Wednesday, 27 February 2019 10:19

Vocus Group holds HY revenue steady, but profits drop

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Vocus Group holds HY revenue steady, but profits drop Pixabay

Fibre network services provider the Vocus Group has held revenue more or less steady for the half-year 2019, with the company pulling in $974.2 million, a rise of 1% over the $967.3 million reported for the half-year 2018.

But profits tumbled by 29%, with the company reporting $48.8 million in net profit after tax, compared to the $68.6 million a year prior.

Outlining the progress made on the three-year strategic plan to turn the business around, managing director and chief executive Kevin Russell said: “Having closed out my first six-month period at Vocus, I have great confidence in the strategic growth opportunity for our company, with the core of that opportunity being in our Australian infrastructure business, Vocus Networks.

"This is a three-year turnaround and our board and leadership team is very clear on the way forward. The turnaround program is well underway, and momentum and change has clearly been established."

Russell highlighted what he said were key achievements over the last six months:

  • Board renewal completed;
  • Organisation restructured into three distinct business units;
  • Leadership team rebuilt and remuneration aligned to three-year turnaround;
  • Australia Singapore Cable launched;
  • Optus MVNO renegotiated, including path to 5G; and
  • Network consolidation program commenced.

vocus hy2019

“In August last year, I said that my key priority was building the right leadership team," Russell said.

"I am delighted and confident with the progress we have made in recent months. We now have a group of experienced and driven leaders in place, who can deliver the execution challenge and maximise our future potential.

"With the new leadership team in place, we will continue to build momentum. I am pleased to reiterate our expectations for FY19 Underlying EBITDA to be between $350 million to $370 million.”

Vocus said the revenue increase was due to growth in Vocus Networks. However, this was kept to a minimum by declining revenues in Vocus Retail.

The underlying earnings before interest, tax depreciation and amortisation (excluding share-based payments) fell by 7% year-on-year to $176.4 million.

Cash conversion in the period was strong at 98% but is expected to have a sustainable level of between 90% and 95%. Capex decreased 8% year-on-ye art as the business reviewed spending in the context of strategic opportunities for growth.

Russell said Vocus Network Services (enterprise, government and wholesale segment) delivered accelerating new sales, partly due to boosting sales staff.

"In addition, demand for capacity on the Australian Singapore Cable, which was delivered ahead of schedule and under budget, continues to be strong, with 3.2TB of capacity now sold. Strong sales momentum was, however, offset by higher than normal churn and provisioning cadence, both of which are being addressed as a priority," he said.

"Vocus Retail (business and consumer) is an important turnaround opportunity, where we have substantial legacy revenue from fixed broadband and voice services.

"While revenue is declining in the retail brands, sales and service automation and digitisation has resulted in significant cost reduction, particularly from our Manila-based outsource provider, where headcount has reduced by 25%. The sharp focus on cost reduction resulted EBITDA margin improving to 13%, up from 12%."

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Sam Varghese has been writing for iTWire since 2006, a year after the site came into existence. For nearly a decade thereafter, he wrote mostly about free and open source software, based on his own use of this genre of software. Since May 2016, he has been writing across many areas of technology. He has been a journalist for nearly 40 years in India (Indian Express and Deccan Herald), the UAE (Khaleej Times) and Australia (Daily Commercial News (now defunct) and The Age). His personal blog is titled Irregular Expression.

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