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​Organic growth sole revenue booster in first half: M2

M2 Group, which operates telecommunications providers Dodo, iPrimus, and Commander, has pointed to organic growth as the sole contributor to its 8 percent revenue growth in the first half of the fiscal year.
Written by Leon Spencer, Contributor

M2 Group, operator of telecommunications providers Dodo, iPrimus, and Commander, and energy provider Engin, reported an 8 percent increase in revenue for the six months ending December 2014 to AU$546.2 million, compared to the same period the prior year, according to its latest financial results published on Monday.

The company's earnings before interest, tax, depreciation, and amortisation (EBITDA) were up by 14 percent for the half, to AU$86.1 million, while net profit after tax came to AU$38.5 million, a 25 percent increase over the previous year's result.

For the year to date, the company added a total of 61,000 new services, 26,000 of which were broadband services, which now tally 508,000 for the group, followed by 14,000 new energy services.

The company said that both its consumer and business segments saw subscriber growth during the period. For the half year ending December, M2 reported an increase of 23,000 fixed voice services compared to the prior quarter, ending in June 2014, to 796,000.

It also reported 26 percent growth in its broadband services. However, it recorded a 2 percent drop in its number of mobile services, to 223,000. Overall, M2 estimated that it saw a 3.7 percent organic growth in services in operation during the six-month period.

The company stressed to shareholders in its investor interim result presentation (PDF) that the new services it added are proof that the group's financial performance is being driven solely by organic growth, rather than through acquisitions, which include Dodo in 2013, and iPrimus in 2012.

"Organic growth has been the sole contributor to revenue growth in the half," M2 told investors in a statement (PDF). "Profit has increased as a product of this organic growth, as well as synergies enacted in the previous fiscal year, and a dedicated program of internal improvement."

This assertion echoes comments made by M2 chief executive officer Geoff Horth in July last year. He said that the 71,000 new post-paid services it added in the second half of the financial year ending June 2014 was evidence that the group's two consumer internet service providers Dodo and iPrimus are able to grow their customer base organically.

"We're growing broadband in every category. It's a really strong growth category for us. NBN is a small part of our total growth story, it's largely ADSL2. It's a combination of on-net and off-net. A little bit of it is because there is growth in the broadband market, but partly it is taking share as well," said Horth at the time.

It seems that the National Broadband Network (NBN) will continue to play second fiddle to the company's focus on expanding its ADSL2+ customer base in the near future, with Fairfax Media reporting that Horth does not expect the NBN to become a serious mainstream service for the group's ISPs until at least 2016.

However, M2 announced that it had connected a further six NBN Points of Interconnect during the half, bringing its total number to 44.

Meanwhile, M2 continued to remain in line with its expected capital expenditure expectations over the period, which ran at around 2.5 percent of its revenue, or AU$13.9 million, up from the previous year's CAPEX of AU$9.7 million.

Horth said in a investor presentation that the group's rollout of a further 40 Dodo kiosks around Australia was a "significant body of work". The rollout brought its tally to 60 kiosks in shopping centres across Queensland, New South Wales, and Victoria.

During the half, M2 also launched its Dodo TV service with Fetch, which it said had increased its bundled package opportunities.

Looking forward, M2 told investors that it wants to continue leveraging technology to reduce costs and enhance customer experience, expand its NBN footprint, progress its pay TV product delivery, and accelerate its Dodo Kiosk rollout.

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