Vocus lifts FY20 guidance after profits take a beating

Written on the 22 August 2019 by Business News Australia

Vocus lifts FY20 guidance after profits take a beating

Shares in telco Vocus Group (ASX: VOC) rose 10 per cent this morning after the company lifted its profit guidance for FY20 by around $9 million.

Despite a tough year that saw Vocus unable to reach takeover deals with two suitors and a class action brought by Slater & Gordon alleging misleading or deceptive conduct in 2016, the internet service provider known for its 'Dodo' brand pulled through at the business end. 

At least that's the impression one gets from its media release today, which highlights 23 per cent total revenue growth and 5 per cent EBITDA growth for its core Vocus Network Services business, in addition to a strong performance from the New Zealand business.

The company also made mention of a 15 per cent decline in retail revenue for its retail business, but profit margins increased 1.8 per cent due to "digital transformation program, operating cost efficiencies, and improved supplier terms".

However, in its financial statements for the year the statutory results are not as positive. The overall revenue increase was negligible, EBITDA dropped slightly by 3 per cent to $349.1 million, and statutory net profit after tax (NPAT) plunged 44 per cent to $34 million.

The market has responded positively nonetheless, encouraged by the increased EBITDA guidance to $359-$379 million, expected growth in Vocus Network Services of $20-$30 million offset by similar decline in Retail, and good signals from a couple of infrastructure projects.

The group noted its Australia Singapore Cable has unlocked the capacity bottleneck from Australia to Asia since it became operational in September 2018, leading to strong sales growth that is driving additional traffic on the domestic network.

Vocus expects this trend to continue in glith of the ongoing rise in bandwidth demands, the need to push content closer to the edge, and the need for diversity on this route becoming increasingly important to content players.

In addition, the Coral Sea Cable project, being built by Vocus on behalf of the Australian Government and connecting the Solomon Islands and Papua New Guinea with Australia, is tracking on time and on budget.

Cable laying commenced in July and is scheduled to land in Sydney by the end of August 2019. The main cable lay is due to be completed in October which will be followed by a period of configuration and testing.

"This has been a year of significant change and our priority has been to deliver our financial guidance whilst laying the key foundations that will enable Vocus to capitalise on our market opportunities and deliver growth from our core network assets. Our guidance has been met and those foundations solidly set," says group managing director and CEO Kevin Russell.

"We have delivered on the immediate priorities outlined at the last result: the right leadership team in place, with the skills and experience to deliver and the re-orientation of our business strategy to capitalise on the strength of our exceptional infrastructure assets.

"The focus is now on execution of our plans over the coming 24 months."

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Business News Australia

Author: Business News Australia





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