Internet service provider iiNet Ltd’s annual profit fell three per cent, but recent acquisitions and rising customer numbers are expected to drive profit growth in the year ahead.
iiNet’s net profit for the year to June 30 was $33.37 million, down from $34.55 million in the previous corresponding period, due mainly to an unrepeated tax deduction in the previous year.
Revenue increased 48 per cent from the previous year to $699 million, reflecting the first full year contribution from Netspace, which iiNet acquired for $40 million in March 2010.
The company also bought AAPT’s consumer division for $60 million in July last year, and from October will begin moving those customers onto its own network and billing system.
“In terms of profit growth in the next year, obviously we will get a bit more from organic growth, but the main game is about getting costs out of AAPT,” chief executive Michael Malone told AAP.
iiNet added 7,700 broadband customers in the year to June, taking total subscribers to 641,000.
Australia’s largest broadband provider Telstra had 2.4 million fixed broadband subscribers at June 30.
Mr Malone said iiNet had been able to lower the number of customers ending their contracts, and maintained average revenues per user, despite increasing competition in the industry.
“We’re still doing it tough in regional Australia, where Telstra’s charging us more for wholesale access than they are selling it for retail themselves,” he said.
“But in suburbia we have continued to grow.”
The roll out of the national broadband network (NBN) is seen by the company as a long-term growth prospect.
“We are genuinely excited by the increased market opportunities the NBN will bring, doubling the available market for iiNet’s services,” Mr Malone said.
iiNet also announced it would buy back up to five per cent of its own shares with excess cash and existing loans from later this month.
The board considered iiNet’s current share price does not fully reflect the underlying value and potential of the company, Mr Malone said.
The buy back will continue for up to 12 months, and the shares bought back will be cancelled.
iiNet shares gained five cents, or 2.24 per cent, to $2.28 on Monday.
The company declared a final dividend of seven cents, fully franked, taking the full year payout to 12 cents, up from nine cents in the previous year.
