Amcom mid year results (AMM)

This week Amcom announced their half year results to the market. Key points:

Revenue up from 29m to 41m 43%
NPAT up from 7.6m to 9.9m 30%
Final dividend increased from 0.4c to 0.6c up 50%

Much of these results are flowing on from the EOFY10 results Amcom posted in which earnings increased by 42%. It is also worth noting that while the business is growing, EPS was flat at 1.4c. Importantly, this is our first look at the results of the IP Systems acquisition and the performance of the NT Government contract.

Firstly on the IP Systems acquisition, this new subsidiary is already showing benefits from integration, with revenue from this business unit increasing 30% by cross-selling existing data clients. For now at least, my skepticism appears to be misplaced, as the rapid uptake of IP Systems services should be an important source of growth when Amcom’s data business begins to mature.

The NT Government data network has already been rolled out, and since signing the original contract, Amcom have written 500k worth of new orders. Nextgen’s competitive backhaul to Darwin should be complete by September this year, helping Amcom reduce their wholesale network costs to Telstra. As discussed in my previous post, Amcom has bucketloads of opportunity in Darwin due to the lack of competition in this market.

It’s obviously still early days for the partnership with Bluefire, but there is significant potential for Amcom to write Cloud business with existing customers, due to the variety of cloud offerings and the SaaS nature of the Bluefire solution.

One negative is the performance of the Amnet consumer DSL business, which is being squeezed with both revenue and EBITDA decreasing. It would make sense for Amcom to offload this business to iiNET and focus on their Enterprise/Government clients instead.

The half year report came with an upgraded earnings guidance estimating Amcom’s year-end NPAT at 21.6m, however there are opportunities for further upside this FY in growth of the NT business, increased services through IP Systems, and the uptake of cloud services with Bluefire. The dividend increase demonstrates confidence in future earnings. With a PE ratio of 10.5 and plenty of room for continued growth, I currently have no plans to exit my position in AMM.