Venture Advisory Monthly Wrap – July 2019

Updated: Sep 18, 2019

Key takeaways from the Telecommunications & ICT, Media and Technology Sectors

During July 2019, Australia’s TMT space announced various acquisitions, partial sell-downs, indicative year-end performances as well as other announcements:

  • 5G Networks announced strong fourth quarter results, with approximately $30.8m in cash receipts for H2FY19, up from $22.7m in H1FY19. 5G Networks noted this was due to re-signing revenue from existing large clients as well as better cross and up-selling. The company has also noted it is in a good position to make targeted acquisitions.

  • Dreamscape announced on 24 July that it has entered a Scheme Implementation Deed (“SID”) with Web.com for 100% acquisition of its shares for $0.27c per share via a scheme of arrangement. Dreamscape’s Independent Board Committee has unanimously recommended this deal to shareholders already.

  • WPP AUNZ announced it has entered into an agreement to sell 60% of Kantar, its global data, research, consulting and analytics business, to Bain Capital. WPP AUNZ further confirmed it is in advanced discussion with WPP plc to sell 100% of its Kantar business in Australia and New Zealand on financial and commercial terms that are in-line with the WPP plc global transaction. If finalised, WPP AUNZ expects net proceeds after transaction costs and adjustments to be approximately $150m.

  • Afterpay Touch announced several changes to its Board with the objective of becoming a truly global player and ensuring it has not only an expert, but also an independent Board.

  • Bravura Solutions announced it has not executed a Process and Exclusivity Deed with GBST Holdings. Consequently, Bravura did not make, and has withdrawn, its preparedness to make an Updated Proposal.

  • GBST Holdings announced it has entered a SID with FNZ at $3.85 cash per share for FNZ to acquire 100% of the shares in GBST. The SID has been unanimously recommended by the directors and the Scheme is subject to limited conditionality, not financing or due diligence.

  • Pushpay announced a partial sell-down of 4.45% of fully paid ordinary shares outstanding (41.2% of interests associated with Chris Heaslip – Non-Executive Director and Co-Founder) for $3.70 per share.

Telecommunications sector highlights:

The five best and worst performers for July 2019 were as follows:

Source: Factset, as at 31 July 2019

5G Networks (26 July) announced its quarterly results, showing strong results with its second half receipts increasing to $30.8m (up from $22.7m in the first half). 5G Networks also noted its existing cash and debt totals $8.7m and is therefore in a position to undergo its agenda of making targeted acquisitions.


Arq Group (8 July) announced changes to its Executive Leadership Team, which included the exits of Peter Wright (Managing Director, Enterprise) and Emma Hunt (Managing Director, SMB) and the appointment of Brett Fenton, who was formerly CTO and Acting Managing Director of SMB for the newly created position of Executive Director, Mass and Middle Market.


Dreamscape Networks (24 July) announced it entered a SID with Web.com. Web.com is a wholly owned subsidiary of Siris Capital Group, a New York based private equity firm. Under the Scheme, DN8 shareholders will receive cash consideration of $0.27 per ordinary share, valuing DN8’s issued equity at c.$105.2m.


Hutchinson Telco (26 July) released its half-year results ended 30 June 2019, reporting revenue of $869.2m (1.7% lower than pcp) resulting in a statutory net loss of $157.1m (cf. $10.3m on pcp) driven by VHA’s loss ($153.4m) during the period (of which Hutchinson Telco’s has a 50% share) and joint venture adjustments ($105.5m) primarily reflecting the revised useful life estimate during the period of PP&E. EBITDA for the period was $290.4m, 0.6% higher than the previous year when account for changes to accounting standards.


Macquarie Telecom Group Limited (8 July) appointed Helen Cox (ex PwC and CBA) as its CFO from 23 August 2019. Additionally, Macquarie appointed Adelle Howse as an Independent Non-executive Director.


Megaport (23 July) announced revenue for the quarter ended 30 June 2019 of $10.9m (up 22% from the previous quarter) of which $3.6m was monthly recurring revenue (up from $2.0m in the pcp) and reached 300 installed locations across 20 countries. Average Revenue per Port in June increased to $887, 23% higher than the pcp.


