Vocus profit rises to AU$47.2m, signs AU$20m deal with Superloop

Vocus Communications has announced its financial results for the first half of FY17, revealing a net profit of AU$47.2 million, up from AU$24.2 million a year previous due to its acquisitions of M2 and Nextgen.

Statutory earnings before interest, tax, depreciation, and amortisation (EBITDA) were 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 six-month period rose significantly, from AU$176.3 million up to AU$888.2 million.

"We are pleased to have continued to demonstrate organic growth across the business despite increasing competition in a number of areas and despite a period of significant corporate activity and integration," said Vocus CEO Geoff Horth.

Cash and cash equivalents as of December 31 stood at AU$131.5 million, up from AU$28.4 million a year prior.

A breakdown of its revenue saw its corporate and wholesale Australia segment rise significantly, with fibre and Ethernet adding AU$94.9 million, up 52.3 percent year on year; internet adding AU$40.4 million, up 31.2 percent; voice adding AU$44.4 million, rising by 181 percent; and datacentre the only segment down, losing 5 percent in revenue for a total of AU$20.7 million.

As of December 31, Vocus had 5,584 on-net buildings and 23,000km of metro fibre.

M2 wholesale contributed AU$36.2 million during the six-month period, while Nextgen contributed AU$34.3 million between October 26, when the acquisition completed, and December 31.

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 (NWCS) for AU$134 million and the Australia Singapore Cable (ASC) project for AU$27 million.

Vocus' mass market Australia segment saw consumer internet and bundles rise by 10.4 percent to make AU$185.5 million in revenue; consumer voice fall by 19 percent down to AU$36.1 million; consumer mobile drop by 29.5 percent down to AU$26.5 million; and consumer energy increase by 20 percent, up to AU$93 million.

These trends continued in Vocus' SMB segment of mass market Australia: SMB internet and bundles rose by 3.8 percent, to AU$63.1 million; SMB voice was down by 19.2 percent, to AU$58.8 million; SMB mobile was down by 40.7 percent, to AU$3.3 million; and SMB energy jumped by 30.1 percent, up to AU$9.9 million in revenue.

As of the end of 2016, Vocus' consumer broadband services in operation (SIOs) numbered 534,258, made up of 111,156 National Broadband Network (NBN) customers, 376,600 copper bundle customers, and 45,940 copper broadband customers.

Average revenue per user (ARPU) was AU$61.56 per month for copper bundles and AU$61.53 per month for NBN customers.

Consumer mobile SIOs stood at 160,108 as of the end of the period; consumer energy SIOs numbered 153,323; electricity customers numbered 105,434; and gas connections numbered 47,889.

In New Zealand, Vocus made AU$158.3 million in revenue: AU$40.5 million in corporate and wholesale, and AU$117.8 million in mass market. Consumer broadband SIOs numbered 199,991 -- 37,500 on the New Zealand government's ultra-fast broadband (UFB) network and 154,491 on copper broadband -- while SMB SIOs numbered 20,709; energy SIOs were 2,299; and mobile SIOs reached 18,732.

ARPU for broadband in New Zealand was AU$71.88 as of December 31.

"The mass market businesses in both Australia and New Zealand continued to secure additional market share under their respective national fibre rollouts, with our NBN market share increasing from 6.4 percent to 7.8 percent (excluding satellite) and UFB share increasing to 12 percent despite fierce competition in both markets," Horth added.

"The rollout of fibre in both Australia and New Zealand is an extremely positive opportunity for Vocus, with similar margins to copper broadband and significantly lower churn from the enhanced on-net customer experience.

"New Zealand continues to build out its business platform following recent acquisitions and is securing new business in both the corporate and wholesale and the mass market segments. The business continues to shape its portfolio to leverage its core, as demonstrated by the sale of its 50 percent share of the Connect 8 joint venture with Spark New Zealand and acquisition of a small energy retailer to increase its bundling opportunities in the market."

Vocus 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. According to Superloop, this will increase the value of its BigAir acquisition.

Services will begin coming online as of July 2017.

Vocus reported a full-year FY16 net profit of AU$64.1 million, up 223 percent, which was attributed to the addition of M2 and its AU$1.2 billion acquisition of Amcom.