Uniti Group Ltd (ASX: UWL) surged 14.53% today thanks to a 217% jump in cash flows. In its quarterly report, the telecommunications provider announced a 217% increase in like-for-like net operating cash flow compared to the prior quarter. Net operating cash flow is the difference between cash inflow and cash outflow for a period.
Who is Uniti Group?
Uniti Group is a telecommunications company that provides internet and phone services in Australia. It launched in 2014 pursuing fixed wireless technologies and built its own network offering high-speed internet as an alternative to NBN. The company listed in 2019 and diversified its product set to include NBN and private fibre networks.
Cash flow generation
Uniti Group's free cash flow increased 754% over the March quarter to $5.7 million. This demonstrates the strong cash generation credentials of its 3 business units. The company divides its offerings across wireless networks, fibre networks, and specialist products & markets divisions.
During the March quarter, growth-related capital expenditure in the Wholesale & Infrastructure business unit was $2.2 million. This reflected another active quarter of fibre network deployments as well as some contingency infrastructure inventory purchasing in light of COVID-19.
Increased demand for Uniti's services
All 3 business units performed above forecast for key financial metrics during the quarter, including revenue, earnings and cash collections. Underlying demand for Uniti Group's super fast fibre-to-the-premises (FTTP) services has been strengthened by increased levels of working from home and online learning. March 2020 saw record net growth in FTTP connections.
Free cash flow increased to 72% of net operating cash flow in the March quarter, up from 27% in the December quarter. This places Uniti Group among the strongest sector performers in terms of cash conversion.
Uniti Group's goals
Uniti Group ended the March quarter with $37.7 million in cash, a 12% increase over the prior quarter. This provides the company with further financial capacity to grow its aggressive growth agenda, both organically and via strategic acquisitions.
The company has made a number of mergers and acquisitions over time. These have served to expand its footprint from Adelaide and Melbourne, to New South Wales, Queensland, and Western Australia. Uniti Group is continuing expansion of its fixed wireless networks and investing in alternative technology including 5G.
The company is seeking to build its fibre infrastructure footprint nationally and increase market share in existing fibre markets. Specialist services provide a unique value add to customers and allow the company to pursue niche and emerging products.
What does the future hold?
Uniti Group has materially completed the integration of LBNCo, OPENetworks, and 1300 Australia which it acquired in the December 2019 quarter. The company is now pursuing strategic acquisition opportunities with the benefit of sizable, growing cash reserves, and negligible debt.
