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Vocus profit continues to slide

Vocus profit continues to slide

Recorded net loss of $178.2 million

Kevin Russell (Vocus Group)

Kevin Russell (Vocus Group)

Credit: Vocus Group

Vocus Group has ended FY20 with a $178.2 million loss after seeing its profits plummet for the past three years.

Having returned to profit in 2018 -- following a stinging $1.46 billion loss the year before -- Vocus has seen its 2020 profit sink by 623 per cent from $34 million last year. 

2019's results saw net-profit-after-tax decline by 44 per cent compared to the year prior despite flat revenues.

Its 2020 revenue also took a hit, dropping 6 per cent year-on-year, to $1.78 billion. Statutory earnings before interest, taxes, depreciation and amortisation (EBITDA) however recorded a rise of 3.5 per cent up to $361.3 million.

On the whole, group managing director and CEO Kevin Russell said the results showed Vocus was on track to meeting its three-year turnaround plan and meet its financial guidance for the year.

This was done within the coronavirus pandemic, he added, which he said bolstered the need for telecommunication infrastructure and services.

“Revenues have been resilient and cash collections strong across the organisation. We demonstrated a robust operational response throughout the crisis, with no interruption to network operations or customer delivery and record service delivery times achieved,” he said. 

“Employee health and safety was our top priority, as 1,700 staff across A/NZ transitioned to working from home in less than a week.” 

Of the separate divisions within Vocus, its Network Services arm (VNS) – which incorporates enterprise, government and wholesale business segments and typically goes by Vocus Communications – was particularly noteworthy for the CEO.

“VNS built momentum in FY20, winning market share in our core markets with growing underlying recurring revenue and an improving customer profile. We also launched our new Vocus brand and saw a demonstrable improvement in brand recognition and consideration,” Russell said.

“VNS is well-positioned to capitalise on the unprecedented demand for bandwidth and diversity resulting from COVID-19. We had record sales in Q4 across all segments and RFP activity remains strong. 

“Customers are not only looking to access our extensive fibre network and direct connection to Asia, they are looking for the speed and agility of service that Vocus provides, and our dedicated highly secure network is increasingly key.” 

Within that business, EBITDA increased by 10 per cent, to $222.9 million and revenue fell by 8 per cent, to $651.9 million.

The report noted that revenue from high-margin data networks increased by 3 per cent and NBN revenue was up 42 per cent, claiming that the telco “took a leading position in key NBN product categories of Enterprise Ethernet and Business Satellite". 

Its most profitable division was its New Zealand operations – which is structured in a consumer and small- to medium-sized business (SMB) group and an enterprise, government and wholesale (EGW) group – which recorded revenue growth of 5 per cent to NZ$398.8 million. 

There was also a rise in underlying EBITDA of 4 per cent, to NZ$65.4 million, which Russell said made it the fifth consecutive year of organic growth.

“Key highlights for the year were growth in wholesale and continued increases in consumer and SMB driven by broadband and energy customers, with the acquisition of Stuff Fibre increasing our broadband subscriber base by 10 per cent,” he added.

The two growth areas in the region were supplemented by an increase in bandwidth demand due to the ongoing coronavirus pandemic, the report added. 

However, this was offset by a decline in the enterprise segment, with customer losses noted through its partner network.

Meanwhile its retail division – consisting of consumer and business broadband, voice, mobile and energy services – took the biggest dive in revenue of 9 per cent, down to $748 million. Underlying EBITDA also took a hit of 22 per cent, down to $80.1 million.

“Retail reached a key point in the consumer segment turnaround, with revenue stabilising in H2 as the transition from legacy services to the NBN approached completion,” Russell said.

“Consumer has seen improving performance from the Dodo brand, with growing NBN margins and slowing churn.”

However, its SMB segment suffered due to COVID-19 and legacy service transitions, declining 27 per cent.

Looking ahead, the report outlined that the combination of the acceleration of VNS, the strong performance of its New Zealand operations and the turnaround of retail consumer has positioned the telco to “strategically consider our options regarding capital allocation and longer-term corporate structure.”

More details on this are expected in its half-year results for FY21, which are expected in February 2021.

The telco also provided its FY21 guidance, with underlying EBITDA growth for Vocus Group pegged at an increase in the next financial year up to a range of $382 million to $397 million. Meanwhile, VNS’ underlying EBITDA is expected to grow within the range of 8 per cent to 12 per cent.

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