With its return to profitability, Webcentral is primed for a big year of growth as M&A activity heats up
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The company’s return to profitability coincides with a number of major strategic initiatives in the year ahead.
For internet services platform Webcentral (ASX:WCG), FY1 marked a major turnaround for the business following the strategic acquisition by 5G Networks (ASX:5GN) last November.
In light of the ownership change and a number of key operational changes, the company released its preliminary final report for the 18 months ended June 30 this morning.
While revenues for the six months to June 30 held steady at $27.7m (up 6%), the results clearly demonstrated the operational efficiencies WCG has implemented since the acquisition.
Core earnings (EBITDA) for the period surged by 391% to $6.3m, accompanied by a similar increase in EBITDA operating margins which rose to 22.9%.
The by-product of that was an almost three-fold increase in operating cash flows, which rose by 176% to $7.3m.
And the results were reflective of strong execution by 5GN’s management team, which stated its intention to leverage WCG’s existing customer base of more than 330,000 SME clients, focusing on cost efficiencies to return the company to profitability.
With strong underlying EBITDA and cashflows now achieved, Webcentral is positioned to capitalise in what promises to be a busy year in FY22.
Highlighting WCG’s recent news flow was its marquee merger announcement with 5GN, which will see the two companies combine to form an ASX 300 business that generates almost $100m in annual revenues with multiple cross-selling opportunities.
“Webcentral is one of the top three domain providers in Australia and 5GN is the largest Australian-owned operator of fibre networks, cloud and data centres,” WCG said.
The strategic rationale is to leverage the strength of both companies; WCG’s customer base and web-hosting platform combined with 5GN’s leading data centre platform, which comprises 70km of fibre connections to capital city data centres and a 900 terabyte cloud capacity.
With recommendations from independent board committees from both companies to proceed, the merger – which will see Webcentral acquire 100% of the fully paid ordinary shares in 5G — is progressing well into the new year.
The combined group has also submitted a takeover offer for IT infrastructure business Cirrus Networks (ASX:CNW), priced at 3.2c per share.
Earlier this week, Cirrus advised the market that its board still assessed the takeover offer as too low, and said it would be open to negotiate the granting of due diligence procedures in the event that WCG/5GN upped its price.
For now, the offer remains live until mid-September, when an independent expert’s report on the fair value of CNW shares is scheduled to be submitted.
With a busy year ahead, Webcentral’s FY21 results today show the company is well positioned to drive growth through organic synergies as well as M&A opportunities, as it builds to a position of market leadership in IT infrastructure and internet services.
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.