Internet services business Vocus Communications Limited (ASX: VOC) this morning posted an underlying net profit of $8.97 million on revenues of $62.75 million for the six months to December 31, 2014.
The underlying profit and revenues are up 54% and 42% over the prior corresponding period (pcp). The company also announced a fully franked interim dividend of 1.2 cents per share, up 50% over the pcp.
A special dividend of 5.1 cents per share will also be payable on the condition that the merger with Amcom Telecommunications Limited (ASX: AMM) goes ahead as proposed.
Structural demand
The company's impressive growth is the result of its position in servicing the demand for high-speed internet and data centre services to businesses throughout Australia and New Zealand.
Its fastest growing division is the fibre and ethernet business, which provides fibre optic cables companies effectively rent out to service their internet and communication needs. Vocus currently owns 687km of metropolitan fibre in Australia and 4,252km of inter-city fibre in New Zealand.
Half-year revenues of $25.2 million (from renting out the fibre's transmission capacity) almost doubled over the pcp. Moreover, with a relatively fixed cost base and plenty more capacity, a high-margin growth outlook is plain to see.
The business has also been expanding its data centre services both organically and via acquisition with revenues of $11.4 million for the half year, up 24% over the pcp. Data centre management looks another growth area as businesses require more facilities of this type to store and manage the ever-increasing amounts of data they create.
The one disappointment was the soft performance of the Internet business, with revenues up 9% over the pcp. This result attributed in part to the performance of its newly acquired New Zealand-based business, FX Networks.
Outlook
Vocus's position in the middle of the digital future means it remains an attractive growth business with potential to keep growing profits and shareholder returns long into the future.
Competitive and technological risks remain, but the company's respected management team have kept it ahead of the game so far and have grand ambitions for its future development.
The stock has slumped 5.7% to $5.62 in morning trade, although has gained around 62% over the past year and remains an exciting investment proposition.
Some investors may be put off by the skinny dividend yield though, and good portfolios need their fair share of high income stocks.
