Vocus Communications Limited (ASX: VOC) reported its full year results this morning for its eventful 2015 financial year.
During the year, the company fought an intense, but ultimately successful battle to acquire Amcom Communications despite the best efforts of rival TPG Telecom Ltd (ASX: TPM) to block the deal.
Let's take a look at the results. For the full year ended 30 June 2015 and compared to the prior year, Vocus reported that:
- Revenue surged 62% to $149.8 million
- Underlying earnings before interest, tax, depreciation & amortisation (EBITDA) jumped 56% to $51.6 million
- Operating cash flow grew 39% to $42.6 million
- Underlying net profit after tax (NPAT) increased 34% to $18.1 million
- Diluted underlying earnings per (EPS) share limped ahead 6% to 17 cents per share.
The disappointing 6% increase in EPS following a 62% rise in revenue is the result of the 27% increase in shares outstanding during the year. A reason why shareholders need to keep an eye on capital raisings and how they impact EPS.
Vocus reports four main business divisions which all delivered good growth compared to FY14:
- Fibre and Ethernet revenue jumped 129% to $64.5 million and is now the biggest revenue source for the business
- Voice revenue surged 67% to $12.3 million. Division revenue declined each year after FY12 and after several years of increased investment the results are starting to show.
- Data Centre revenue grew 43% to $26.6 million. An additional two data centres were added to the portfolio and the Amcom deal will add another seven in Perth.
- Internet revenue increased by 17% to $43.9 million following internet volume growth of 111% over the past 18 months, which was offset by a 40% decline in pricing power (which perhaps highlights the current degree of competition within the sector).
Vocus-Amcom combined
The Vocus – Amcom deal was finalised after FY15 and, therefore, didn't impact these financial results in a major way. However, Vocus provided indicative pro-forma statements of the combined entity's financials if they were merged for the entire year:
The combined business would have delivered revenue growth of 20% to $314.7 million, a 26% increase in underlying EBITDA to $100.3 million and underlying NPAT would have increased 11% to $40.9 million.
What about Amcom?
Originally a Western Australian business, Amcom is heavily reliant on the WA economy and the downturn in resources has affected its operating results – which in turn will impact Vocus in the future. Amcom shareholders may have gotten the better end of this deal!
Amcom reported (unaudited figures) that FY15 sales revenue declined 3% to $165.7 million, net profit declined 2% to $22.8 million, but underlying EBITDA bucked the trend and grew by 4% compared to FY14.
Foolish takeaway
Amcom's growth has hit reverse over in the west which will likely affect the combined entity. The long-term benefits and synergies may be worth the price but Vocus shareholders should brace themselves for lower growth during the first year of the combined entity.
