Vocus's new-look network business a shining light in flat year

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Vocus's new-look network business a shining light in flat year

Vocus’ newly-minted Network Services business was the shining light in an otherwise flat year for the telco and fibre network builder.

Revenue for the year ended 30 June 2019 saw a minor bump of $8 million, bringing the total to $1.89 billion. Statutory EBITDA fell just three percent to $349.1 million, while net profit dropped 44 percent to $34 million.

The bulk of channel-specific news came in July when CEO Kevin Russell detailed the company’s three-year turnaround plan, which included trimming down the number of managed partners from 350 down to 50. You can check out our coverage here.

One new point around the channel was the announcement that Vocus plans to focus more on strategic partnerships with "major technology players" particularly around public cloud, SD-WAN and voice.

The latest results announcement (pdf) also offered a more comprehensive breakdown of Vocus’s four new business units, the second time it has restructured its various operations this financial year.

The new business model is comprised of four business units: Network Services (formerly enterprise, government & wholesale), Retail (formerly consumer and business), New Zealand, and Infrastructure, Operations and Corporate (formerly group services).

The Network Services business is Vocus’s biggest money spinner, adding another $134.2 million in revenue to hit $710 million. The biggest revenue source was data networks, growing 29 percent to $526 million, while voice fell three percent to $89.6 million, NBN rose 85 percent to $52 million, and data centres fell 8 percent to $31.3 million.

Vocus said improved revenue was thanks to the delivery of its Australian-Singapore cable and growth in NBN wholesale services, which was offset by the end of a legacy Nextgen contract and structural decline in fixed voice revenue.

The Retail business, which has come under much scrutiny as of late, dropped 15.2 percent to $826.1 million, driven predominately by a $148.2 million decline in legacy product sales, including PSTN phone lines and NBN.

Vocus also has a turnaround plan for Retail, which included reducing its cost base by driving digitisation and reducing its offshore headcount. The Retail business will look to diversify its revenue mix away from legacy voice and data products in favour of taking marketing share in mobile and energy.

“This has been a year of significant change and our priority has been to deliver our financial guidance whilst laying the key foundations that will enable Vocus to capitalise on our market opportunities and deliver growth from our core network assets,” said Russell. “Our guidance has been met and those foundations solidly set.”

“We have delivered on the immediate priorities outlines at the last result: the right leadership team in place, with the skills and experience to deliver and the re-orientation of our business strategy to capitalise on the strength of our infrastructure assets. The focus is now on execution of our plans over the coming 24 months.”

Vocus’s shares were trading at $3.04 at the time of writing, up 4.11 percent from the opening of trading on 22 August.

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