A Glance at The Half-Yearly Results of Two Communication Players- SWM, SLC

The communication services sector is one amongst the sectors on ASX, which has delivered a total return of 27.6% in 2019. The sector surpassed its benchmark index during this period. The YTD price return of the communication services sector is 6.07%.

In this article, we are covering two of the small players from this sector who have released their half-yearly results. These players are Seven West Media Limited and Superloop Limited.

Let’s dig into their results and see how the companies performed in their half-yearly results.

Seven West Media Limited (ASX: SWM)

Seven West Media Limited (ASX: SWM) ranks amongst the top leading integrated media companies in Australia with a market-leading presence in broadcast television, magazine & newspaper publishing and online.

On 18 February 2020, the company released its 1H FY2020 results for the half-year ended 28 December 2019. Let’s take a look at the highlights of first half FY2020.

  • Advertising market conditions remained challenging during the period with a drop of 7% in metro FTA (free trade agreement) TV in the half against a total advertising market drop of 8.5%.
  • #1 metro TV revenue share went up by 0.4% pts to 38.8% share during the period (38.4% including Broadcaster Video on Demand (BVOD))
  • Group revenue dropped by 3.2% as a result of weaker advertising markets.
  • Underlying Group EBIT declined by 20.8% to $119.7 million as compared to the previous corresponding period (pcp).
  • Digital EBIT grew by 205% on pcp.
  • Significant items of $165.6 million before tax, pertaining to impairments & difficult deals
  • Net debt of $541.5 million, which represents 2.4x net debt to EBITDA (comprising proceeds from the divestment of Redwave).

Outlook:

SWM considers that trading conditions have remained consistent with 1H FY2020. Depending on the market condition, the company expects its underlying EBIT to lie in between $165 million to $175 million.

The company expects that there would be a growth of more than 30% in BVOD market during FY2020.

2020 Strategic Priorities:

  • New content strategy targeting primetime entertainment and 25-54 to launch in Q4 2020.
  • Accelerate BOVD growth across Olympics, targeted content, scale WAN paywall.
  • New cost program aiming an additional $20 million for execution in 2H20 for gain in FY2021.
  • Put an end on Pacific sale.
  • Strategic assessments of undervalued or surplus assets after inbound investigations.

Stock Information:

The shares of SWM have responded in a positive way after the release of the half-yearly result. At AEDT 3:15 PM on 19th February 2020, the shares are trading at $0.212, a growth of 3.415% from its previous close. The shares are near its 52 weeks low price. Around 7,765,789 shares have traded on ASX. SWM’s market cap on 19 February 2020 stood at $315.3 million and the company has ~ $1.54 billion outstanding shares.

Superloop Limited (ASX: SLC)

Superloop Limited is a standalone provider of connectivity services building, designing & operating networks all through the APAC metro locations.

Superloop Limited (ASX: SLC) has released its 1H FY2020 results for the half year closure on 31 December 2019.

Let’s take a look at the 1H FY2020 highlights:

  • EBITDA during 1H FY2020 was in line with the company’s expectation. It was $4.1 million for the period. Total group revenue during 1H FY2020 was $51.3 million.
  • Core connectivity revenue went up 48% year on year with growth in customer buying rate and Superloop delivering at a faster rate. This is helping to establish future momentum.
  • Reported strong 1H FY2020 sales performance of $7.8 million annualised new monthly connectivity recurring revenue, with numerous multi-year deals. These include that Superloop would provide Aurizon’s high bandwidth national network. Aurizon is the largest rail freight operator in Australia.
  • Superloop Home Broadband NBN services got launched completely. From July 2019, there was an increase in the number of subscribers by 30%.
  • Reported a 70% drop in the capital expenditure on property, plant and equipment, year on year.
  • Operational expenses, mainly from employee costs, reduced 14% year on year.

Financial Highlights:

A Glance at Superloop’s portfolio connecting APAC region:

Asia Pacific Core Fibre Network:

It includes a fibre network that connects key hubs in Singapore, Australia & Hong Kong & INDIGO subsea cable. This region reported a 48% growth in its revenue to $17.2 million as compared to the previous corresponding period.

Platforms leveraging APAC Fibre Network:

It comprises of Fixed Wireless (Connectivity), Guest WiFi (Broadband), Home Broadband (NBN & FW) CyberHound Security (Services). The segment reported a drop in its revenue by 7% to $23.5 million.

Non-core CMS:

It comprises of Cloud Managed Services, delivering hosted IT & equipment purchasing to small businesses. The revenue from this portfolio declined by 31% to $7.4 million.

FY2020 Focus Area:

  • Complete additional master service agreements, contracts as well as orders to provide connectivity to main bandwidth clients across its on-net footprint.
  • Utilize unique Superloop national backbone extension of NBN to service providers & enterprises in Australia.
  • Continue to drive operational competences with specific attention on lessening delivery cycle in order to provide customer benefits & revenue realisation.
  • Leverage core fibre networks to broaden Superloop’s platform entry for campuses as well as enterprises throughout the Asia Pacific region.

1H FY2020 Progress:

  • During the period, SLC entered into 16 new Master Service Agreements signed with new clients which includes a chief global data centre operator & Aurizon.
  • Employee benefits costs declined by 14% as compared to the previous corresponding period. Broadband COGS got lowered with the switch to Superloop on-net network.
  • Book to Bill cycle declined from 104 days to 59 days.
  • All Superloop Home Broadband clients moved to on-net & most of Guest WiFi customers have moved to the new platform allowing scalable future growth, with new hospitals & campuses coming online.

Outlook:

  • Superloop is placed satisfactorily for future value creation. Most of its capital expenditure is complete. Incremental capex includes primarily success-based projects & process automation
  • Proof points in sales pipeline translating into new clients and would help in its future revenue growth on SLC owned core fibre connectivity.
  • The company’s on-net footprint in Australia & Asia Pacific is placed to get benefitted from the growing demand for broadband & connectivity.

Stock Information:

The shares of SLC have responded in a positive way after the release of the half-yearly result. At AEDT 3:26 PM, the shares are trading at $0.800, a growth of 6.67% from its previous close. Around 2,576,047 shares have traded on ASX. The market cap of Superloop Limited on 19 February 2020 stood at $365.87 million and the company has ~ $ 274.4 million outstanding shares.


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