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Superloop shares higher after confirming FY 2020 earnings growth guidance

The Superloop Ltd (ASX: SLC) share price climbed higher on Tuesday following the release of its full year results.

The shares of the independent provider of connectivity services rose 1.5% to 90.5 cents.

How did Superloop perform in FY 2019?

Superloop had a very disappointing 12 months in FY 2019. Despite posting a 1.6% increase in revenue to $117.3 million, its earnings before interest, tax, depreciation and amortisation (EBITDA) came in 61.5% lower than the prior corresponding period at $8.5 million.

Things were even worse on the bottom line where the company recorded a $72 million loss for the year. This was due partly to an impairment of $50.7 million for the retiring of the non-core, non-bandwidth services segment.

What were the drivers of its revenue growth?

The company’s Connectivity operating segment, which includes the Superloop fibre infrastructure and high-performance network solution businesses and fixed wireless wholesale and corporate products, saw its revenue slide 8.9% to $57.7 million.

The company’s Services operating segment contributed revenue of $24.7 million, which was down 32.5% on the prior corresponding period.

And finally, the company’s Broadband segment, which covers Guest Wifi and Home Broadband businesses, contributed revenue of $35.2 million. This was an increase of 89% year on year and offset weakness in other segments.

Outlook.

One positive from an otherwise very disappointing result, was that management reconfirmed its FY 2020 guidance.

It expects EBITDA of $14 million to $16 million in FY 2020, excluding any one-off transactions that may occur, which equates to year on year growth of 64.7% to 88%.

Another positive is that the Core Asia Pacific loop is now live and connected with the launch of the INDIGO subsea cable and the Australian national backbone complete. This has led to 392 buildings across key markets in Singapore, Hong Kong, and Australia being connected by 894km of fibre and ~9,000km INDIGO subsea cable. 

Also on the rise in the telco space on Tuesday was the MNF Group Ltd (ASX: MNF) share price with a 12.5% gain after its full year results release and the Telstra Corporation Ltd (ASX: TLS) share price with a 1% gain on no news.

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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of SUPERLOOP FPO. The Motley Fool Australia owns shares of and has recommended MNF Group Limited and Telstra Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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