Inabox acquires Neural to build Cloud portfolio

Purchase adds base for Cloud play ahead of future acquisitive growth

The Inabox Group (ASX:IAB) will purchase the business and assets of Brisbane-based Neural Networks Data Services for $A350,000 from its cash reserves in a bid to build its Cloud play.

Neural is a provider of wholesale Cloud and VoIP products. Its communications portfolio spans voice and messaging, while its data and servers services include co-location, Cloud and connectivity.

The agreement will see Inabox attain more than 100 wholesale customers which include ICT and managed services providers, Neural’s proprietary customer portal, and other back-of-house operations.

According to Inabox managing director, Damian Kay, Neural was pursued to meet demand for Cloud services among small to medium-sized enterprises (SMEs) which are its customers’ end users.

“The acquisition of the Neural business sets us up well to take part in the growth of these revenue streams… [and] complements our acquisition of iVox in 2013.”

"Eighty (80) per cent of our revenues are from SME end users. That market in the Cloud space is growing very fast. For our services providers to be sustainable with an over-the-top Cloud play is vital."

The purchase is scheduled for completion in early July, at which point Neural founder, David Swinton, will join Inabox as general manager for Cloud; the role will see him continue to manage the Neural business which will retail its brand under the Inabox umbrella.

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"This is a strategic acquisition," Kay said. "It adds revenue, profit, earnings per share (EPS), but that's marginal compared to our business."

"What it really adds to the business is knowledge and technical expertise so we can take Neural's Cloud products through the rest of our channels."

The agreement will see Inabox attain more than 100 wholesale customers (ICT and managed services providers), Neural’s proprietary customer portal, and other back-of-house operations.

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Inabox will also employ three or four of Neural six staff, with the remaining to be made redundant.

According to a statement, Inabox expects the deal to be earnings per share (EPS) accretive during fiscal 2015 (before transaction costs and amortisation of acquired tangibles) irrespective of whether the purchase price is paid wholly in cash or partially in equity.

Moving forward, Kay said Inabox will continue to chase acquisitive growth targets. He said the Group is in talks with a number of wholesale services providers and small Cloud companies; these will be smaller players which Inabox will effectively take out of the market if buys occur.

In May, Inabox said it expects to finish the second half of fiscal 2014 with no less than $A850,000 in net profit before tax.

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Tags MSPwholesaleTelcoinaboxacquisitionInabox GroupIABservicesEPSDavid SwintoncashCloudfinancialsvoipASXtecloTelecommunicationsNeural Networks Data Servicesmanaging directorDamian Kay

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