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Vocus brings FY17 revenue guidance down by AU$100m

Lower earnings than expected across enterprise, wholesale, and mass market energy, as well as acquisition and integration costs and an accounting review, have led Vocus to revise its FY17 guidance.

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.