Vocus brings FY17 revenue guidance down by AU$100m

Vocus Communications has revised its guidance for the 2017 financial year, with revenue down by AU$100 million, underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) down by between AU$65 million and AU$75 million, and net profit down by AU$45 million to AU$50 million.

According to a presentation delivered by Vocus CEO Geoff Horth on Wednesday, underlying EBITDA is now expected to be between AU$365 million and AU$375 million, net profit between AU$160 million and AU$165 million, and revenue at AU$1.8 billion.

The company attributed AU$10 million of the EBITDA reduction to the impact of lower than expected billings and an increased headcount across its Enterprise and Wholesale division; AU$5 million to low earnings in its mass market energy business due to "volatility created by extreme weather events in 3QFY17"; AU$12 million to higher expenses than expected, particularly on technology; AU$33 million to an accounting review of "the negotiated contract terms on a number of large projects"; and AU$10 million to other trading variances.

The drop in expected net profit is due to pre-tax expenses of AU$113 million, including AU$61 million from the non-cash amortisation of acquired customer intangibles; AU$26.4 million from the amortisation of acquired software; AU$21.4 million from acquisition and integration costs; and AU$5.6 million from the non-cash book loss on the divestment of the Connect 8 joint venture and the Cisco HCS voice platform.

Revenue, meanwhile, will be lower than previously forecast thanks to a AU$12 million take-back from lower billings across its Enterprise and Wholesale division; AU$40 million as a result of the accounting review, as it was found that revenue from the projects involved would be earned in future periods; and AU$20 million from the divestment of the Aggregato Australia business and the Cisco HCS voice platform.

Vocus' net debt is now expected to be between AU$1 billion and AU$1.1 billion.

Vocus had in February announced a net profit of AU$47.2 million, up by almost 100 percent, due to its acquisitions of M2 and Nextgen. This mirrored Vocus' FY16 results showing a 223 percent rise in net profit, up to AU$64.1 million, attributed to its AU$1.2 billion acquisition of Amcom.

Statutory EBITDA for the first half of FY17 was AU$168.3 million, up from AU$60.7 million a year previous, while underlying EBITDA -- excluding acquisition, integration, and other costs -- was AU$187.2 million, up from AU$62.3 million. Vocus' underlying net profit was AU$91.85 million, up from AU$27.37 million.

Revenue for the first half of the financial year rose significantly, from AU$176.3 million up to AU$888.2 million.

Vocus merged with M2 last February to form the third-largest telecommunications provider in New Zealand and the fourth-largest in Australia worth more than AU$3 billion. It raised AU$652 million last July to acquire Nextgen Networks for AU$700 million, along with the North West Cable System for AU$134 million and the Australia Singapore Cable project for AU$27 million.

Vocus in February also announced signing a capacity agreement with Asia-Pacific fibre infrastructure company Superloop, giving the latter a 15-year indefeasible right of use for international, inter-capital, and regional Ethernet access and metropolitan fibre capacity across Australia.

Under the AU$20 million deal, Superloop will upscale Vocus' metro, national, and international capacity. Services will begin coming online as of July 2017.