The Vocus Group Ltd (ASX: VOC) share price is on course to finish the day with a solid gain.
In late afternoon trade, the telco’s shares are up 2% to $5.10. This follows the release of its half year results this morning.
How did Vocus perform in the first half?
For the six months ended 31 December, Vocus reported a 2% increase in recurring revenue to $896 million.
This was driven by an 11% increase in Vocus Network Services revenue to $340.2 million and a 4% lift in New Zealand revenue to $195.8 million. This offset a 6% decline in Retail revenue to $360 million.
And thanks to its good costs control, underlying operating earnings grew 1% to $192.7 million.
However, due to higher depreciation and amortisation, Vocus wasn’t able to grow its bottom line. It reported an 11% decline in underlying net profit after tax to $45.4 million.
How does this compare to expectations?
According to a note out of Goldman Sachs, Vocus beat on the top line by 1% but missed on the bottom line by 6%.
Goldman commented: “Compositionally the result was strong, with the key Network Services segment revenues +5% vs. GSe (but higher costs resulted in an inline EBITDA), while non-VNS were -1% vs. GSe with better cost driving an in-line EBITDA.”
Guidance upgraded
Offsetting the earnings miss and giving the Vocus share price a boost today was its guidance for FY 2021.
Management advised that it now expects Vocus Network Services recurring revenue growth of 8% for the full year. This is an increase from 5% previously.
In light of this, the company has narrowed its underlying Vocus Network Services EBITDA growth guidance range to 10% to 12%. Previously, its guidance range was 8% to 12%.
Overall, management believes it is well-placed to achieve its group underlying EBITDA guidance of $382 million to $397 million. This will be up 6% to 10.1% from FY 2020’s underlying EBITDA of $360.5 million.
Finally, the company also revealed that its FY 2021 capex guidance has increased to $185 million to $200 million. Previously it was $160 million to $180 million. However, this will be be funded by customers.
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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