Vocus (ASX: VOC) has reassured this morning with its FY20 guidance and the announcement of refinanced debt.
What is Vocus?
Vocus is a vertically integrated telecommunications service provider, operating in the Australia and New Zealand markets. Thanks to a merger with M2 Group, it is responsible for numerous retail and business telco brands, such as Primus.
What Vocus announced
Vocus has both refinanced and extended the duration of its existing debt.
The new debt facility is AU$1.255 billion and NZ$135 million with a weighted average of 3.5 years. The interest and gearing ratios are unchanged. However, the net leverage ratio (net debt / EBITDA) has been changed to a maximum of 3.25x at 30 June 2020 and 31 December 2020, reducing to 3x from 30 June 2021 and beyond.
At the most recent testing date, December 2019, the ratio was 2.8x. This is expected to reduce at 30 June 2020.
Vocus has also reaffirmed its FY20 financial guidance whilst tightening the guidance range.
FY20 EBITDA is expected to be in the range of $359 million to $369 million. EBITDA growth of 10% is expected in the core Vocus network services business. Cash conversion for the year is expected to be 90% which is helping to reduce net debt.
Summary
Vocus is steadily improving its position. A while ago it looked a bit touch and go. It’s not the type of telco that I’d want to invest in right now. Shares like MNF (ASX: MNF) and TPG (ASX: TPM) attract me more at the moment.
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Disclosure: At the time of writing, Jaz doesn’t own shares in any of the businesses mentioned.
