Webcentral sinks but 5GN rockets before companies merge
Webcentral has announced its 2021 financial results, following a whirlwind year-and-a-half filled with restructuring activities and the settlement of a major dispute.
For the 18 months ending 30 June 2021, the company reported an after-tax net loss of AU$61 million, a further 33.7% tumble from the AU$46 million net loss recorded during the 2019 financial year. The loss included the discontinued operations of its Enterprise business of AU$1.57 million.
Revenue came in at AU$78.3 million, 6% lower than the $83.6 million reported during the 2019 financial year, with revenue achieved from solutions, hosting, and services contributing AU$52.3 million and registration revenue adding another AU$35 million. The total, however, was offset by a reversal of revenue of AU$9 million that was associated with the settlement of a customer dispute.
Underlying earnings before earnings before interest, tax, depreciation, and amortisation (EBITDA) scraped in just under AU$12 million for the 18 months.
The company described the “improved” performance as a reflection of significant changes that occurred during the period, including the acquisition of a controlling interest in the company by 5G Networks (5GN) in October 2020, the settlement of a customer dispute, and the disposal of the Enterprise and Netalliance businesses.
“The group’s revenue has been stable since the change of control in October 2020 and the group is confident that revenue growth will return across all four core services of domains, hosting, email, and digital marketing as these short-term issues are resolved,” the company said.
“The non-recurring restructuring activities that led to the loss for the period are now complete and the business has recorded an operating profit and has generated positive operating cashflows each month since the change of control by 5GN in October 2020.”
At the same time, 5GN reported for the 2021 full year before acquisition and non-recurring costs, it achieved 77% year-on-year revenue growth to AU$87 million, and EBITDA of AU$15.5 million, representing a 144% growth compared to the prior year.
Of total revenue achieved by 5GN, the company’s cloud business chipped in nearly AU$28 million, its domain business AU$15 million, managed services another AU$13.4 million, hardware AU$11 million, network and voice was just over AU$9 million, and data centres at AU$8.5 million.
“The completion of the Webcentral takeover provides the group with significant organic growth opportunities leveraging Webcentral’s 330,000 customers through their online sales channel, offering 5GN’s suite of cloud, network, and managed services,” 5GN managing director Joe Demase said.
Looking ahead, 5GN said it hopes to achieve revenue that exceeds AU$110 million and an EBITDA margin of more than 20%, as it continues to help customers to migrate onto its networks and cloud, as well as plans to take advantage of the launch of .au domains.
The release of the Webcentral results comes days after the company updated the market on its proposed takeover of Cirrus Networks, of which the company is a major shareholder.
It noted that Cirrus Networks had already indicated it would reject Webcentral’s bid of 3.2 cents a share on the basis that it undervalued the company. In Webcentral’s defense, it believes the offer it made “fully values” Cirrus and implies a market capitalisation of AU$29.7 million or 15 times EBITDA, which is “well beyond conventional market pricing” for a company such as Cirrus.
Webcentral also added that it attempted to contact Cirrus’ advisers Azure Capital to gain access to due diligence, but said the approach was rejected.
However, on Monday, Cirrus Networks said it “strongly rejects” Webcentral’s claim that its attempts to “constructively engage” with Cirrus were rebuffed, saying the contrary occurred.
“A Cirrus board director and a representative of Azure Capital invited Webcentral to directly contact Cirrus chairman, Mr Andrew Milner, on 1 August and 5 August 2021 respectively. Neither invitation was accepted or acted upon by Webcentral,” Cirrus stated in market update.
“On 23 August 2021, an invitation was again put to Webcentral via a letter to its lawyers. The same letter offered access to Cirrus’ due diligence information, should it be formally requested by Webcentral.”
The Cirrus board added it believes that Webcentral’s actions are “opportunistic and disingenuous”.
Also on Tuesday, software firm Dug Technology reported its full-year results. It ended the year with after-tax net loss of $15.7 million, almost a 40% difference to last year’s $11 million after-tax net loss. Despite total revenue of $41.4 million, the company had nearly $31 million worth of employee benefits and just shy of $12 million in other expenses, including IT related costs, facilities, consultants, and professional fees.
The company also detailed that unlike other parts of its business where subdued activities resulted in declines, revenue earned in the company’s high-performance computing as-a-service division increased by $1.6 million to $2.68 million compared to the prior year. Its software business saw revenue decline by approximately $1.1 million to $5.16 million, and revenue for its service business came in $7 million lower than last year to $30.6 million.