Local providers serve it up to multinationals

Local providers serve it up to multinationals

Flurry of mergers and acquisitions fuel massive growth

Publicly listed Australian service providers are outperforming their multinational competitors, according to a leading analyst.

Speaking at the recent IDC Directions summit in Sydney, corporate advisory services team member, Bob Cowley, said a flurry of mergers and acquisitions were fuelling massive growth for Australian-listed IT companies. This growth was in striking contrast to global providers with Australian subsidiaries, which saw almost neutral revenue growth and declining pre-tax profits.

The findings are based on a study of 20 leading publicly listed Australian companies and nine global companies conducted by IDC in November last year. The report split local companies into four categories - services, software, information providers and recruitment - and was based on the financial year to June 30, 2007.

On the services side, the analyst group found Australian listed companies reported an average of 40.6 per cent revenue growth and 61 per cent pre-tax profit growth. Nine local companies were mentioned: CPT Global, Oakton, SMS, DWS, ASG, CSG, UXC, Data#3 and Hostworks.

Seven software companies were included in the report including Technology One and Bravura. The average revenue growth in this category was just under 45 per cent, while pre-tax profits grew 17.9 per cent.

"The revenue growth shown by Australian companies is extremely strong. This has been driven by organic growth and acquisitions," Cowley said. "What's also telling is that pre-tax profits growth has run alongside the revenue growth.

"In contrast, global companies showed just 1.3 per cent revenue growth and a 12.9 per cent decline in pre-tax profit growth.

"What this says is local companies are being quite successful, are growing rapidly and holding profits and retaining that profit formation which becomes new capital to invest in the business, along with dividends to shareholders."

See next week's ARN for more on this story.

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