Volante: services growth of $52m over two years

Stan Beer
Friday, 27 January 2006 06:27

IT Industry - Listed Tech

IT services and products company Volante Group Limited (ASX:VGL), in the wake of its announced South Australian Government services contract win, has projected that its annual services revenue will grow by nearly $52 million over the next two years.

Last week Volante was selected as a preferred tenderer for the South Australian Government's Distributed Computing Support Services (DCSS) procurement in a deal estimated by industry sources to be worth $100 million in services over the next five years. The deal is also expected to add between $15 million and $25 million to Volante's bottom line over the five year period.

In its targets statement to the ASX on 25 January, Volante said it expected services revenue growth from $103.9 million in FY 2005 to $119.6 million in FY 2006 and $155.7 million in FY 2007.

According to Volante Chairman, Robin Crawford, the projected figures have effectively put paid to any suggestion that the company will accept Commander's hostile take-over bid lodged on 23 december 2005.

'Services revenue is forecast to grow by close to 50 per cent from $103.9 million in FY 2005 to $155.7 million in FY 2007. Group EBITDA is expected to grow at a compound annual growth rate of 12.0 per cent per annum with NPAT growing 15.6 per cent per annum between FY 2005 and FY 2007.

'In light of all of these factors, Volante directors, who collectively own just under four per cent of Volante shares on issue, do not intend to accept the $1.01 Offer from Commander for any of these holdings,' Mr Crawford said.

To underline the point, Volante tabled an "independent experts report" in its targets statement prepared by Lonergan
Edwards & Associates Limited, which valued Volante's shares at between $1.27 and $1.44 each or between 26 per cent and 43 per cent more than the $1.01 per share being offered by Commander. According to Volante, Lonergan Edwards found Commander's Offer to be neither fair nor reasonable and that almost 80 per cent of Volante's value relates to the Services business while the Product Solutions business contributes only 20 per cent.

Volante Group Managing Director and CEO, Ian Penman, said: 'Volante is now a very attractive business, with a high degree of strategic value. This value is not recognised in Commander's offer. Following substantial investment and corporate restructuring and a significant improvement in customer satisfaction, Commander is obviously trying to buy Volante 'on the cheap'.

'The Managed Services market is a 'tough nut to crack'. With a lot of hard work and expense, Volante is now a strong competitor in this high value market. This is most recently evidenced by last week's announcement regarding our selection as a preferred tenderer on the South Australian Government's extensive server fleet maintenance and support services contract,' Mr Penman said.

According to Mr Penman, Volante is on the cusp of a strong and sustainable earnings uplift, based on the benefits of cost management initiatives, improvements in systems and processes, and increased revenues from long-term Managed IT Services contracts with both major private and public enterprises.