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Vocus reports steady revenue as NZ IPO remains on track

EBITDA hovered around the AU$192 million mark and after-tax profit took a dip.
Written by Campbell Kwan, Contributor on

Australian carrier Vocus has reported recurring revenue increased by 2% to AU$896 million while underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) remained steady, hovering around AU$192 million, which the company credited to "disciplined overhead reductions".

Underlying net profit after tax was AU$45.4 million, which was a 11% year-on-year dip.

Broken down by division, Vocus Network Services (VNS) chipped in AU$340.2 million of the carrier's overall revenue, which was an 11% improvement from its performance in the year prior. This was primarily comprised of revenue from data networks, which accounted for 63% of VNS' recurring revenues and 77% of its gross margin.

VNS' EBITDA also increased by 8%, driven by higher margin data network revenues despite its large infrastructure revenue dropping from AU$25.5 million to only AU$1.4 million.

Vocus' New Zealand arm also delivered growth in the half, with both revenue and EBITDA up by around 5%. The addition of Stuff Fibre helped its consumer and business division grow by 11%, with underlying EBITDA growing by 5% largely driven by growth in Ultra-Fast Broadband and the bundling of energy services.

Vocus Retail, however, continued to see its overall revenue decline. During the half, overall revenue dropped by 6% to AU$350 million. Retail's EBITDA also declined 20%, which was slightly less than the 22% decline experienced in the year prior.

The company said it remained optimistic about its retail business as consumer revenue returned a 1% year-on-year growth.

"Vocus group and the Australian retail business can now see a clear path to an end of legacy products decline. Legacy gross margin in the half now represents 15% of the retail business; the majority of this lies within the small and medium business standalone voice products," Vocus CFO Nitesh Naidoo said in the half-year results presentation.

"With consumer now returning to growth, there is a clear line of sight to a stable retail business."

Providing an update about its New Zealand IPO at the results presentation, Vocus CEO Kevin Russell said the IPO is still on track to be completed by the end of the 2021 financial year. He added that the carrier is still planning to exit its New Zealand business post-IPO.

With Vocus currently in talks to be sold to Macquarie Infrastructure and Real Assets Holdings (MIRA), the carrier was scant in providing additional details about the proposed deal during the results presentation. 

Yesterday, the carrier revealed that Aware Super joined MIRA's bid for the company under the same AU$5.50 per share terms.

"Vocus has been advised by MIRA that it has entered into a co-operation agreement with Aware Super ... to progress its proposal via a consortium," Vocus told the ASX.

"The consortium's due diligence investigations are continuing. The Vocus board notes that there is no certainty that the proposal will result in a binding offer."

Meanwhile, Webcentral, which is still being pursued by 5G Networks, reported in its interim results for the half year to December that revenue declined due to the impact of COVID-19 and poor customer experience, posting AU$31.5 million in total revenue, a drop of 15% year-on-year.

The company said poor customer experience was spread across three main areas: Support services, console experience, and technical stability.

"We've undertaken a number of initiatives to address these issues. Management is confident that revenue growth will return across all four core services as these short-term issues are resolved," the company said.

Underlying EBITDA also more than halved year-on-year, going from AU$7.6 million to AU$3.7 million.

The 5G Networks deal has not yet been finalised as there is still a takeovers panel application being processed, which has impeded the deal from crossing the finish line.

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