Speedcast (2 July) revised its full-year EBTIDA expectation to $140-150m, down from $160-171m previously communicated due to weaker performance than anticipated across various service streams, which Speedcasts attributes to weaker market conditions, delays in expected revenue and other factors.


Superloop (1 July) revised updated expected FY19 ETBIDA from $13-18m as announced on 25 February 2019 to between $7-8m. Superloop notes this was largely due not completing negotiations to secure a significant commercial agreement that would have otherwise contributed the anticipated EBITDA to achieve the initial EBITDA guidance communicated.


Spirit Telecom (2 July) announced its acquisition of Arinda IT for $2.6m resulting in an immediate expansion of Spirit’s product offering and entry into the Managed Service Provider (“MSP”) sector. Spirit Telecom (24 July) announced its acquisition of Phoenix Austec Group for $1.6m, further expanding Spirit’s market share in the MSP sector specifically within the SME space. Phoenix has been operating since 2007 providing managed IT and support services to SMEs with approximately $1.9m revenue across 100+ customers.


Vocus Group (3 July) presented during its strategy day its reaffirmation of FY19 guidance with underlying EBITDA expected to be between $350-370m and its strategic plan to drive long-term growth across all business units, simplified to Network Services, Retail and New Zealand.


Forward EV / EBITDA Multiples Chart

The forward EV / EBITDA multiples for leading telco stocks at the end of the month is as follows:

Source: Factset, as at 31 July 2019

Media sector highlights:

The five best and worst performers for July 2019 were as follows:

Source: Factset, as at 31 July 2019

iCar Asia (11 July) announced its quarterly net operating cash outflow reached a 5-year low (improved 48% on pcp and 20% on the previous quarter). iCar continued to record quarterly positive EBITDA and net cash flow in Malaysia and Thailand and halved its EBITDA loss (YoY) in Indonesia.


NEC (1 July) announced the completion of the sale of Australian Community Media and Printing to a company controlled by interests associated with Anthony Catalano and Thorney Investment Group. Nine received cash proceeds of $105m (subject to post-completion adjustments in coming months), with a further $10m to be received in one year’s time. Nine commented these funds, as currently planned, will be used to reduce the Group’s indebtedness.


Pacific Star Network (3 July) confirmed its existing FY19 underlying EBITDA guidance of between $8.75-9.25m. Pacific Star expanded its radio audience reach across regional radio markets as well as several cities following the acquisition of 23 radio licences for cash consideration of $6.25m.


QMS Media (30 July) confirmed that it has received consent from the Overseas Investment Office NZ to undertake the strategic merger of its New Zealand out-of-home, digital media and production (QMS NZ) with MediaWorks NZ (MediaWorks).


Village Roadshow (29 July) noted iPic Entertainment (NASDAQ: IPIC), in which Village holds a 24.4% ownership share, announced that it had missed an interest payment under its credit facility, which may lead to an event of defaulted being declared. Village carries a contingent liability of $8m, which it plans to pay to eliminate, with no further recourse to the Village Group and it was stated this will not have a material impact on its financial covenants.


WPP AUNZ (12 July) WPP plc (WPP AUNZ’s majority shareholder) announced it has entered into an agreement to sell 60% of Kantar, its global data, research, consulting and analytics business, to Bain Capital. WPP AUNZ further confirmed it is in advanced discussion with WPP plc to sell 100% of its Kantar business in Australia and New Zealand on financial and commercial terms that are in-line with the WPP plc global transaction. If finalised, WPP AUNZ expects net proceeds after transaction costs and adjustments to be approximately $150m.


