Vocus wipes $100M off revenue target after review

Blames lower than expected billings and re-jigged terms on some large projects

Vocus Group has wiped $100 million off its revenue target for the financial year ending 2017, blaming the forecast downgrade on lower than expected billings in its enterprise and wholesale business, and re-jigged terms on a number of large projects.

The company also pointed to the divestment of its Aggregato Australia business and the Cisco HCS voice platform, equating to around $20 million in revenue.

The publicly-listed telecommunications provider made the revision of its revenue forecasts following an accounting review of its negotiated contract terms on a number of large projects included in the 2017 second half forecast.

The company said in a Macquarie Conference presentation that the revenue associated with the projects in question will be predominantly recognised in future periods rather than within the 2017 financial year, ending June.

“The positive cash flow benefits of these contracts is now expected to be $45 million across FY17 and FY18,” the company stated in its trading update, published by the Australian Securities Exchange (ASX) on 2 May.

The company said that its underlying pre-tax earnings (EBITDA) for the 2017 financial year is now expected to be $365-375 million, down from its previous forecasted range of $430-450 million.

This drop in forecasted earnings was driven by lower forecasted billings and an increase in its service delivery headcount in the enterprise and wholesale division, higher than expected forecasted expenses in group services and other trading variances.

The forecast downgrades comes after a big and somewhat tumultuous year for the telco, which not only saw it undertake some big mergers acquisitions, including Nextgen Networks and M2, but also saw the departure of some of its top brass after boardroom wrangles.

In October, a failed plan to shake-up the leadership landscape at Vocus led to the departure of the company’s founder, James Spenceley, and former Amcom chairman, Tony Grist, from the board of directors.

The resignations followed a “difference of opinion” between the departing directors and majority of the board about the future leadership of the company, with the board voting down a proposed plan to change the company’s CEO early next year.

While Vocus has since settled down on a new boardroom line-up, the company has also found itself entangled in a legal battle between IBM Australia and Nextgen Networks over its subsidiary’s role in the bungled 2016 eCensus project.

In a legal action filed with the NSW Supreme Court late last year, IBM Australia alleges that Nextgen Networks and Vocus Communications were negligent and in breach of contract in relation to their work associated with the 2016 eCensus portal.

The court documents also reveal that IBM wants Nextgen Networks to pay for the settlement it reached with Australian Government over the Census troubles, alleging that Nextgen Networks is liable for the claim brought against IBM by the ABS.