Amaysim sells energy business for AU$115m and returns to being solely a mobile brand

Subscribers up, but revenue and profitability down as business sells off its energy arm to AGL.
Written by Chris Duckett, Contributor

Amaysim has returned to its mobile virtual network operator (MVNO) roots, with the company announcing the sale of its energy business to AGL on Monday morning.

The all-cash AU$115 million deal will be used to repay AU$53 million in debt, as well as "boost" the mobile business as it seeks a new wholesale network agreement. The company said it has launched a competitive tender to purchase wholesale services once its 2019 agreement with Optus comes to an end.

"The growth of our mobile subscriber base is of great strategic importance as we explore the future supply of wholesale mobile network services," chair Andrew Reitzer, and CEO and founder Peter O'Connell said in a letter to shareholders.

"A larger customer base and proven ability to grow makes us very valuable to our mobile network wholesale partner, Optus, or any future wholesale partner."

To that end, the company increased its number of mobile customer by 24% to 1.18 million at the end of June, however, its mobile revenue was down 6.6% to AU$190 million, and average revenue per user (ARPU) was down 7% to AU$15.23 a month.

"The lower ARPU can be attributed to fewer data top ups given increased plan inclusions, which has reduced our reliance on excess revenue. This has now all but disappeared and accounted for less than 3% of total mobile usage revenue in FY20, hence, to a large degree, this revenue headwind is behind us," the company said in its results.

"We have now weaned our business off any future reliance on revenue attributable to excess usage."

On the energy side, customers were up 2% to 211,000 while revenue was down 1.5% to AU$300 million and ARPU declined 5% to AU$122 a month.

The end result was an overall decline in revenue of 3.3% to AU$491 million, with underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) falling by AU$7.2 million to AU$40 million, and underlying net profit crashing by AU$5 million to AU$1.8 million.

Looking through the lens of new AASB16 accounting standards, the company posted EBTIDA of AU$38.4 million, a AU$5.5 million decline on last year, and improved its net profit from a AU$6.5 million loss last year to AU$600,000 in the black this year.

The sale of the energy business to AGL is set to be completed by the end of September, and will mark just over three years since the MVNO purchased Click Energy for AU$120 million in April 2017.

The company said its energy business was responsible for just shy of AU$88 million in EBITDA during its time at Amaysim.

For its part, AGL said the purchase was in line with recent acquisitions, such as its October 2019 purchase of Southern Phone for AU$27.5 million, that it is using to pursue growth.

"The purchase of the Click Energy business and its connection service provider, On The Move, is another step towards AGL achieving our target of 4.5 million customer services by 2024," AGL managing director and CEO Brett Redman said.

"With AGL's cost to serve already below that of Click Energy's, we believe we will be able to unlock further value as these customers share in further benefits from our continuing investment in automation, optimisation, and digitisation."

AGL said the integration of the company will cost around AU$40 million and will be "modestly accretive" to its earnings.

Elsewhere on Monday morning, Huawei Australia blamed the end of its major sponsorship of the Canberra Raiders rugby league club on the ban imposed on it by Australian government locking it out of 5G contracts.

"The continued negative business environment is having a larger than originally forecasted impact on our planned revenue stream and therefore we will have to terminate our major sponsorship of the Raiders at the end of the 2020 season," the company said.

Huawei will remain on the back of the Raiders' jersey, as well as keep the naming rights of the Huawei Raiders Training Centre.

"We at the Raiders supported Huawei Australia through a difficult period and Huawei supported us through a very difficult time as well," the angriest coach in rugby league, Ricky Stuart, said in a statement.

"Huawei and the Raiders went well beyond simply being a commercial arrangement, we forged a very strong relationship that became very personal and it is one which we will always be grateful for."

For its full year to December 31, Huawei Australia reported net profit was down 78% to AU$6.4 million, from revenue of AU$657 million, which was down 10%.  

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