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Webcentral profitability plummets to $24.7M in the red

Webcentral profitability plummets to $24.7M in the red

Due in part to data centre and network costs, a non-cash goodwill impairment expense and acquisition, restructuring, transaction and merger costs.

Joe Demase (5G Networks, Webcentral)

Joe Demase (5G Networks, Webcentral)

Credit: 5G Networks

Webcentral’s post-tax losses continue to deepen as it reported a 322 per cent decline year-on-year, to a loss of $24.7 million, for the 2022 financial year.

Contributing to this decline, according to a report posted to the Australian Securities Exchange (ASX), were various expenses and costs. This included $24.3 million in network and data centre costs, $11.5 million on a non-cash goodwill impairment expense, followed by $4.6 million in acquisition, restructuring and transaction costs, which includes the purchase of 18.5 per cent of Cirrus Networks.

The IT provider had initially offered Cirrus roughly $26.3 million, or 3.2 cents cash per Cirrus share before its rejection last August.

However, in a separate statement released to the ASX over an hour after its FY22 report, Webcentral flagged it had agreed to sell the 172 million shares for $5.5 million, which is to be used to fund potential acquisitions, on-makret share buybacks and to reduce debt.

“At this stage we have decided to not pursue the acquisition of [Cirrus;] we agitated for change, more accountability and improved performance and we can see that slowly taking place," Joe Demase said.

"The enterprise hardware space is challenging with tight [margins. That] coupled with hardware constraints makes the turnaround road a bit tougher for [Cirrus].’”

It also spent $8.8 million in non-cash share-based payments expenses and restructuring costs of $3.7 million following the merger between itself and 5G Networks, which took place in July last year.

In addition, the report highlighted the share-based payment expense was “significantly higher” than previously as it represents two listed companies and the acceleration of options vesting period due to the merger.

As a point of comparison, the last 12 months recorded a loss of $5.9 million. However, its financial report for FY21 covered the 18 months to 30 June 2021 in order to align itself with 5G Network’s reporting period and saw post-tax losses decline by 33.7 per cent to $61.4 million in the red.

Meanwhile, revenue was up by 5.5 per cent, to $96.7 million, and earnings before interest, tax, depreciation and amortisation (EBITDA) also rose by 13.5 per cent, to $17.6 million.

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