Vocus Communications Limited AGM - 23 October 2012 at 11.00am
Chairman’s and CEO’s Address
1. Chairman’s Address (David Spence)
Welcome to the 2012 Annual general meeting of the Company and thank you for your attendance today. I confirm we have a quorum.
Let me introduce my fellow Directors. Your Board today includes: • Nick McNaughton
• Jon Brett • John Murphy • Steve Baxter
I’m also joined by our executive directors - James Spenceley, our founder and CEO, and Mark de Kock our Executive Director of Strategy. Completing the line up on the platform are Rick Correll our CFO, and Mark Simpson our General Counsel and Company Secretary.
Despite all the growth and changes to the company we have experienced, we
continue to have a very stable Board and leadership team, with no changes from last year.
Our second full year as a public listed company has again been an exciting one with the company achieving all its growth, profit and diversification goals during the 2012 financial year.
Today, Vocus provides four core services: Internet transit, voice services, data centres and fibre cables on core routes in capital cities. Fibre and ethernet products are now 12 per cent of the company’s product mix, while data centre services now contribute nearly 21 per cent.
The growth in these services in the last 12 months has been extraordinary, reflecting the astuteness of the vision to grow the company beyond a pure internet bandwidth play into the telecommunications provider of choice for the cloud revolution for both Australia and New Zealand.
Internet transit and voice – the original products we supplied - now make up only 45 per cent and 22 per cent, respectively, of total revenue.
The remaining 33% is accounted for by our rapidly growing fibre and data centre businesses. This represents a substantial contribution towards the year’s growth, and we expect that to continue with an even greater weighting towards data centres and fibre into FY2013.
James Spenceley will present a more detailed analysis shortly but in summary I’m very pleased to report that in the year ended 30th June 2012 we achieved:
an increase in revenue of 46%
an increase in underlying EBITDA of 70% an increase in Net Profit after Tax of 52%
Underlying diluted earnings per share increased to 13.28 cents per share from 9.91 cents per share.
Key achievements
FY2012 has been another big year for Vocus. For the third year in a row we made Deloitte’s Fastest Growing Technology Company list and the BRW Fast Starters table. I am also particularly pleased that we were nominated and won the ACOMMS Customer Service Award in July 2012. The combination of fast growth based on exceptional customer service is a true reflection of the Vocus business model.
Bedding down and growing the fibre business, securing the high profile acquisition of Maxnet and growing the New Zealand brand and customer base have kept things buzzing. Add to that the unprecedented Sydney Harbour crossing fibre project, and the energy and focus of the Vocus team is clear.
A key strength of Vocus has been our ability to respond quickly to opportunities as they present themselves to us. In order to enable us to continue to react in short timeframes to market opportunities as they arise, we went to the market this year and raised a further $21.7 million. This additional capital sets Vocus in good stead to implement our existing capital management plans and to continue to assess complementary acquisitions. This also remains a key part of our strategic focus going forward. I would like to thank all new and existing shareholders who participated in our equity raising during the year.
Let me comment briefly on the market.
The Market
The insatiable demand for high bandwidth remains although we are seeing some reductions in international internet transit pricing. We believe that the “cloud”
revolution and the trends to outsourcing, including for example SaaS (Software as a Service), will continue and will drive demand for data centre capacity and the
associated connected fibre routes.
In the year ahead we plan to continue to focus on fibre opportunities, revitalize our voice offerings as well as keep a look out for complementary acquisition
opportunities. As a Board we are very aware that growing these businesses requires investments in administration systems, workflow processes and customer support systems. We will endeavor to ensure that we install, implement and transfer to new systems as fast and as efficiently as we can, as and when they are required. This however requires careful planning and we are happy to report that in this area of our business we think we are currently getting it right.
Now to the Thank You’s.
