Perth-born technology company Alphawest is enjoying a period of solid business growth but it also has a soft share price and a corporate raider on its share register. Mark Beyer reports.
Perth-born technology company Alphawest is enjoying a period of solid business growth but it also has a soft share price and a corporate raider on its share register.
Mark Beyer reports.
IN 1993, when four small technology businesses came together in Perth to form Alphawest, the directors would have had little idea of the corporate dramas that lay ahead.
The company has been through several ownership changes, completed numerous business acquisitions and faces the possibility of being taken over yet again.
Through it all, chief executive Garry Henley has had to try to build a business while managing the seemingly constant corporate changes.
Today Alphawest has about 400 staff in Australia and Singapore, annual sales revenue in excess of $140 million and a blue chip client base but a patchy profit record.
That combination may be the attraction for UXC Limited, a technology holding company run by former Elders executive Geoff Lord.
UXC owns 14 businesses – including Perth-born telecommfunications consultants Gibson Quai – under an unusual federation structure that allows each subsidiary to retain its brand and some autonomy.
UXC has progressively crept up Alphawest’s share register and last month announced that it held a 19.9 per cent stake, the maximum level allowed before launching a takeover.
Mr Henley describes the UXC situation as “a bit of a conundrum for us”.
If Mr Lord does launch a takeover bid, it would follow three ownership changes in the past five years.
Alphawest was acquired in 2000 by Solution 6, one of the spectacular high fliers of the ‘dot com’ boom.
The acquisition coincided with the collapse of the boom, and led to two years of restructuring.
Mr Henley said corporate advisory group Gresham then tried to put together a $400 million ‘roll in’ of several technology businesses, resulting in months of due diligence, but eventually the management team bought back the business in 2002.
That was followed last year by a relisting on the Australian Stock Exchange, through a ‘backdoor’ takeover of shell company AIS Corporation.
Alphawest, which Mr Henley says “is still being fine tuned”, failed to match its prospectus earnings forecasts, reporting a loss of $764,000 for the 2004 calendar year.
Pro-forma accounts provided for comparative purposes show that sales revenue reached $142 million, up 21 per cent on the previous year but just below the prospectus forecast of $145 million.
The company kept a tight rein on expenses, which came in below the prospectus forecast.
Despite this, underlying earnings (before interest, tax, depreciation and amortisation) were only $2.5 million, down slightly on 2003 and only half the prospectus forecast.
The poor performance was attributed to several factors, including delayed tendering by state governments, project delays in Singapore, and weak returns from the Victorian and NSW branches, which are seen as future growth markets.
The WA operation, headed by general manager Steve McNally, still accounts for about one third of Alphawest’s total revenue. WA is one of three states where Alphawest is itching to proceed with major government projects but is waiting for final decisions.
In October last year, Alphawest was selected as preferred tenderer to provide electronic document and records management systems for the government’s shared corporate service centres.
(Another listed Perth company, ASG Group, was also named as a preferred tenderer for part of this project. Final contracts were due to be signed by March.)
Mr Henley believes this project illustrates the growth potential of Alphawest’s information management business unit, which seeks to streamline business processes and improve areas like document amd workflow management.
He said most states were moving to a ‘whole of government’ approach, creating new opportunities in this area.
The increased focus on compliance is also forcing organisations to achieve superior control over their documents and other data.
The growth of email, which increasingly is used to confirm business deals, is also creating opportunities.
“IT managers are really struggling with how they get control over email,” Mr Henley said.
He added that information management staff were more likely to deal with chief financial officers and chief information officers than with technology people.
“Half the issue is understanding what the business wants, it’s not a technology issue.”
A second major business unit is Alphawest’s infrastructure solutions area, which includes VoIP and IP telephony services.
Mr Henley believes a point of difference is Alphawest’s expertise in both information management and infrastructure solutions.
Alphawest’s third business unit is business continuity, which includes a major disaster recovery centre in Sydney.
Mr Henley said the company’s business continuity clients include most of Australia’s second tier banks.
