A year or so ago telco Vocus Group would have been near the top of the list of companies in trouble (in the minds of investors) as it struggled with too much debt, too little cash flow and management, and board problems.
AGL shares at least steadied yesterday after the solid 7.7% sell-off on Tuesday in the wake of news of a firm but indicative approach to telco Vocus at $4.85 a share and the $100 million cut to expected 2019-20 earnings from a lengthy electricity generator outage at the Loy Yang station in Victoria.
UBS notes Vocus has abandoned the NZ asset sale process. The answer to whether the company needs to raise equity to de-leverage depends on the new covenants negotiated as part of the re-financing, the broker suggests.
The new FY17 guidance for EBITDA is now $365-375m, around 16% below prior guidance. UBS observes half of the downgrade relates to an accounting review and the other half to genuine underperformance in operations.
The company has undertaken a lot in the last 18 months, Macquarie observes, including mergers and acquisitions of Amcom, CallPlus, M2 and NextGen. This is occurred against the backdrop of a rapidly evolving Australian fixed line market due to the roll out of the NBN.