5G Networks share price falls 6% on FY20 results

The 5G Networks share price has fallen 6% following the release of the company's FY20 results that fell short of analyst expectations.

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The 5G Networks Ltd (ASX: 5GN) share price has fallen 5.56% following the release of the company's FY20 results. At the time of writing, the 5G Networks share price had fallen to $1.87 after closing yesterday's trade at $1.98.

5G Networks is a licenced telecommunications carrier operating in Australia. It currently owns and operates a nationwide, high-speed data network with points of presence in all major Australian capital cities.

FY20 results

Financial highlights for 5G Networks included achieving earnings before interest, taxation, depreciation and amortisation (EBTIDA) of $6.3 million which represents 96% growth compared to the prior corresponding period (pcp) before acquisition and share option costs.

Other highlights include 16% recurring revenue growth compared to the pcp from the continued migration of customers to higher margin annuity services. This has resulted in strong operating cash flow generation of $7.5 million which is 700% higher than the pcp.

Revenue from ordinary activities was down 3.6% to $49.325 million in FY20 compared to $51.155 million in the pcp. Additionally, the net loss decreased 63% in FY20 to $1.545 million from $4.141 million in the pcp.

Basic earnings per share was -2.29 cents per share in FY20 compared to -7.77 cents per share in FY19. Analysts estimated earnings per share of 1 cent. 

5G Networks' gross margin has improved to 60% as a result of synergy realisations because of acquisitions.

Successful share placements by 5G Networks of $18.2 million in June and $3.9 million in July 2020 have provided a strong capital position for the company to pursue further acquisitions and strategic capital expenditures.

Additionally, 5G Networks will pay a 1 cent dividend for the year ended 30 June 2020, payable on 16 October 2020.

Outlook

Managing Director, Joe Damase, said:

Our focus for acquisitions this year has been on data centre services and after completing the Melbourne Data Centre purchase in FY19 we progressed to acquire Pyrmont data centre and then St Leonards, both in Sydney, NSW. The synergies from these acquisitions will continue to flow into FY21, which builds the key foundations for supporting our fibre optic rollout.

This infrastructure project will inter-connect 90 leading data centres to our on-net fibre backbone across Australia.

5G Networks has provided guidance for FY21. Revenue will be between $60 million and $65 million and EBITDA is expected to be between $8 million and $8.5 million before material acquisitions. 

About the 5G Networks share price

5G Networks owns and manages critical infrastructure, 24 hours a day, 7 days a week. These are connected via 100Gb links to over 100 data centres, global networks and the company's cloud platform. 

The 5G Networks share price has rallied 76% higher over the past year. It is also 143% higher in year-to-date trading.  

Matthew Donald has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. recommends 5G NETWORK FPO. The Motley Fool Australia has no position in any of the stocks mentioned. 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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