ASX-listed Vocus Group plans to sell its New Zealand assets, which include the Orcon and CallPlus retail businesses, by the end of June next year.
Sydney-based Vocus said the board had decided to sell the New Zealand assets and was in the final stages of appointing an adviser with a view to wrapping up a sale by the end of the financial year on June 30, 2018.
Morningstar analyst Brian Han yesterday said Vocus Group's transformation journey to rehabilitate earnings and restore investor confidence would be arduous.
It was not a process to be hastily judged on short-term indicators.
The telecommunications group wrote down the value of its assets by $A1.47billion ($NZ1.65billion) in the June 2017 year after rapid expansion through a series of acquisitions, including $A199million on the New Zealand business. That shook out interest from private equity bidders, although no deal was forthcoming, and Vocus subsequently identified some Australian assets it could divest.
At an investor briefing on Monday, the company said it would sell the New Zealand business and the Australian data centres, with the proceeds going to reducing debt.
Vocus gave an update on the Kiwi business at the briefing, which showed broadband customer numbers rose to 192,000 as at September 30 from 189,000 three months earlier with average broadband revenue per customer slipping 3c to $71.18. It also added 4000 customers to its energy retailer Switch Utilities, taking it to 9000.
The New Zealand Vocus business more than doubled underlying earnings before interest, tax, depreciation and amortisation to $60.9million in the year ended June 30 on a 126% jump in revenue to $342million after a merger with rival M2 Group brought the CallPlus, 2talk, Orcon, Slingshot and Flip businesses and local fibre line provider previously called FX Networks under one umbrella.
Vocus anticipated the New Zealand business would generate a high single-digit increase in revenue and low single-digit gain in earnings.
Mr Han said the Vocus group had been beset by integration and execution risks, as illustrated by the recent ructions in the boardroom and a series of disappointing trading updates.
The National Broadband Network, or NBN, regime also posed a risk to some of Vocus' businesses.
''The decision to begin a sales process for the New Zealand business also demonstrates the group's awareness of market concerns over its profit sheet.''
With an operating profit base of $A60million and improving consumer broadband metrics, the New Zealand unit could be worth up to $A300million, he said.
''This is precisely why New Zealand has been picked for sale, as it is the only autonomous asset within Vocus capable of instantly moving the needle on the current 2.6-times net debt to profit.''
Management progress on key issues meant Vocus shares had a mini rally, up more than 20% on September lows.
-Additional reporting by BusinessDesk
