Vocus says it’s on track to meet guidance, complete turnaround

Vocus tells shareholders that a COVID-19 boost to demand for bandwidth means it will meet full-year guidance.

Vocus CEO Kevin Russell. Picture: Hollie Adams

Telecommunications provider Vocus is on track to hit guidance for FY21 and successfully pull off its three-year turnaround plan after the coronavirus pandemic increased demand for bandwidth.

Speaking at the company’s 2020 AGM on Wednesday, Vocus CEO Kevin Russell said he fully expected the company to hit an underlying FY21 EBITDA “in the range of $382m - $397m,” driven by growth in Vocus Network Services.

“We expect Vocus Network Services to deliver revenue growth of at least five per cent in FY21, which exceeds the three per cent growth in the key data and IP networks segment in the prior period,” Mr Russell said.

“And we expect VNS to deliver underlying EBITDA growth in the 8-12 per cent range, which we believe will be a market leading performance in this segment.”

Mr Russell also said capital expenditure would be reduced from $200m to $160-$180m and the group’s financial leverage will be reduced, on the back of growth as COVID-19 inspires an “acceleration of market trends”.

“I believe that Vocus will benefit from a number of these trends,” Mr Russell said.

“Firstly, the acceleration of digitisation, and the resulting demand for bandwidth.

“Secondly, the increased focus on cybersecurity where our recent investments in secure network capabilities are very timely.

“Finally, customer expectations on speed, flexibility and value. We proved throughout COVID that our people and our culture are competitive strengths.”

Mr Russell said the company’s New Zealand consumer and wholesale businesses were performing strongly, while the Australian retail business – conducted through brands Dodo and iPrimus – had managed to stem losses inherent from the transition from ADSL to the NBN.

“Retail showed significant progress in stabilising the business, with year-on-year revenue declines improving from -12 per cent in H1 to -6 per cent in H2,” Mr Russell said, adding that challenges remain in the small and medium business sector.

“The small and medium business segment is the one area where we continue to face challenging market conditions,” he said.

“This business will continue to navigate the decline in legacy revenues over the coming year and will prepare for a difficult environment as government support for small business is withdrawn.”

Vocus chairman Bob Mansfield told shareholders that FY20 marked the second successful year of a three-year turnaround program.

“I have consistently said that Vocus would require three years to turn around,” he said.

“FY20 marked year two of that three-year turnaround, and it was a year of strong operational execution and financial progress.

“Today, four months into year three of our turnaround, I’m pleased to say the execution risk is largely behind us and the foundations for growth are firmly in place.”

Mr Mansfield said in the year ahead Vocus would focus on winning more market share.

“As we move into FY21 our focus is shifting to winning in market and capitalising on the progress we have made in the past 12 months,” he said.

“Vocus cemented its credentials as a critical infrastructure company in FY20, and this provides us with a strong and stable growth platform for the coming year.”