Acquisitions hit Inabox half-yearly profits

Australian telecommunications and IT services provider Inabox has seen its half-yearly after tax profit fall by more than 21 percent, following its acquisition of rival Anittel, and Neural Networks.
Written by Leon Spencer, Contributor

Inabox Group saw a 21.1 percent tumble in profit after tax from ordinary activities, to AU$371,843, from the AU$471,344 it reported for same period the prior year, according to its latest financial results (PDF), published on Monday.

The results also revealed a 3.5 percent drop in revenue from ordinary activities to AU$23.3 million.

The company told investors that its half-yearly earnings were impacted by non-recurring costs related to its acquisition of Neural Networks Data Services, which it completed on July 8 last year, and rival IT, cloud, and telecommunications provider Anittel, which was finalised in early January.

The results reveal that Inabox's acquisition-related costs were AU$363,089 for the six-month period.

The company acquired Neural Networks for a total cash consideration of AU$350,000, including provisional goodwill of AU$20,000, representing the value of "expected synergies" and growth arising from the acquisition.

It was acquired to help grow the group's capacity to provide wholesale cloud and voice-over-IP products, the company said.

Meanwhile, the Anittel acquisition in January was carried out for a cash consideration of AU$500,000, along with 6.15 million shares in the company.

Inabox said that it had now substantially integrated the Neural Networks business, had made substantial progress in integrating the Anittel business with its other operations, and expected continued earnings from the two acquisitions.

"The group looks forward to continuing earnings contribution from its acquired businesses in the coming financial year, and is satisfied that after excluding the non-recurring costs of acquisition, earnings from the group have increased," the company told investors.

Inabox managing director Damian Kay called the first half a "transformative period" for the company, with the new acquisitions accelerating its transition from being a wholesaler of legacy telecommunications services into a "leading supplier of next generation IT, cloud, and communications services".

"We now have 410 active resellers, 1,000-plus direct large SMW, corporate, and government customers, and over 200 staff working from 14 offices around Australia," Kay told shareholders in a statement (PDF). "This creates enormous cross-selling and upselling opportunities, and gives us scope for significant cost savings as we maximise efficiencies.

"While the acquisitions have resulted in some non-recurring transaction costs, which impacted earnings in the first half, we will be a much stronger, more profitable business in FY16," he said.

Meanwhile, Inabox reported earnings before interest, tax, depreciation, and amortisation (EBITDA) for the half of AU$1.09 million, down from its EBITDA of AU$1.13 million for the corresponding period the year prior, and underlying EBITDA of AU$1.45 million, up 28.6 percent from the previous year.

Looking forward, the group expects to see a substantial reduction in operating expenses following the integration of Anittel, with benefits of the restructure expected to be realised and lead to significantly higher earnings in FY16 and beyond.

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