Vocus Group Limited (ASX: VOC)
VOC Details
Conclusion on sale process for Vocus NZ: Vocus Group is an ASX listed, vertically integrated telecommunications provider, operating in the Australian and New Zealand markets. The Company owns an extensive national infrastructure network of metro and back haul fibre connecting all capital cities and most regional cities across Australia and New Zealand.Vocus Group announced that the Board has now concluded that it is in the best interests of shareholders for Vocus to retain the Vocus New Zealand business. Vocus has ceased all discussions with interested parties in the sale process. Although Vocus received multiple offers for Vocus NZ, in the Board’s view none of these offers appropriately reflected the fundamental and strategic value of Vocus NZ and did not provide sufficient certainty of funding and execution. Vocus NZ is a decent business with strong leadership, and growth profile, a clear competitive position and a track record of delivering solid returns on capital. The Board intends to continue to invest in and grow Vocus NZ which will enable its business to realise its strategic potential for shareholders.
Revenue Bridge from H1FY17 to H1FY18 (Source: Company Reports)
Vocus announced that its lending syndicate has consented to amend its covenants under its existing debt facilities by extending the ‘surge limit’ relating to its Net Leverage Ratio cap of 3.5x. As a result of this amendment, a Net Leverage Ratio cap of 3.5x will remain until 31 December 2018. A Net Leverage Ratio of 3.0x will then apply at the testing date of 30 June 2019 and for the following periods. Also, further to its announcement on 27 March 2018, Vocus has continued to progress on its facility refinance plans and is in the process of finalising its appointment of several banks as joint Mandated Lead Arranger and Bookrunners (“MLABs”) to arrange a full refinance of its debt facilities, including an extension of tenor, an upsizing of the facility and appropriate financial covenants.
Vocus expects to complete its facility on refinance by the end of the current financial year. Based on expected cash flows, including the final ASC project payment in H1 FY19, Vocus expects that its Net Leverage Ratio will peak in H1 FY19 and will organically reduce over subsequent periods. The Group is comfortable that the increased financial capacity and covenants as sought through the refinancing will provide sufficient financial flexibility for the Company to complete its strategic and transformation initiatives over the next few years. The Group revised its earnings guidance for the full year with Underlying EBITDA now expected to be in the range of $365-380 million (previously $370 - $390 million) on revenue in the range of $1.9-2 billion (unchanged). The stock prices have declined in the last one year by 34 per cent but went up by 2.23 per cent on 24 April 2018. We recommend to “Hold” the stock at the current market price of $ 2.290, in view of the strategic and transformation initiatives underway.
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