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Acquisitions hit 5G Networks’ financials

Acquisitions hit 5G Networks’ financials

Webcentral, ColoAU and a Brisbane data centre were acquired by the telco carrier over the period.

Joe Demase (5G Networks)

Joe Demase (5G Networks)

Credit: 5G Networks

Telco carrier 5G Networks has taken another hit to its half yearly loss, which increased by 348 per cent, to $2.1 million for the half year ending 31 December 2020, due in part to its wave of acquisitions over the period.

An increase from the loss of $475,00 seen in the first half of FY20, the latest period's loss was impacted by the acquisition and costs incurred by the group for its acquisition of digital services provider Webcentral, as well as other acquisitions totalling $2.6 million and non-cash share based payments expense of just over $1 million.

During the period, it also acquired data centre services and hyper-speed data networks wholesale provider ColoAU in July and a Brisbane data centre in December.

Regardless of the loss increase, the company’s board was “extremely satisfied” with the Webcentral takeover, according to its financial report for the half year.

Its underlying pre-tax earnings (earnings before interest, tax, depreciation and amortisation, excluding acquisition and transaction costs, depreciation and amortisation expenses, share-based payments expense and finance costs) and revenue, however, increased on the positive side, growing by 105 per cent to $6.2 million, and 47 per cent to $37.3 million, respectively.

It should be noted that its results include those of Webcentral from when 5G Networks gained control, which was from 28 October.

5G Networks also saw continued growth in its sales pipeline, with $4.7 million of new and re-signed revenue in the period, as well as continued investment in cloud infrastructure to connect and integrate three cloud zones across Melbourne, Sydney and Adelaide.

From the Webcentral deal, 5G Networks has accelerated its entry into the small- to medium-sized business (SMB) market, gaining access to the digital services provider's 330,000 SMB customers.

Meanwhile, Webcentral will get cloud, telecommunications and managed IT services from Webcentral.

The business relationship between the two companies is also set to expand, with 5G Networks employing Webcentral’s capability for software development for operational improvement and automation across its service delivery platforms.

The telco carrier is also set to develop a comparable digital sales channel to the one used in Webcentral’s portal for the implementation of automation into its own services.

Even with its losses expanding due to acquisitions, the publicly listed company is still looking for future acquisitions, which will be funded from its existing cash reserves with a cash balance of $8.3 million and an additional $1.1 million of available debt.

The results cap off a tumultuous period for 5G Networks and its Webcentral acquisition, with the digital services provider posting a hit to its own revenue for the period, which fell to $31 million, and follows numerous challenges to the acquisition process by financial services firm Keybridge Capital.


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