Quarterly Insights: Australian Information Technology June 2020
PKF Melbourne Corporate Finance is pleased to present the Information Technology Insights for the June 2020 quarter, including a summary of key merger and acquisition transactions observed in the industry.
Our quarterly release helps demonstrate our knowledge of the sector and our ability to drive business value and achieve a successful outcome for anyone contemplating a transaction.
The All Technology Index
The All Technology Index was launched on 24 February 2020 and it is comprised of companies involved in the development and provision of information technology, healthcare technology, interactive media and services, Internet and direct marketing retail, and consumer electronics.
The All Technology Index provides a broad measure of the performance of the Australian technology industry.
The All Technology Index experienced a growth of 16.90% over the 12 month period from July 2019 to June 2020 and a growth of 47.30% for the June 2020 quarter. The All Technology Index outperformed the ASX for the June 2020 quarter.
COVID-19: Impacts on Australian Technology Sector:
Demand for remote working technology
Remote working technology developers are already seeing increased demands as businesses are forced to shift to working from home as required.
Labour market remains strong
Recent research from LinkedIn shows the employment rate in the Software & IT Services sector has increased by 17.3%(1) despite the economic downturn.
Buy now, pay later trend
Under the COVID-19 outbreak, data from the Reserve Bank of Australia has shown that more customers have shifted to buy now, pay later services from using traditional credit cards(2).
Varying impacts on different sub-sectors
In general, the software sector is less impacted under the pandemic compared to other sub-sectors such as hardware technology, as it is less affected by the supply chain disruptions due to social distancing and closed borders.
74% of CFOs and Finance leaders intend to move at least 5% of their previously on-site workforce to permanently remote position post COVID-19(1)
88% of organisations in Australia require or encourage their employees to work from home since March 2020(2)
How companies are responding to the pandemic
- Afterpay raised $650 million in July 2020 which will be used to accelerate investment in growing underlying sales. The Company has recorded a 112% increase in FY20 sales.
- Zip has acquired QuadPay, a US-based buy now pay later company, in June for $538 million. Zip has achieved a 91% increase in FY20 sales.
- Splitit raised $16 million in April 2020 in order to strengthen its balance sheet to accelerate high growth strategy.
- Atomos has implemented staff reductions, redundancies and salary reductions to reduce costs and optimise cash reserves in response to the current market conditions. The Company raised $10.9 million in May 2020.
- Elmo software raised $70 million to accelerate organic growth and to fund acquisition opportunities. The Company is expecting to record a growth of 20-24% in Annual Recurring Revenue (ARR) for FY20.
- REA Group has launched new product features including Digital Inspection and Online Auctions in order to adapt to changes in the real estate sector.
- Audinate has reduced its marketing and travelling expenditure and actively monitoring all discretionary expenses. The Company raised $28 million in July 2020 to increase capital investment as well as to strengthen its balance sheet.
Sources: ASX Announcements
Key deal activities in June 2020 quarter
PKF Melbourne Corporate Finance has observed the following key technology transactions announced during the June 2020 quarter.
Source: S&P Capital IQ, ASX announcements, MergerMarket, PKF analysis
(1) 5% stake
Download the report for the Australina Information Technology sector Insights for the June 2020 Quarter as a PDF.