Shares in fast-growing internet services provider Vocus Communications Limited (ASX: VOC) edged higher this morning after the company revealed underlying EBITDA of $62.3 million on revenue of $176.3 million for the six-months ending December 31 2015. The results are up 181% and 188% respectively over the prior corresponding period thanks to a juicy combination of organic and acquisitive growth.
The big growth driver was the acquisition of Western Australia-based rival fibre-optic internet and data centre business Amcom that was completed in July 2015, while the group also completed its merger with internet broadband provider M2 Group this February.
The combination of M2 Group's retail and wholesale internet brands like Dodo, Commander, engin and iPrimus with Vocus's physical infrastructure of high-speed fibre optic internet cables offers the opportunity for the combined group to compete with old enemy TPG Telecom Ltd (ASX: TPM).
The Vocus Group now operates 1,719km of Australian fibre and 4,500km of New Zealand fibre, with more capex earmarked for susbsea-internet cables and metropolitan fibre network expansion.
Despite shares on issue more than doubling over the period to 226.7 million to finance the recent Amcom acquisition underlying earnings per share still grew a whopping 39% to 12.07 cents per share, with Vocus able to dish out 9.5 cents per share in total dividends for the period.
The combined M2 / Vocus Group now has 532 million total shares on issue, a market cap of around $4 billion, and net debt of $670.8 million. The combined group expects to extract synergies of $40 million by the end of financial year 2018 with pro forma underlying net profit of $82.5 million on total revenue of $883.7 million for the half year ending December 31 2015.
Integrating the two groups will be a big challenge, although cost savings look possible and M2 and Vocus possess two entrepreneurial and well regarded management teams with a consistent track record of success in the fast-growing internet services space. If able to deliver on the integration this stock may have an especially bright future.
