iiNet fesses up to poor forecasting and flawed book-keeping

Stuart Corner
Monday, 01 May 2006 11:46

IT Industry - Strategy

See also:
iiNet makes $15M DSLAM gamble
iiNet on track for 100,000 DSLAM customers

ASX-listed ISP, IINet, whose shares have been suspended from trading since 20 April, has told the ASX that it got its forecasts wrong and made 'clerical errors' in its revenue recognition.

In a statement iiNet said: "The company’s financial performance in the March quarter has been well below expectations. This situation was not identified earlier due to deficiencies in forecasting and clerical errors in revenue recognition that have only recently emerged. It has become clear, however, that expected EBITDA for the 2006 financial year will be significantly below the company’s guidance to the market.

In an investor presentation in March, the company gave full year guidance on revenue, EBITDA and NPAT before amortisation of $247m, $40.1m and $13.6m respectively. Actuals for the half year to 31 December were $120m, $16.4m and $6.0m. These were up or spot on against guidance of $118m, $16.4m and $5.8m.

iiNet said it was working with its auditors Ernst & Young, to investigate the matter. "This work is well advanced and also involves a thorough analysis of the variances between the guidance and the actual financial results in the March quarter." It described the issues as "material" but insisted "the underlying business remains strong".

"Operationally, customer numbers and service delivery continue to track well. ADSL, VoIP and telephony growth is higher than expected. Churn of fixed monthly dial up accounts and call centre performance have improved. The New Zealand business (iHug) is performing well and is expected to produce an EBITDA result for the full year above the level included in the guidance."

iiNet says it expects to resume trading during the week commencing 8 May.