On behalf of the Board I want to thank James Spenceley, the executive leadership team and all our staff for the huge effort during this past year. I would also like to welcome all the Maxnet staff to the Vocus team. Integration of product, services and cultures is never easy but we are delighted by how the staff are jointly managing the integration and re branding of the company to Vocus.
We have a lot of confidence in the team and I’m sure they will continue to bring focus and energy to the program we have planned for 2013 which includes looking at further opportunities and expanding our reach.
In relation to this, I would recommend the approval of the Loan Funded Share Plan and issue of shares to senior executives proposed at today’s meeting. The Share Plan gives the Remuneration Committee greater flexibility in terms of the
remuneration packages it can offer to our key employees and allows the Company to remain competitive. Without the ability to compensate senior staff with share based incentives based on increasing the value of today’s share price, we would be
required to pay substantially higher salaries and short term bonuses, which we have so far been able to avoid. It makes no sense to me to pay high salaries instead of a share of the increased value of the company. Aligning our senior management’s interests with those of our shareholders makes much greater sense in a company like Vocus.
I would also like to express my thanks to all of our loyal customers. Our goal is to continue to provide the best possible service, and we look forward to continuing to work closely with you over the coming year and beyond in order to ensure your success.
I'd also like to thank my fellow directors for their work this year. In particular, I must single out Jon Brett for the extra effort he puts in to assist the management team and my Deputy Chairman, Nick McNaughton, for his continued wise counsel.
On behalf of the Board, let me close by again thanking our employees, our
shareholders, all my fellow Directors and you, our stakeholders, for your continued support.
I’ll now hand over to James Spenceley.
2. CEO’s Address (James Spenceley) Thank you David,
First of all I would like to thank the staff for their efforts over the previous 12 months. It was indeed another fantastic result for the Company and directly attributable to the experience, hard work and culture of the Vocus staff.
As David mentioned, FY12 was a transformation year for the Company with us successfully moving into two new infrastructure based products and so successfully diversifying the business from its original Internet and voice product base. We now provide four key products which are highly in demand, as businesses continue to use more data and shift their infrastructure to data centres and the cloud.
Our entry into the Data Centre and Fibre markets was highly successful, showing that the Vocus brand was instantly trusted for new technical products offered by the
Company.
In our first year as an operator of fibre optic infrastructure we have seen significant success in capital cities and major metropolitan areas. The fibre network has grown from 59kms to 235kms during this period and at 30th June 2012 had 166 on-net buildings. Today, Vocus fibre is within a couple of hundred metres of every CBD building on the east coast.
Our data centre business also grew during the FY12 year, with revenue up 199% to $9.4m, showing an increase in the size of our facilities as well as an increase in the utilisation of those facilities. During the year we acquired the Maxnet business in Auckland adding an Auckland data centre to our stable.
FY12 Highlights
While on this topic I'd like to talk about some of our highlights during the year. • Maxnet acquisition
This acquisition gives Vocus a larger presence in New Zealand as well as an industry leading data centre in the business hub of Auckland. In addition, we have gained staff and skills that will benefit the business on both sides of the Tasman.
• Sydney Harbour Crossing
After significant planning, Vocus completed its own fibre crossing of the Sydney harbor, involving almost a dozen government authorities. The cable ship completed laying the armoured cable on the floor of the harbour on June 14th. The laying of fibre directly across the harbour guarantees Vocus the lowest latency path between the CBD and the North Shore (including the ASX Liquidity Centre).
• Capital raising
We successfully completed an Institutional placement and issue under a Share Purchase Plan, raising $21.7m. One of Vocus' advantages has been our speed and agility. Having access to this capital will allow us to deliver continuing growth (both organic and via acquisition).
• Southern Cross renegotiation
Just after the end of the financial year, Vocus was able to secure a renegotiation of our capacity on the Southern Cross cable as well as purchase additional capacity. With the growth in data demand every increasing, this capacity will set Vocus up for a number of years
• Singapore POP
Almost 12 months ago we launched our first expansion to Asia via a Point of
Presence (POP) in Singapore and capacity back on the lowest latency cable path to Australia. This product has proved popular with Asian carriers requiring capacity back to Australia as well as the reverse. Since launching, Vocus has upgraded capacity due to demand a number of times.
