Aqua Online doubles headline earnings per share

By Iain Scott, ITWeb group consulting editor

Johannesburg, 31 Aug 2001

E-services provider Aqua Online increased its headline earnings per share by 97% in the year to 30 June 2001.

"Aqua`s specialised provision of value-add e-services has shielded us from the fallout in the global Internet market," says joint-CEO Brent Shahim, who adds that product-based e-businesses and Internet start-ups have been predominantly affected.

"As we have focused on enabling established corporates to migrate online, our dot-com exposure has been limited to online gaming businesses which have a high-volume transaction flow and are strongly cash generative."

Shahim says annuity income, derived largely offshore in dollars and sterling, accounted for 69% of total revenue for the year.

The earnings before interest, tax, depreciation and amortisation (EBITDA) margin of 30% reflects the company`s specialised focus on the niche e-services industry and dedication to maintaining operational efficiency, he adds.

The company made two acquisitions with effect from May this year: Interface Solutions, a software-usability consultancy; and Integrity, an Australian-based former competitor.

Shahim says the Interface Solutions acquisition provides a significant differentiator, and its blue-chip client base complements that of Aqua. The Integrity deal means that the group has derived additional earnings streams with only a marginal upscaling of existing infrastructure.

UK-based joint CEO Tal Harpaz says the group`s financial stability has positioned it to focus on medium- to long-term growth.

"Aqua`s enablement division will grow its client base, targeting corporates with proven brick-and-mortar brands. The group will also continue to grow its offshore revenue streams while leveraging its cost-effective South African skills base, and develop its annuity income streams."

He says the online gaming industry`s sustained growth despite the global Internet market fallout, bodes well for the group. A Merrill Lynch survey estimates that the value of the industry will exceed $160 billion by 2015.

"Although we are exposed to a volatile industry and global economic pressures, we will concentrate on our core business within a framework of strict financial discipline to deliver growth over the long-term," Harpaz adds.

He says strategic acquisitions can be financed off the strong balance sheet, and management will continue to operate within a framework of strict financial discipline.

The Aqua Online share was unchanged at 90c on the JSE early this morning, after rising 5c or 5.88% yesterday.