Special Report: The momentum is a by-product of strong execution in the management team’s growth-by-acquisition strategy.

For cyber security service provider Vortiv (ASX:VOR), the decision to enter the market for fast-growing industries via acquisition has paid off handsomely in 2020.

The company released its preliminary financial report for the June financial year on Friday, with annual revenues on track to increase to $11.5m – a gain of 98 per cent from the year prior.

Reflecting strong margins in its business model, that top line growth is also expected to flow through to net profits of $1.4m.

Markets responded positively to the announcement as shares climbed by more than 10 per cent to end the week.

Speaking with Stockhead, Vortiv CEO Jeffrey Lai said the result was evidence of the company’s ability to execute on a pivot in strategy and generate value for shareholders.

He highlighted strong operating results for Vortiv’s two key acquisitions — cybersecurity platform Decipher Works (acquired in August 2017) and cloud and cloud security service provider CloudTen (acquired in February 2019).

“Both companies have performed well over the COVID-19 period. We haven’t lost any clients and revenue has continued to increase,” Lai said.

By sector, both cybersecurity and cloud computing have seen unexpected tailwinds from the pandemic, amid the mass shift to work-from-home solutions. And Lai said current activity levels placed the business on track for a “record quarter” of revenue growth in June quarter.

Lai said the company also benefited from its strategic focus on larger clients such as financial institutions and government departments, which were often more resilient during a downturn.

Looking ahead, Lai said he was excited by the prospect to expand profit margins in the 2021 financial year, now the hard work had been done in acquiring and integrating its target companies.

“The way we look at the strategy for the next 12 months is, we want to grow the organic businesses by 25-30 per cent,” Lai said. “And we think that top-line growth will feed into similar growth in profits, because the investments have been made and we’ve built economies of scale.

But while the business is positioned to extract additional value from its organic growth channels, Lai said it wouldn’t neglect its areas of core competency – looking for acquisition targets to integrate and add value.

“If you look at the growth trajectory over the last three years, we’ve really transformed the business,” Lai said.

“Through smart acquisitions and improving performance we’ve turned it from a loss-making enterprise to a company with over $10m in annual revenues. And we’ve done that with minimal dilution to shareholders.”

Lai said Vortiv had only expanded its equity base by around $6-7m during that time – funds used to acquire the new businesses that are now driving profit growth.

“So I think we’ve demonstrated the track record now. And because of where we are today, it’s easier for us to appeal to an acquisition target because not only are we a player in the market, but we also have customers to bring to the table,” Lai said.

“With that platform we can attract potential targets and pitch them a strong synergy story.

“The hard yards have been done, so now the goal is to continue to build on that momentum.”

This story was developed in collaboration with Vortiv, a Stockhead advertiser at the time of publishing. This story does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.

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