WebCentral is targeting FY22 EBITDA growth of more than 50% as it scales across all of its key verticals.

WebCentral (ASX:WCG) is heading into 2022 with major momentum, following its merger with 5G Networks (ASX:5GN) which was completed earlier this week.

And to provide some details on its near-term outlook, the company released an investor presentation on Tuesday which was well received by investors.

In terms of its business fundamentals, the combined group heads into next year with a stronger balance sheet comprising almost $100m in assets, as well as a significant improvement in its cash position which now totals more than $17m.

Accompanying the presentation, WebCentral CEO Joe Demase spoke with Stockhead to provide some extra context around what the company is looking to achieve next year.

“I think those key points (from the merger) are relevant – we’ve increased our net assets and cash while also reducing debt,” Demase said.

“So it’s really simplified the structure. We’ve got 330m shares now on offer, it’s one company and now we can focus on targeting the customer bases in each of those market segments.”

 

Strength in numbers

By integrating WCG’s 330,000 strong customer base, the group now has an even mix of large corporate and government clients (50%) and SME clients (41%), which together accounted for more than 90% of FY21 revenues.

Through its existing organic growth channels, WCG expects to grow EBITDA by more than 50% in 2022 – from $18.3m to ~$29m.

“It’s a good launching pad for us to sell and promote other products into that combined base, then go out and expand new business lines,” Demase said.

“We’re still on the lookout for M&A opportunities but that’s the growth we think we can drive just from our existing business.”

The company is also focused on driving improved margins by cross-selling across its networks, which will include bringing web-hosting customers onto the company’s existing data management infrastructure.

“The more customers we bring onto our infrastructure, the more we drive margin growth so there’s a real opportunity there to fill up our existing capacity just through that combined customer base,” Demase said.

In addition, WCG is already generating pre-paid cash income from its web-hosting customers who have paid to switch their domain names to .au in March next year.

“What we do is presell the .au domains, but can’t recognise revenue until April once the new domains are released,” Demase explained.

“But we’ve collected the cash for those April subscriptions in advance and we’ve already processed $500,000 worth of sales,” he said.

Elsewhere, the WCG management team is awaiting the next set of results from its M&A target Cirrus Network Holdings (ASX:NCW), in which it has now built an 18.4% stake.

“We still really like the business but don’t have access to the information to get a good handle on it, so we’re not prepared to offer higher (takeover) price until we see that information,” Demase said.

 

Scaling up

It adds up to an exciting year ahead for the combined business, as it leverages its increased size to scale into an already fast-growing market.

“I think one of the features of the Web 3.0 movement is that new markets are opening up around decentralised data management,” Demase said.

“Private cloud providers like ourselves are decentralised from all centrally-managed networks, which means clients can manage their data without being centrally controlled – either nationally or internationally,” he said.

Looking ahead, the next step for Demase and the WCG management team is to build the business into an ASX300 company.

“We’ve got aspirations to do that, and performance rights for our directors are linked to that and have been signed off by shareholders,” he said.

“Once you start getting close to the ASX300, it often means people really start taking notice of what you’re doing and start acquiring the stock.”

“So over the next 12 months that’s a key target we’d like to achieve.”

This article was developed in collaboration with WebCentral, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.

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