FY13 Preview
Looking forward I would like to share with you some of our initiatives for the coming FY13 year.
• Hong Kong POP officially signed and build in progress.
With the success of the Singapore presence, I am pleased to confirm Vocus has signed and begun the process of building a POP in Hong Kong. With the capacity on a direct cable system from Hong Kong to Sydney, we expect this will leverage strong demand for our existing products and services between these two locations.
• Second Melbourne DC lease signed and work commenced
With our original Melbourne Data Centre (MEL01) being full for a number of years, I'm delighted to announce that we have signed the lease on the former ASX data centre located in Collins Street in the heart of Melbourne's CBD. The facility,
historically operated by the ASX, will receive a multi-million dollar upgrade ready for Vocus clients in the new year.
• Auckland Expansion leases signed and work commenced
With access to the larger Vocus sales organisation, we have now almost filled the existing data centre in Auckland. As a result we are about to sign a long term lease of a facility in the same business park as our current Albany site to expand the
existing data centre. The multi million dollar project is well under way and will provide growth for the New Zealand side of the business in FY14.
The above two new data centre projects will increase the total data centre floor space operated by Vocus from 2471sqm to 3263sqm – an increase of over 32%.
While the above growth opportunities are currently a negative contribution to earnings for H1FY13, we expect them to be positive contributors in FY14. Setting the company up for growth.
As FY12 was a transformation year in terms of products we offer, FY13 is transformation year in terms of the size and scale of the business we are in the process of building. As a result we have taken the opportunity to invest in the human capital we see required to continue to expand the business and get us closer to our goal of being the leading telco challenger brand in corporate Australia. I'm pleased to confirm we have recently strengthened our management team with the following additions.
Sales Manager - Direct, Evan Savva
Evan has a long history in telco sales management, having worked in senior sales management roles for AAPT, BT and Optus. Having successfully built new sales teams as well as motivated and developed existing teams, Evan is perfectly suited to building our Corporate sales team and getting the same level of success from the Corporate market we have enjoyed in wholesale.
General Manager, Voice - Hamish Priddle
Hamish has more than a decade of experience in the technical and commercial aspects of the Voice Industry. Hamish is tasked with putting focus back into our existing voice business as well as growing the product and market for the Vocus voice services. Voice is still a large component of a corporate monthly spend and
having a senior manager focused entirely on this business unit will result in Vocus growing this part of the business as well as offering an important lead generation for the other business units.
Business Finance Partner – Chris Lira
Taking an outcome oriented, committed approach to his endeavours, Chris has 19+ years experience working in financial / accounting roles. This includes time at Computer Sciences Corporation (CSC) and most recently a similar position within NBN Co.ʼs Network Operations, Data Centres and End User Technologies group where Chris provided full business driver analysis, assisted with long term plans and forecasts and helped to ensure business and operations measurement. Chris will assist us in measuring business delivery metrics and working with various units within the business to operate more efficiently and fully leverage our cost base and investments.
COO – Luke Mackinnon
Luke has 15+ years in ISP and telco senior management. As well as starting and running his own ISP in the mid 1990s (which he sold to EFTel) he has recently been the Director of Operations for Fetch TV. Luke has the perfect balance of technical and commercial experience, which is critical for a company such as Vocus. He is taking on the newly created role of COO and is tasked with running the technical and operational side of the Vocus business. As we continue to increase the number of services, customers and scale of the business having a strong operational manager is critical to our success and I personally know Luke is the right person for the Job. On that note, I would again like to again thank the staff but would very much also like to thank our shareholders (both new and old). The continued support from our shareholders not only motivates the staff but allows us to stayed focused on our role of building the best possible company.