Forward EV / EBITDA Multiples Chart

The forward EV / EBITDA multiples for leading media stocks at the end of the month is as follows:

Source: Factset, as at 31 July 2019

Technology sector highlights:

The five best and worst performers for July 2019 were as follows:

Source: Factset, as at 31 July 2019

Afterpay Touch (2 July) announced it is in the process of transitioning to a majority independent Board with an independent Chair, as such, Afterpay is actively seeking to recruit at least two independent directors. However, effective immediately are the following changes:

· Anthony Eisen (Co-founder) assumes the role of CEO and Managing Partner, while continuing to serve the Board as an Executive Director;

· Elana Rubin (currently Independent Non-Executive Director) will assume the role of Interim Chair;

· Nick Molnar (Co-founder) will be Global Chief Revenue Officer, reporting to Anthony and continue to serve on the Board as an Executive Director;

· David Hancock (formerly an active director since Afterpay’s IPO) has assumed the role of Group Head following the merger of Afterpay and Touchcorp in mid-2017; however, intends to step down at the conclusion of the 2019 financial year-end; and

· Ferk-Malte Feller was newly appointed to Afterpay as its Global Chief Operating Officer. Malte has previously held roles at Facebook, eBay and PayPal, including being PayPal’s Managing Director in Australia from 2009 to 2011.


Bravura Solutions (1 July) announced it has not executed a Process and Exclusivity Deed with GBST Holdings. Consequently, Bravura did not make, and has withdrawn, its preparedness to make an Updated Proposal.


Computershare (23 July) announced Mark Davis (CFO) intends to step down from his position after almost seven years in the role and 20 years with the company.


Data #3 (11 July) announced it expects to report a record full-year NPBT for FY19 to be approximately $26m (FY18: $20.4m and FY17: $22.4m).


ELMO Software (25 July) released its unaudited FY19 results, which indicate a 48% increase in ARR to $46m (cf $31m in FY19) and statutory revenue of $40m (up 41% from $26.5m). ELMO notes these results were driven by an increase in customers from 1,031 in FY18 to 1,341 in FY19 an increase cross-selling its increasing customer based.


GBST Holdings (29 July) announced it has entered a SID with FNZ at $3.85 cash per share for FNZ to acquire 100% of the shares in GBST. The SID has been unanimously recommended by the directors and the Scheme is subject to limited conditionality, not financing or due diligence.


Gentrack (25 July) announced a downward revision of its FY19 EBITDA expectation to between NZ$27-28m from its previous guidance of over NZ$31m, it was noted this was due to delays in customer projects and contracts and bad debt risks in the UK.


Integrated Research (15 July) announced, based on its unaudited internal accounts, that it expects to report a record revenue in the range of $100-101.5m (representing a 10-12% growth) and profit after tax in the range of $21.2-22.0m (cf. $19.2m in the pcp). Integrated Research attributed some of its improved performance to an increase in License sales, which are estimated to have increased between 17-20% (to between $61.5-63m) from FY18.


Kogan.com Limited (1 July) announced a partnership with Splitit Payments (ASX: SPT), a payments business enabling customers to pay for purchases with existing debit or credit cards by splitting the cost into interest-and-fee-free monthly payments, which is envisioned to make most in-demand products and services affordable and accessible for Australians.


Nearmap Limited (12 July) announced its FY19 preliminary results that indicate another record year of growth in its Annualised Contract Value growing to $90.2m at 30 June 2019 (cf $66.2m in the pcp), representing 36% growth primarily due very strong performance in North America and continuing good performance in Australia and New Zealand.


Pushpay (4 July) announced a partial sell-down of 4.45% of fully paid ordinary shares outstanding (41.2% of interests associated with Chris Heaslip – Non-Executive Director and Co-Founder) for $3.70 per share.


Forward EV / EBITDA Multiples Chart

The forward EV / EBITDA multiples for leading technology stocks at the end of the month is as follows:

Source: Factset, as at 31 July 2019

Receive our monthly wrap

Learn what's happening in the Australasian technology sector.

Each month Venture Advisory looks at what is happening across the telco, media and technology sector, including key events such as M&A as well as movements in share prices and trading multiples.

©2019 by Venture Advisory

61dca1_b42096bf0cec44a7b135c150e960fcf1_
  • Linkedin