Home Business Telecommunications Vocus says it will take hit of $1.5b, warns of lower profit

Vocus says it will take hit of $1.5b, warns of lower profit

Vocus Telecommunications has advised investors that it will take an impairment hit of $1.53 billion across its Australian and New Zealand operations and that its profit for the full year 2017 will fall short of guidance.

In an announcement to the ASX on Thursday, the company, Australia's fourth largest telco, said its unaudited earnings before interest, taxes, depreciation, and amortisation was $366.4 million, which was within its guidance range of $365 million to $375 million.

It said net profit after tax was $152.3 million below the company's guidance range of $160 million to $165 million due to net finance costs being higher than forecast and also the fact that it had to pay a higher effective tax rate of 33.4%.

Vocus has had two takeover offers this year, one from the American equity group Kohlberg Kravis Roberts and the other from an Asian private equity firm, Affinity Private Partners.

The Affinity offer is the same as that made by KKR on 7 June and, at $3.50 a share, prices Vocus as being worth $2.2 billion. Including debt, that comes to $3.3 billion.

Vocus shares ended Thursday at $3.21, the same as on the previous day. The company is due to announce its annual results on 23 August.

In the ASX announcement, Vocus said it had carried out a review of its carrying assets and goodwill as part of a full-year audit.

As a result, Vocus said it would recognise a non-cash impairment of $1.532 billion post-tax spread across both its Australian ($1.333 billion) and New Zealand ($199 million) cash generating units.

In the last 11 months, Vocus has lost almost 70% of its value in its bid to incorporate a number of acquisitions, most recently the $807 million purchase of Nextgen.

Vocus provides telco, data, cloud and energy services through its Commander, Dodo and iPrimus brands. It also owns Nextgen Networks which it acquired in October 2016.

In May, Vocus was reported to be thinking of a sale of its data centres to service its debt. The company was said to have reached a preliminary agreement on the sale, with NEXTDC among those expressing an interest.

Credit Suisse and Goldman Sachs were reported to be around the sale.

Vocus has a fibre network across and in between major cities and 112 of 121 points of NBN interconnect.

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Sam Varghese

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A professional journalist with decades of experience, Sam for nine years used DOS and then Windows, which led him to start experimenting with GNU/Linux in 1998. Since then he has written widely about the use of both free and open source software, and the people behind the code. His personal blog is titled Irregular Expression.