The Uniti Group Ltd (ASX: UWL) share price has dropped lower this morning following the release of its full year results.
At the time of writing the shares of the Telstra Corporation Ltd (ASX: TLS) challenger are down 3.5% to $1.58.
How did Uniti perform in FY 2020?
Uniti was a solid performer in FY 2020 and delivered strong sales and earnings growth thanks largely to the acquisitions of LBNCo, OPENetworks, and 1300 Australia during the year and organic growth in the second half.
For the 12 months ended 30 June 2020, the company delivered a 306% increase in revenue to $58.2 million.
Thanks to a notable increase in its margins, Uniti’s earnings grew at an even quicker rate. Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) came in at $26.5 million. This compares to negative EBITDA of $0.9 million a year earlier.
Pleasingly, this EBITDA growth looks set to continue in FY 2021. At the end of the period, the company’s annualised underlying EBITDA run rate stood at $41 million.
Its performance in the new financial year will also be boosted by the $532 million acquisition of OptiComm. This acquisition is expected to complete in October and be 23% earnings per share accretive (inclusive of synergies).
If the OptiComm acquisition completes successfully, management expects to be operating on an EBITDA run rate of $90 million per annum.
Management commentary.
Uniti Group’s Managing Director and CEO, Michael Simmons, was pleased with its transformational year.
He commented: “FY20 has seen Uniti Group completely transform from a loss-making, fledgling start-up to a highly profitable, diversified and growing organisation, with the platform set for further marked expansion over the coming years.”
“Whilst we are pleased to have secured a number of materially accretive business acquisitions during FY20, what we are most proud of is that our team has delivered strong organic growth in the last 6 months, a period in which no new acquisitions were undertaken and the nation was (and remains) in the midst of dealing with the impacts of COVID-19 and with no financial contributions received from JobKeeper.”
“This is evidence that we are building a business with highly defensive qualities, capable of making strategic acquisitions, integrating them effectively, and delivering forecast earnings accretion, enhanced by organic growth,” he added.
Outlook.
No real guidance has been provided for FY 2021, but the company has spoken about its plans.
Management has suggested that its acquisitions could continue for its Consumer & Business Enablement business in FY 2021, subject to market and regulatory changes.
It also advised that it expects its Wholesales & Infrastructure business to continue to grow in FY 2021. This is based on strong contracted pipeline. It notes that there has been minimal slowdown in the construction of new projects since COVID-19. As a result, strong net active port growth is expected despite higher vacancy rates and expected delays in/lower settlements in the property sector.
The company also revealed that adjacent market opportunities will be actively pursued during the year.
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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