$30m spend-up on acquisitions

$30m spend-up on acquisitions

ASX-listed IT services firm UXC plans to spend at least $30 million acquiring IT companies in Australia this year, capitalising on the poor performance of its competitors.

UXC, formed by the merger of Utility Services Corporation and Davnet, reported a staggering 276 per cent growth in revenues for the fiscal 2003 year, recording profit after tax of $6.67 million.

UXC chairman Geoff Lord disagrees with the assertion that the positive results indicate a general strengthening in the local IT industry.

“Consulting is picking up — so people are starting to look at projects, but the capital expenditure associated with actually going ahead with the project has not picked up yet,” he said.

Instead he attributes the growth to UXC’s capacity to improve its operations at the same time that its competitors have been faltering.

In the consulting area, Lord said many competitors had separated — or were separating — their auditing and consulting operations and selling business units off to avoid conflict of interest.

Lord said UXC had capitalised on the confusion this caused in the market.

In the software area, Lord pointed to the management and financial performance issues that were affecting the likes of KAZ, SMS and Solution 6. The same applied to the infrastructure (voice and data) area, he said, citing the struggling National Telecoms Group as an example.

The consolidation in the market was yielding UXC considerable market share, Lord said.

For this growth to continue, UXC has committed $30 million this year into funding the acquisitions of yet more small IT companies.

“We are continuing to look for small bolt-on acquisitions that fit our model,” he said. “And if a large player comes onto the market, we will look at it.”

ARN has learned that the company is in discussions with a prominent networking reseller, but Lord refused to be drawn on such speculation. “We will release details of any acquisitions once the deal is finished,” he said.

Lord said UXC, with $17.7 million in cash and investments on the balance sheet, was in a unique if not unusual position for an ASX-listed technology firm.

“We are still debt free, and that is unusual,” he said. “We are paying dividends, and that is unusual. We are growing rapidly at the moment, again unusual. The most unusual thing — we are a business run by business people, not technology people.”

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