Earnings season: Vocus share price on watch today

The Vocus Group Limited (ASX: VOC) share price is on watch this morning following the release of its FY 2020 results.

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The Vocus Group Ltd (ASX: VOC) share price is on watch this morning after the company released its FY 2020 results. Vocus recorded total recurring revenues of $1752.6 million. This was a slight 1% decline on the prior year .

Sharp drop in retail revenues

Overall revenues in Vocus' retail division fell significantly by 9% over the prior year to $748 million. However, the fibre and network solutions provider did see an improvement in the decline of its consumer revenues by -3% for the full year. Meanwhile, consumer revenues were stable in the second half of the year.

Vocus continues to suffer from the impact of the migration of legacy fixed line services to the National Broadband Network. This is particularly the case within in its small business division. Revenues within the division declined sharply by 27% during FY 2020.

Overheads within the retail division declined by 14% due to a disciplined cost control strategy. The overall retail business saw a strong fall in underlying EBITDA of 22% to $80.1 million. This was mainly driven a decline in EBITDA in its SMB division as well as the further migration to the NBN.

Strong growth in network services 

Vocus's  network services division was the standout performer for the Vocus share price during FY 2020.

The division recorded EBITDA growth of 10% for the full year. This was a very strong 10% growth on the previous year. Meanwhile, recurring revenue for the division increased by 6% to $626.3 million.

Revenue from its high-margin data networks division grew 3% during FY 2020. National Broadband Network (NBN) revenue growth was particularly impressive. It was up by a massive 42% during the 12-month period.

Vocus also now has achieved a market leading position in the enterprise ethernet and business satellite product segment. Growth in Vocus' wholesale and international division also was a strong contributor to network service growth. Further sales momentum with respect to capacity on Australia Singapore Cable was a significant reason for this.

The New Zealand division was another strong performer for the Vocus share price. Recurring revenue grew by 6% to $378.3 million.

Group managing director and CEO Kevin Russell said the FY20 results showed the company was firmly on-track in its three-year turnaround, meeting all aspects of financial guidance that was first provided in July 2019. He said:

"Vocus Network Services (VNS) built momentum in FY20, winning market share in our core markets with growing underlying recurring revenue and an improving customer profile. We also launched our new Vocus brand and saw a demonstrable improvement in brand recognition and consideration."

Market outlook for the Vocus share price

Vocus anticipates a stronger year in FY 2021, with its network services division expected to grow by 5% during this period. Underlying EBITDA growth is expected to be in the range 8%  to 12%.

For the entire Vocus Group, underlying EBITDA is expected to be between $382 million and $397 million. While the capex range for Vocus Group is expected to be between $160 million and $180 million.

Motley Fool contributor Phil Harpur has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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