iiNet Limited today announced a net profit after tax of $5.2 million for the year ended June 2003, an increase of 20% on the previous year. The Company has declared a fully franked 4 cent per share final dividend, bringing dividends for the year to 6 cents per share.

Operating revenue of $40 million was 51% higher than last year. Earnings before Interest, Taxation, Depreciation and Amortisation, was $11.6 million, an increase of 20% on the $9.7 million achieved in the previous year.

Earnings per share of 13.5 cents represents 18% from the prior year and net operating cash flow of 35.2 cents per share, was 40% above that reported last year. Cash holdings stood at $8.6 million after paying $7.3 million for the acquisition of Internet Service Provider subscriber bases during the year.

The company continued to achieve solid growth in its customer base, which totalled 132,000 active accounts as at 30 June. Approximately 46% of these services are now provided outside Western Australia. As at 30 June 2003 iiNet had 26,000 DSL clients up 622% from 3,600 as at 1 July 2002. iiNet is one of the largest DSL providers nationally, with 57% of services outside Western Australia.

iiNet has successfully integrated 27,500 acquired subscribers over the last seven months and is currently finalising the integration of a further 16,500 subscribers in Canberra and Darwin. Infrastructure to support those customers has been rolled out with commissioning now occurring. Earnings from acquired customers are expected to be in line with those from existing customers once iiNet’s infrastructure is fully deployed.

iiNet continues to pursue a range of organic and acquisitive growth opportunities. The company routinely examines proposals presented to it, including potential rationalisation opportunities within the 550-strong Australian ISP market.

All potential acquisitions must adhere to the Company’s strict investment parameters, which include:

• Positive contribution to earnings per share in the year of acquisition
• Immediate scale within or access to identified target markets
• Conformity to iiNet’s capital and balance sheet management program, notably conservative gearing ratios.

The Company is currently in discussions with a significant ISP. iiNet is conducting due diligence with the intention to move to a Sale and Purchase agreement by the end of August 2003. On the assumption that the opportunity meets the above financial hurdles it is envisaged that the consideration for the business will comprise both cash and iiNet shares. It is expected that iiNet would raise capital to complete the transaction.

Excluding future acquisition opportunities, iiNet expects continuing improvement in profitability in the 2004 financial year as the contribution from subscribers acquired in 2003 are fully realised and DSL services continue to grow.

The fully franked dividend of 4 cents will be paid on 22 August 2003 with a record date of 15 August 2003. Directors anticipate paying a further fully franked dividend at the next half.