If EBITDA guidance has been lowered to $365m (let's be honest here, they won't achieve the mid-point), this implies 2H18 EBITDA of $176m. So on that annualised run-rate, their net leverage ratio will be 2.99x.
Talk about walking on thin ice.
This assumes:
a) debt does not increase?
b) it has been eluded that they cannot sell their data centres at a multiple that helps their situation i.e. covenant ratios
c) ACCC data has shown Vocus' NBN share has turned sharply lower
d) see slide 6, broadband subs are flat. This means they are losing market share.
e) points c) and d) will only hurt margins
f) bringing in more skill without eliminating senior executives won't help margins
I admit I have picked out only a few of the risks here and ignored blue sky scenarios, but given how close they are to the edge, one needs to understand what might push them to the downside, rather than just hope-for-the-best.
$585 million of debt is due in May 2019, yet in slide 25 they are talking about FY20!
If they don't get it right in the next 12 months, on my numbers there won't be an FY20.
Institutional shareholders who also sit on the board will be restricted from buying/selling, so this is effectively their last chance to get out. They have to choose between staying safe vs. being sorry (to their investors).
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