Over the Wire’s post-tax profit continues to slide

Over the Wire’s post-tax profit continues to slide

Revenue was propped up mostly by its acquisitions over the last six months.

Credit: ASX

Publicly-listed telecommunications services provider Over the Wire has posted another decline in net profit after tax (NPAT), which fell by 23 per cent to $1.8 million, during the six months ending 31 December 2020.

This is down from $2.3 million in the same period last year, which declined by 27 per cent, according to a financial report submitted to the Australian Securities Exchange (ASX). It also follows its FY20 results, which saw NPAT drop by 50 per cent, to just over $5 million, as reported in August

Earnings before interest, tax, depreciation and amortisation (EBITDA), however, fell in the top end of its guidance, rising 28 per cent to $10.5 million for the period. 

Revenue was up, an increase of 17 per cent to $50.3 million, which was largely attributed to the contribution from its acquisitions of J2 Australia Cloud Connect for $36 million in August, which has offices across Sydney, Brisbane and Auckland, as well as the Brisbane-based cloud hosting company Digital Sense in an October deal worth $27 million.

Recurring revenue was also up by 25 per cent year-on-year to $17.9 million, representing more than 90 per cent of Over the Wire’s total revenue. The bulk of this growth was due to a 71 per cent increase over the period in its voice product line to $16 million.

Also seeing growth was its hosting and security and services businesses, which recorded recurring growth of 54 per cent to $8 million, and 34 per cent to $4.1 million, respectively.

Meanwhile, data networks recurring revenue took a slight hit, declining by 6 per cent to $17.9 million.

Although COVID-19 played a significant role in Over the Wire’s FY20 results, the pandemic had a minimal impact on the business in the following half year.

“We have worked with a number of customers over this period as they have looked to consolidate and re-assess their data and voice requirements going forward,” the report noted.

The company has also reverted its extended payment terms back to standard terms to its customers that were affected during FY20, which has resulted in an increase in cash received during the half year.

Michael Omeros, Over the Wire managing director, said its results, particularly its second quarter of its financial year — it’s most successful quarter to-date — has left him feeling optimistic about the provider’s upcoming half year.

“The strength of our current sales pipeline and the orders  being provisioned from last quarter, our most successful quarter to-date, gives us confidence of a  second half result in line with our expectations,” he said.

This, the provider claimed, has placed the provider to deliver further organic growth, as well as provide the opportunity to look at further accretive acquisitions.

Over the Wire also said the businesses it acquired during the half year are expected to make a “significant contribution” to its future results.

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