Telecoms and Internet services reseller, M2 Telecommunications, has singled out wholesale revenue as a key contributor to its strong financial performance over the past year.
According to its results M2’s total revenue rose by 149 per cent to $109.2 million in the year to June 30, while pre-tax earnings (EBIT) were up 145 per cent to $7.9 million. Net profits over the same period also doubled and reached $5.2 million.
Managing director and CEO, Vaughan Bowen, said its wholesale division was the stellar performer with 420 per cent top-line growth over the 12-month period. M2 supplies telco services to smaller independent telcos and ISPs. The wholesale division was bolstered by M2’s acquisition of Commander’s wholesale arm, Unitel, in February.
In just two years wholesale has grown to represent about two-thirds of M2’s business, Bowen added.
Last October M2 also purchased ASX-listed Orion Telecommunications (formerly Southern Cross Telco) to expand its customer-facing retail division. Bowen said this gave M2 access to a well-established contact centre and a platform for expansion. M2’s retail business focuses on small businesses with up to 25 staff.
But despite claiming to have integrated the two acquisitions successfully, Bowen stressed the importance of organic growth.
“Our business grew $66 million year-on-year but the two acquisitions accounted for less than $30 million of that – so a good percentage of our growth was organic,” he said. “If your underlying business isn’t growing, acquisitions can just leak away.”
Bowen said it would continue to look at acquisitions that “bolted on” to its existing structure and confirmed it would be participating in the Commander assets sale.
“There are a couple of Commander assets that would fit our business… but we’re conscious that acquisitions have to be the right fit,” he said. “If we bought a whole business it could upset the apple cart – Commander had this difficulty when it brought Volante.
“Both of our businesses [wholesale and retail] now have a complete product set, management teams and back-end resources, so any acquisition will be on the basis of finding a customer base to bulk up our business and get economies of scale.”