M2 Telecoms reports record profit

Stuart Corner
Monday, 29 August 2011 10:08

IT Industry - Listed Tech

Telecommunications services provider M2 Telecommunications Group (ASX: MTU) has reported a record net profit after tax (NPAT) of $27.6m (up 72 percent on the previous year) and record EBITDA of $48.3m (up 54 percent) on revenues that were five percent up, to $426.8m.

The company has also issued bullish guidance for FY12, predicting EBITDA of $58m - $62m and NPAT of $30m - $32m. However it expects revenue to fall by about six percent, to $380m - $420m because of its decision to eliminate a sizable volume of low margin revenue sources that were present in FY11.

The company acquired the customer base of its wholesale customer Edirect in April 2011 and has eliminated a large number of low margin customers that had, through Edirect, contributed $55m to M2 revenues in FY11.

The company said the principal contributors to its FY11 result had been "marked improvements in the underlying wholesale purchasing arrangements, reduced operating expenditure resulting from a range of operational efficiency measures set in place in late FY10 and organic customer growth across both retail and wholesale operating divisions."

I added that significant acquisitions in FY11 - Clear Telecoms business assets and Austar mobile customers in February 2011 and Edirect in April 2011- had been made late in the financial year and as such had made only modest contributors to FY11 earnings.

M2 described its guidance as being "marked growth by any measure and considerably exceeds the average earnings growth being delivered by the industry at large," and said the guidance targets would be achieved through "a conscious decision to invest more aggressively than in previous years into expanding and unifying [our] sales and marketing channels, to take advantage of what is believed to be a unique opportunity to seize additional share of, in particular, the small and medium sized business market and, in doing so, strengthen M2's reach and market presence for the medium to long term."

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