June 30, 2016. According to CEO Julian Ogrin, the falling ARPU was a result of the company's dual-brand strategy to target both the sub-AU$30 market and high-end market.

"The dual-brand strategy obviously is a big part to our success, and it's now just getting started," Ogrin told ZDNet.

"The reason why we embarked on the dual-brand strategy is there's two battlegrounds: There's a sub-AU$30 APRU category, which we figure is in the range of 20 to 30 percent of the Australian market, and they come with a different set of drivers, very wallet conscious, but they still want to use data, but obviously it's about managing your wallet at the same time.

"Then you have the higher-ARPU customer segment that is all about the latest and greatest, lots of data, high data usage, very much high users of their smartphone across data, voice, and text, so we now tap into that with those two great brands."

Net assets stood at AU$32.3 million as of the end of the financial year, while its total subscriber base hit 966,000, up 34.5 percent from 718,000 customers this time last year. In the last two months, however, it has added approximately 19,000 more customers for a total of more than 985,000 customers as of August 18.

Acquisition expenses accounted for AU$1.7 million in spending over the year, with network expenses amounting to AU$168.1 million.

Calling it a "solid result", Ogrin added that it proves Amaysim's "ability to continue to acquire new customers with an appealing, competitive, and profitable suite of products, and to improve key metrics such as online customer engagement, churn, and the profitability of our subscriber base, while managing our costs".

"It really comes back to focusing on customer experience and letting the brand drive the growth we've enjoyed over the last five years," Ogrin said.

"Our strong free cash flow enabled the successful acquisition of Vaya, payment of a maiden interim dividend, announcement of a final dividend, and accelerated broadband strategy. We look forward to completing our acquisition of Australian Broadband Services in late August 2016."

Amaysim acquired mobile virtual network operator (MVNO) Vaya for AU$70 million in January via AU$5 million in cash, AU$15 million in Amaysim scrip, and assumption of Vaya's AU$50 million liability to Optus.

The Optus debt will be paid through Amaysim's cash flow over a 24-month period ending January 2018, and as such should not impact Amaysim's net profit next financial year.

Ogrin called Vaya the "icing on the cake" for Amaysim's offerings.

Last month, Amaysim also announced its acquisition of AusBBS in an effort to enter the National Broadband Network (NBN) retail market.

"We believe the timing is perfect; there is a forced one-off migration event that's going to happen in Australia over the next three years ... when we launch, we will launch ADSL and NBN, but naturally, we will want to capture the benefits of the migration to NBN and the switching opportunity that's going to exist," Ogrin told ZDNet.

"How we're going to do it -- we always said we want to bring the Amaysim philosophy into fixed broadband. We're a technology leader, our success is built on our technology platform. We provide an online disruptor experience not unlike Netflix, not unlike Spotify or Uber, and for us it's download the app, we're the telco in your pocket, and we want to drive that experience into fixed broadband as well."

The chief executive added that Amaysim plans to differentiate its NBN offering by providing customers with assistance during their broadband switchover, including in completing tasks like finding electricians.

"It's not just about being online, but it's just about addressing the pain point of the needs of the customer," he explained.

Amaysim also wants to combine its digital customer experience with AusBBS' cloud-based platform.

"We want to be digitally led, and one of the things I would say is what AusBBS brings is they bring the underlying technology enabling platform which does all the web flow management in an automated fashion, which talks to all the different people that need to be communicated to in a scalable fashion," Ogrin said.

"What we bring is our customer experience layer, the UX that sits over the top ... we have an in-house web development team, we will obviously have our team that will work on a user experience that can sit over the top of that platform."

The acquisition, which Ogrin says will be completed next week, will see Amaysim pay AU$1 million in cash, AU$1.5 million in shares, and another AU$1.5 million in shares one year after completion, which will be subject to the successful integration of AusBBS' proprietary platform into Amaysim's business.

Once it is complete, Ogrin said the two companies will begin working on its market strategy encompassing product, brand, experience, and integration of AusBBS' network into the Amaysim business.

Amaysim in February reported a half-year net profit of AU$681,000, a year-on-year drop of 96 percent, on revenue of AU$117.5 million and EBITDA of AU$12.58 million off the back of its acquisition of Vaya and initial public offering (IPO) in June last year.

Both Macquarie Research and Goldman Sachs have predicted a "solid growth trajectory" for Amaysim next year.