Vocus shares are getting destroyed

BLee Markham throws a left hand punch against on Andrew Robinson during the English middleweight title in Brentwood, England. Leigh Dawney/Getty Images

Shares in Vocus Communications fell hard after the telco gave its shareholders an update on revenue and profit expectations following a string of mergers and acquisitions.

A short time ago, the shares were down 26% to $4.23.

The negative sentiment spread to competitor TPG Telecom whose shares fell 6.5% to $7.055. The telecommunication services sector was down 1.5% as a whole.

Vocus CEO Geoff Horth told the AGM he expects revenue to be $1.9 billion this financial year and underlying after tax profit of between $205 million and $215 million, or more than double that of 2016.

However, the performance of the Nextgen business, formally acquired last month, was below expectations.

“The FY17 year will be one in which we are focused on execution of our strategy, delivering on the growth potential of the business and integrating the recent acquisitions,” he says.

Vocus looks like it will ease back on takeovers after two years of stellar growth by acquisition.

Chairman David Spence says the company has undergone an amazing transformation and now needs the next two years to get all the businesses together.

“Our CEO Geoff Horth and his management team have a significant task over the next two years integrating the business and ensuring that we maximise the returns from the platforms we have built,” he told the company’s AGM.

Since July last year, Vocus has completed a $1.2 billion merger with Amcom, then announced the $3.8 million M2 merger and $807 million Nextgen acquisition.

Revenue in 2016 was up 455% to $830.8 million and underlying after tax profit up 461% higher at $101.7 million.

The Nextgen acquisition completed in October expanded the company’s fibre network to 30,000 km across Australia.