The Uniti Group Ltd (ASX: UWL) share price is plummeting after the release of the company's earnings for the first half of financial year 2022.
At the time of writing, the Uniti share price is $3.325, 10.38% lower than its previous close.
Image source: Getty Images
Uniti share price plunges despite record results
- Revenue came to $109.5 million – 98% higher than that of the first half of financial year 2022
- Underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) of $70.5 million – a 140% increase
- Reoccurring revenue now makes up 90% of total revenue, coming to $99.2 million
- Operating cash flow reached $65.4 million – a 130% increase
The market is seemingly disappointed by the technology infrastructure constructor's performance over the first half. That's despite it posting a record result.
Additionally, in calendar year 2021, the company's underlying EBITDA grew by 30% to $135 million.
According to Uniti, that demonstrates "exceptional wholly organic growth" from its acquisitions of Opticomm and Velocity in 2020.
The largest indicator of growth, said Uniti, is its 'win rate' of new fibre-to-the-premises (FTTP) developments and strategic partnerships with apartment and housing developers.
It secured 115,000 new FTTP contracts in 2021, taking its contracted order book to 292,000.
However, the company's earnings growth from construction revenue was around $5 million lower than the second half of financial year 2021. The drop was due to delays caused by lockdowns in Eastern Australia.
That will see revenue from construction deferred to later periods.
Uniti's wholesale, enterprise, and infrastructure (WEI) digital infrastructure and technology business accounted for around 95% of its EBITDA before overheads last half.
Meanwhile, the company's telecommunications business unit grew its customer base and earnings. It contributed EBITDA of around $4 million.
What else happened in the half?
The company's EBITDA margins expanded to 64% of revenue in the first half.
It believes that leaves it in a strong position to fight against macroeconomic inflationary pressures.
It also paid $36.5 million off its borrowings last half, leaving it with $172 million of net debt.
Uniti also announced an upcoming on-market share buyback program.
What did management say?
Uniti managing director and CEO Michael Simmons commented on the company's first-half results, saying:
Our commitment to our shareholders is to build a strong, sustainable company. We are doing that by continuing to win in market, building best-in-class fibre access networks, and filling those networks with customers – 'Win, Build, Fill' remains our core strategy.
Well over 90% of our earnings are now generated from high margin, recurring, annuity revenues which are delivered predominantly on our owned super-fast FTTP networks, and this ratio will continue to expand as our contracted FTTP order book of nearly 300,000 premises deploys over the years ahead.
With integration and simplification largely completed in 2021, Uniti is now primed for continued organic growth in greenfields and adjacent property markets and inorganic growth through asset acquisitions aligned to our core infrastructure business.
What's next?
Uniti believes it is on track to meet its financial year 2022 consensus underlying EBITDA of $145 million, notwithstanding COVID-19's impact on construction.
Additionally, its property developer partners are committed to maintaining and expanding their pipelines.
Particularly, as residential buyer demand and population growth are expected to return to pre-pandemic levels in financial year 2023 and will likely be driven higher by international migration.
Uniti share price snapshot
Today's fall puts the Uniti share price well and truly in the year-to-date red.
It is currently around 27% lower than it was at the start of the year. Though, it's still 70% higher than it was this time last year.
