Investors wiped $874 million off Vocus Communications' market capitalisation on Tuesday after its profit forecast fell short of expectations.
Delivering its first earnings guidance rolling in the recently acquired Nextgen, M2 Group and Amcom businesses, Vocus said revenue was expected to be about $1.9 billion, underlying earnings before interest, tax, depreciation and amortisation (EBITDA) was forecast between $430 million and $450 million in 2016-17, while underlying net profit after tax was expected to be between $205 million and $215 million.
While revenue was in line with consensus analyst estimates, both profit and EBITDA were between 4 and 9 per cent below analysts' estimates. Consensus had profit at $224.4 million and EBITDA at $470.3 million.
Vocus' shares plunged 24.5 per cent, or $1.41, to $4.35, down from a 12-month high of $9.19 in May.
Arnhem Investment Management partner Theo Maas said the majority of the miss was a poorer than expected number from Nextgen, which the market had forecast would contribute $60 million to EBITDA, but Vocus came out with guidance of $41 million.
"Between due diligence and closing the deal, that business has really deteriorated," Mr Maas said.
However, Mr Maas said he wasn't worried.
"My view has always been they bought this business as a piece of infrastructure ... if they can get that up and running pretty quickly most of that will be used on their own customers...that will be a relief to the market," he said.
Vocus chief executive Geoff Horth told analysts and investors on a conference call before the company's annual general meeting that the Nextgen situation was "unfortunate" due to high cancellation numbers between due diligence and closing the deal.
"Our view hasn't changed though, this is a very important asset to us and a significant opportunity. We're very confident we can turn that negative revenue trajectory around," Mr Horth said.
Vocus did not issue guidance at its full-year results in August because it was continuing to work through the task of bringing four businesses together as one.
In the past 18 months, Vocus completed a $1.2 billion merger with Amcom, then a $3.8 million merger with M2 and finally acquired Nextgen for $807 million.
The company said the expected synergies from the Amcom merger - $13 million to $15 million annually by the end of this financial year - and the M2 merger - $40 million annually by the end of the 2018 financial year - were on track.
Former directors James Spenceley and Tony Grist, founders of Vocus and Amcom respectively, have sold large chunks of their holdings since August and left the company in October after a failed attempt to have Mr Horth replaced.
Vocus shares have been caught up in panic about shrinking margins from the switch over to the national broadband network, sparked by David Teoh's TPG Telecom.