Inabox Group (ASX:IAB) Managing Director and CEO Damian Kay discusses FY16 results and convergence in telco and cloud services.
Carolyn Herbert: Hello I’m Carolyn Herbert from the Finance News Network and joining me from Inabox Group Limited (ASX:IAB) to discuss its full year FY16 results, is Managing Director and CEO, Damian Kay. Damian, welcome back.
Damian Kay: Thank you very much.
Carolyn Herbert: Inabox had a strong year financially. Can you tell us what were the highlights?
Damian Kay: From a revenue point of view, we grew very strongly. We grew by 37 per cent to about $88 million. That was underpinned by strong organic growth from the existing business, and we also had the full year of the acquisition that we made in the previous year, which was Anittel. From an EBITDA point of view, we more than doubled the EBITDA to $5.5 million, which was a fantastic result, and really proves out the work that we’ve been doing in the previous years. And from NPATA, the NPAT excluding amortization, we more than doubled that as well. So from a financial point of view, it was very very strong.
Carolyn Herbert: You have three channels to market. How did they perform during the year?
Damian Kay: The three channels being direct, indirect and enablement all performed very strongly. From a direct perspective the business that we acquired, which is the Anittel business, which I mentioned previously, was very, very strong. That’s the business that we have that managed IT business, that trusted advisor model, that we have over 1500 customers.
The really big focus for FY16 was to start selling and cross selling the telecommunications into the direct channel. And that performed very, very well, we met our expectations. And for FY17 in fact, we have much higher expectations for that cross sell, into those customers that we provide a managed IT service. And we now provide that telecommunications into that, which is really our heritage.
From our indirect site, it also performed quite strongly. It grew by about six to eight per cent and we put on a lot more retail service providers, really brought on NBN and really starting to see some gains out of the NBN, in that focus. And the enablement channel as usual, grew very very strongly with our cornerstone customer. We now support over 100,000 services and it grew very strongly. So from an overall perspective, it’s nice to see all three channels doing very well.
Carolyn Herbert: What are you focused on this year?
Damian Kay: FY17 sees a really big investment in our business. We’re investing in platforms to go up the value stack and up the value chain, to increase our margins. We’ve been running EBITDA margins of 7-7.5 per cent and it’s really important for the Board and my executive team, to get those margins above 10 per cent. So investing in that infrastructure and going away from a reselling model, into owning our own platforms. And an application layer will really lead to those higher margins that we’re after. We’re also investing in more sales capability in more resources, in order to invest in the future and keep up those organic sales.
Carolyn Herbert: How do you see your results for this half and the full year?
Damian Kay: From a full year point of view, obviously I’m not going to talk too much about where we’re going to end in the full year, it’s a bit too early. But from a half-year, we always know that this business is usually weighted till the second half. So the first half will be fairly flat. As we lead into the second half, a lot of our projects and initiatives will come through in the second half. So our results, as it was in FY16, will be highly weighted to that second half.
Carolyn Herbert: Finally Damian. What are the short to medium term goals of the business?
Damian Kay: We’ve got some really strong goals to meet our vision of being the leading managed IT and communications player in Australia. We’re really focused on getting organic revenue over $100 million and getting, as I mentioned before, that EBITDA over 10 per cent. And that’s through those investments that I talked about, around investing in those platforms and taking out some of the middlemen, so that we start to control our own destiny and able to drive those margins higher.
And also driving those higher margin products, such as those over the top products. Such as Cloud compute, Cloud storage, Cloud backup, real time voice applications to drive those margins, to reach those goals of $100 million plus in organic revenue. And over 10 per cent in EBITDA margin.
Carolyn Herbert: Damian Kay, thanks for the update on Inabox.
Damian Kay: Absolute pleasure, thank you.