iiNet maintains the momentum

Improved margins helped telecommunications player iiNet (IIN: ASX) grow earnings before income tax depreciation and amortization to $187 million, up 29% on the prior year. Earnings per share were also up 58%. Net profit after tax was $60.9 million, up 64%.

The company said increased margins were the result of better acquisition synergies, implemented cost-out initiatives and increased bundled-service ratios. Bundled services are important in offsetting the long-term decline in fixed phone usage.

iiNet recently bought Adelaide-based Adam Internet for $60 million, adding 70,000 new broadband subscribers and taking total subscribers to over 900,000. Second-half broadband sales growth was up over 20% on the first-half.  The future of the NBN remains an industry-wide issue, however, with 20,000 NBN customers already, iiNet should benefit as the roll-out speeds up.

In an ultra-competitive race, sales, service and brand awareness are key riders and the WA-based business is looking to challenge the competition in the eastern states and Victoria. Acquisitions remain on the agenda and management’s success in pursuing this strategy will be crucial.

The company declared a final fully franked dividend of 11 cents, lifting the total dividend 36% on the prior year.

Foolish takeaway

The company continues to grow its broadband subscriber base. However, product innovation and development are required to build new foundations for future growth. If this is achieved the success story should continue.

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Motley Fool contributor Tom Richardson owns shares in iiNet.

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