5G Networks Limited (ASX: 5GN) is a telecommunications company headquarters in Australia and provides services including hosting services, cloud infrastructure, a virtual private network (VPN) etc. It also provides high-speed internet offer which is underpinned by a lower cost of delivery compared to its competitors
On 26th April 2019, the company released its quarterly activities report for the March quarter 2019 with details of the new issue of shares.
Cashflow for the March quarter
The company received a total of A$629,000 of cash from operating activities. Receipts from customers saw a high inflow of cash of up to A$15.41 million. However, more than $13 million of cash outflow was seen because of payments for product manufacturing and operating costs and staff costs which stood at A$8.63 million and A$4.48 million respectively.
Investing activities saw a negative cash flow of A$315,000 during the quarter while a positive cash flow of A$5,000 was seen through financing activities. At the end of the quarter, the company had net cash of A$3.13 million.
The estimated cash outflow for the next quarter is A$14.03 million, again high spending on Product manufacturing and operating costs and Staff cost is estimated at A$8.39 million A$4.85 million respectively.
The company achieved sustained growth in cash receipts and YTD Cash receipts totalled at $38 million which is 11 times higher than the previous corresponding period (pcp) in FY18. In this quarter alone $15.4 million of cash receipts depicted 8% growth from the previous quarter.
It has also demonstrated successful sales strategy which generated $6.8 million in new and retained annualised contracted revenue. It is delivering on its strength in the media, professional services industries etc. the company expects these customers to drive organic growth.
The acquisition of Melbourne Data Centre (MDC) worth $5.7 million delivered operational synergies and also met customer demand. On 2nd April 2019, the company announced the acquisition of MDC. The company also gained the opportunity of leveraging several cost synergies; $600k of savings will be realised within the first three months. It also raised $8 million capital which will fund the future acquisitions.
The new issue of shares
The company also filed a detailed Appendix 3B on ASX containing all the necessary details about the new issue of shares. It is issuing a total of 2,246,470 fully paid ordinary shares at an issue price of A$0.779 per share. The shares are issued as a consideration to the Melbourne Data Centre Pty Ltd, against the asset purchase agreement settled on 17th April 2019.
The ordinary shares will rank equal to other same class of shares which also includes participation in dividend and voting rights. However, Melbourne Data Centre Pty Ltd has signed an escrow deed which restricts it from selling 50% shares within six months and the remaining 50% within one year from the date of settlement.
Earlier in March 2019, the company had launched Nationwide High-Speed Managed Data Network.
The market capitalisation of the company is A$69.48 million. The 52-week high and low of the stock is A$1.180 and A$0.375 respectively. The stock trading at A$1.100 on ASX (as at Mon 29 April 2019, AEST: 12:01PM) down by 3.084%. In the last six months, the stock has delivered a massive return of 152.22%, and YTD return is even better at 170.24%.
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