Singtel's NCS acquires Aussie IT company The Dialog Group for A$325m
Move is to help NCS gain a foothold in Australia very quickly, says CEO Ng Kuo Pin
Singapore
NCS, Singtel's technology services arm, announced on Monday (Mar 7) that it would acquire Australian IT services company The Dialog Group for A$325 million (S$328 million) as it looks to further its plans to be a pan-Asian business-to-business (B2B) digital services provider.
The acquisition is expected to be completed in 3 months, subject to the approval of regulators and other third parties. A$290 million of the consideration will be paid once the acquisition is completed, while an additional A$35 million will be paid out in tranches within 2 years after.
In its bourse filing of the acquisition, Singtel noted that Dialog's net asset value as at June 30, 2021 was A$43 million. According to a Citi analyst report released on Monday, the company made A$176 million in revenues and A$12 million in profits in its last fiscal year ended June 2021.
In an interview with The Business Times, NCS chief executive Ng Kuo Pin said that the move would help the information and communications technology (ICT) subsidiary gain a foothold in Australia very quickly, as opposed to if the company had to grow its operations there from scratch.
Dialog is Australia's largest privately-owned IT services company and has about 1,000 IT consultants spread across offices in cities like Canberra, Melbourne, Perth and Sydney. Notable clients of the group include Australian telco Telstra and the New South Wales Electoral Commission.
"We think that this is a very good foundation for us to build on in order to capture the growth that we're starting to see in the Australian marketplace," Ng said. He noted that according to research firm Gartner, IT spending in Australia will grow by 6.5 per cent this year.
He also pointed out that NCS has grown in the last 2 years with NCS NEXT to provide digital, cloud and platform services on top of its existing application and infrastructure solutions to customers. Likewise, NCS will integrate Dialog's existing solutions with NCS NEXT to provide its clients with end-to-end solutions.
Additionally, he said that the acquisition will help to grow the company's talent pool at a time when tech talent is difficult to come by. NCS currently has a staff of about 10,000.
"The number one inhibitor to digitalisation is the lack of talent, whether it's in Singapore, Australia or across the Asia-Pacific," Ng said, noting that with the scale of Dialog, NCS will be able to attract more talent from the Australian market too.
"When you have that size of talent base in a post-Covid world, they will not just be serving in that geography, they will be able to serve in Singapore, South-east Asia and in various markets that NCS chooses to operate in.
"At the end of the day, NCS needs to be able to win this talent war to be better than our competition," he said.
There are also plans to facilitate the personal growth of its consultants and cross-pollinate ideas between its different talents as Dialog joins NCS, he added.
The acquisition comes after NCS's rebranding and strategic transformation announced in July last year.
Since then, the company has acquired Riley, a cloud consultancy with Google cloud application expertise, and Eighty20 Solutions, a cloud transformation specialist with capabilities across Microsoft cloud platforms in 2021.
In Singtel's latest business update for the 9 months ended Dec 31, 2021, NCS's revenue grew 8.3 per cent to S$1.63 billion year on year, while earnings before interest, taxes, depreciation and amortisation (Ebitda) fell 18.8 per cent to S$219 million. The group attributed the decline in Ebitda to increased hiring at NCS to support its pivot towards digital services.
Citi analyst Arthur Pineda maintained a "buy" on Singtel with a target price of S$3.44 and noted the fact that Dialog is profitable, which is a step change from Singtel's previous acquisitions of digital advertising unit Amobee and cybersecurity arm Trustwave that dragged down the group's profitability.
"As such, we see that from an earnings standpoint, the move will not dilute group profitability with the added interest burden offset by Dialog's own profits," he said.
Singtel shares closed flat at S$2.51 on Monday (Mar 7).
