Vocus climbs as turnaround nears end

The telco is up by nearly 5pc despite slipping to a net loss of nearly $200m.

Vocus CEO Kevin Russell. Picture: Hollie Adams/The Australian

Shares in fixed telecommunications provider Vocus gained nearly 5 per cent on Wednesday, after the company declared it was nearing the end of a painful three-year turnaround.

The telco announced a net loss for the 12 months through June of $178.2m after writing down the value of its Australian retail business, compared with a $34m profit a year earlier.

The loss was primarily due to $202.1m in non-cash impairments against the retail business unit, which operates its small-and-medium business unit.

Chief executive Kevin Russell was upbeat, declaring it had “just been a good year”.

“It’s been a year of a lot of change and events we all know about. We’ve had a strong year of execution, we’re in the second year of a turnaround and we are rock solid on track,” he told The Australian.

“We’re in a good place, we’re having a good year, and we’ve got momentum going in to 2021.”

Shares in Vocus were up by nearly 10 per cent, before closing 4.8 per cent higher to $3.07.

Mr Russell added that the company‘s three-year turnaround was “firmly on track”, and that the company had met all aspects of guidance provided in July 2019.

“We’ve had three years of significant legacy revenue erosion, as fixed voice revenues have eroded and we’ve had this migration from the ADSL to NBN. We’re getting towards the tail end of that erosion, and we’re seeing our consumer business returning to growth. That’s a big statement to make,” he said.

“By the end of 12 months we will be growing strongly as an overall group, with good momentum and a good operational platform. We’re right on track two years in, and I’m very confident with where we’re going.”

The company was hit by challenges to small businesses and wrote down the value of the retail business unit to about $298m, from $500m.

Underlying net profit fell by 4.2pc to $101.1m.

Revenue dropped by 6.0pc to $1.78bn as retail operations continued to be squeezed by the National Broadband Network.

According to Mr Russell, COVID-19 has provided an opportunity for NBN Co and the federal government to reset the NBN pricing model.

“There’s been some really good collaboration across the industry in terms of addressing this need for people to work from home, with capacity uplift and expediting quick decisions, that’s been really good,” Mr Russell said.

“We’ve got a platform now, that we’ve built, which is less adversarial and more constructive around how the industry needs to move forward. We need to make some decisions around what continual pricing structure is right for NBN, in market, and I’m hopeful that we can actually take the learnings from the last six months and get more collaborative solutions.

“We all know the current pricing regimen doesn’t work. It doesn’t work for retailers and inevitably it won’t work for consumers in the long run.”

After failing to pay a dividend in the last financial year, directors again opted against a payout.

With Dow Jones Newswires