iiNet (IIN) is the third largest Internet Service Provider (ISP) in Australia.

IIN has built its own network (the iiNetwork), boasts the largest Voice over IP network in the country, abolished monthly phone line rental with Naked DSL and has released wireless modem-and-phone-in-one BoB to the world.

Acquisitions driving growth

A large part of IIN's growth has come from acquisitions and evidence suggests the group is effectively managing their integration into the current business structure.

In late 2011, IIN purchased TransACT, an ISP provider in regional Victoria and the ACT. Early this year, it acquired South Australian-based ISP Internode.

The acquisitions helped lift FY12 revenue by 19%. IIN was able to report another blockbuster earnings result, with full year operating profit rising 47% to $145 million.

The group expanded its profit margins thanks to revenue increases, efficiency gains and operational cost-outs. The robust growth in profit also helped deliver a 17% jump in the full year dividend, to 14 cents (8 cent final dividend).

Cross selling benefits

A key benefit of IIN's growth strategy is the cross selling opportunities available to it.

IIN offers a range of products and services to both residential and business customers. In addition to providing internet access, the company offers hardware (modems, routers, etc.), television (fetchtv), NBN, and phone services.

The complementary nature of these products, and the recent growth of IIN's client base, sees it well placed to deliver on its aim of increasing the average product per customer from 2 to 3.

Outlook

A large part of IIN's earnings growth has come from acquisitions, and the group is on track to achieve cost synergies from TransACT and Internode in FY13. The synergies are expected to drive cash flow and net profit growth this financial year.

Longer-term, the growth in IIN's customer base, coupled with its expanded product offering, should provide the company with more cross selling opportunities.

We are confident in IIN's ability to continue its strong growth path, helping to boost dividends and the return to shareholders.

iiNet (IIN) Web Grows FY12 operating profit up 47% is a post from: Australian Stock Report Share Tips

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