Generating strong, free cash flow ad primed for growth
Webcentral Group Limited (ASX:WCG)
Webcentral Group’s (WCG) legacy and core business have survived the test of time, operating in Australia and New Zealand, servicing over 300,000 customers. Founded in 1996, Melbourne IT (now WCG) had a strong presence in the domain and hosting market, and grew to be the leading registry provider in Australia.
The company grew exponentially during the dot.com period, however, in the years to follow the company’s highly profitable core division encountered headwinds and was not able to organically maintain previous growth rates. Management was under pressure to deliver, and as history illustrates, growth by acquisition did not favour the company, contributing to a gradual decline over many years. At the peak of the dot.com boom, the share price on 31 March 2000 reached $8.96 only to fall to 48 cents as of 31st December 2000. The company recovered over the following years to reach two further peaks of $2.59 (30 June 2007), and $3.62 (31 Dec 2017). In mid-April, the share price reached an all-time low of 7 cents, and currently trades at 45 cents. The company has changed its name several times throughout this period.
What is different this time?
WCG has since restructured by divesting all non-core assets, leaving their legacy domain and hosting business with A$60m+ of predominantly recurring, strong margin revenue-generating A$10m+ free cash flow per annum.
The company has endured a confusing and complicated previous 12 months, as the subject of a bidding war between WCG’s now largest shareholder (5G Networks 44%) and Web.com, funded by a New York private equity firm…
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