This is it folks; it's crunch time for telco company Vocus Group Ltd (ASX: VOC)!
Later this month the company will announce its first full-year of earnings result since the group merged with M2 last year and given how much is riding on the result, all eyes will be focusing on the outcome.
The Private Equity wolves
First, there will be KKR and Affinity Equity Partners, the two private equity groups who have lobbed heavily conditional offers to acquire Vocus Group.
Both companies have led with offers of $3.50 per share, which to me seems highly opportunistic. Their due diligence will hinge on the full year audited result.
The wolves are hungry and two things they will be looking for will be strong cash flows and opportunities to slash costs and create value. This is value that Vocus management may have been unable to realise.
The nervous investors
After the horrific 12 months that Vocus shares have had investors (including myself) have reason to be nervous about this result.
I want to see the company deliver on the vision of a streamlined, integrated operation. Here is a reminder of the guidance Vocus Group has provided for the full year 2017:
- Revenue of $1.8bn
- Net Profit After Tax (NPAT) of between $160-$165m
- Impairments of up to $116m
Of course, many of us also want to see dividends! Dividends are decided by the board, but could be an item of hot debate as the company manages its debt position.
The ruthless competitors
Finally we have Vocus Group's big listed competitors Telstra Corporation Ltd (ASX: TLS) and TPG Telecom Ltd (ASX: TPM), as well as Spark New Zealand Ltd (ASX: SPK) on the other side of the Tasman.
The telco industry is cut throat, and competitors will want to see how well Vocus has grown customer and subscriber volumes, especially in the significant 'Mass Market Australia' segment which made up 59% of revenue in 2016.
Foolish Takeaway
There hasn't been a more pivotal period of reporting for Vocus. The company will need to convince investors it can integrate its many operations, and deliver earnings.
But it will also need to prove to the chasing wolves that the company can make it on its own, and that strong future earnings require a large premium to the current, searching, offer.
Vocus is scheduled to report its results for the full year to 30 June 2017 on 23 August 2017.
