What: Telecommunications and internet service provider iiNet Limited (ASX: IIN) delivered another record profit result for FY 2014, with underlying net profit up 19% to $65.8 million. The big news was the telco's return to organic subscriber growth, with more than 40,000 new broadband customers added for the year.
So what: It appears iiNet's strategy of marketing itself heavily has been paying off as Australians sign up to its bundled broadband and telecommunications packages. iiNet charges a premium compared to some of its competitors but its reputation for good customer and technical support service has allowed it to grow the all important margins for bigger profits.
Earnings per share grew faster than revenues and the year's total dividend of 22 cents was up 16% on the prior year. For junior telcos like iiNet and M2 Group Ltd (ASX: MTU) disappointing demanding investors on the dividend front is a quasi-sacrilegious act to be avoided at all costs. Fortunately iiNet has come up with the goods.
Now what: iiNet remains focused on winning market share through a heavy marketing campaign particularly focused on the potentially lucrative eastern-seaboard states, where the Perth-based telco has yet to make big inroads. iiNet also has the opportunity to cash in on the NBN network's development and its NBN subscriber base should grow as the roll out develops.
Australia's broadband and digital services market remains ferociously competitive but the winners are likely to deliver shareholders outperformance in the years ahead. In my opinion iiNet's growth strategy points to further success ahead.
Shares were down around 1.5% to $8.15 on today's news, but have risen almost 10% in the last month alone and more than 28% over the last year.
