Vocus Group, the Australia-based telecommunications company, has reported its results for the first half of the financial year 2019 and updated investors on the company’s outlook.
Revenue was flat (growth of almost 1% year-on-year) and underlying earnings before interest, tax, depreciation and amortisation dropped 10% compared to the same period in 2018.
Consequently, underlying net profit after tax declined 29% and net leverage ratio increased to 3.1x. Net debt increased $88 million to $1.09 billion.
The company grew revenue from its New Zealand operations, its enterprise, government and wholesale (the bulk of the growth is from the project revenue associated with the construction of the Coral Sea cable system).
However, the growth was offset by the decline in its retail business in Australia, consumer declined 12% and small-to-medium business (SMB) declined 27%. Overall, the financial results are not looking too good for the first half of the financial year.
A new CEO and a 3-year plan
However, Vocus is now a revamped company that is ready to pounce. Since Kevin Russell, the new CEO, was appointed in May 2018, several changes have been made, and “resetting Vocus” was his key message to investors.
Russell has restructured the business, put in place a three-year turnaround strategy and refreshed the leadership team.
There are now three distinct business units in the company: Vocus Networks-Services (enterprise, government and wholesale), Vocus Retail (consumer and SMB), and Vocus New Zealand.
Since May 2018, 19 executives have left the business and a new team has been formed.
As part of the strategy, Vocus has set itself the target of doubling the revenue from enterprise, government and wholesale in five years.
Another key highlight of the announcement is the MVNO deal with Optus which includes the access to Optus’ 5G network.
Wireless broadband development
While the renegotiated deal does not cover fixed wireless access, this is an area Vocus is very keen to explore. This is part of the strategy to revive its retail business and Vocus will shift its focus from selling NBN services to growing its wireless broadband customer base instead.
The company is also making progress in its own technology transformation. The focus is on developing a programmable network to remove manual processes and reduce provisioning times from weeks and months to minutes through automation.
The company is rationalising its network suppliers and consolidating its business support systems. These efforts will deliver significant cost savings and improve customer experience.
Vocus has been embattled with organisational changes for the past few years. Having a new leadership team gives the company a fresh start.
The revamped Vocus has plenty of room for growth. Over the next 12 months, business activity is expected to grow market share, particularly in the enterprise and government segment.
The company’s network asset remains a key differentiator in the market.