Another day, another mid-cap meltdown. This time, it's former market darling and enterprise telco Vocus Group, which announced a profit downgrade well after dusk on Tuesday (7:.0pm to be precise). That's not a good look – and that's just for starters!
Vocus shares were off 26.6 per cent in early trading on Wednesday, from $3.35 to $2.46, just short of RCG Corporation's front-on smash with the yoghurt truck on Monday (27 per cent). Isn't it amazing how something can be a $2.1 billion company at 9.59am but a $1.5 billion company at 10am?
On the company's February 22 interim results call, Macquarie analyst Andrew Levy asked chief executive Geoff Horth to "confirm that … there are no lumpy one-offs that are being relied on to get across the line for the guidance number"? (which at that stage was between $430 million and $450 million). Here, Levy was referring to multi-year service contracts whose entire top-line Vocus was attempting to book as revenue in the current year.
"It's just about making sure we're transparent with that and call it out," Horth responded to Levy. "And so, if there are any one-off benefits in the second half, we'll be sure to tell you."
So why, in response to our questions on Wednesday, did Vocus admit that "none of the value of these contracts was included in the first-half result even though two of the contracts were paid pre-Christmas". If transparency is Horth's stated aim, why wait more than five months to disclose the very lump he was directly asked about by the street in February, at which time he already knew about? That's a $40 million lump accounting for more than half the value (or loss thereof) of Vocus' downgrade.
Levy circulated this update yesterday: "This is a very disappointing update ... Vocus was relying on a very significant contribution from lumpy network sales … to hit guidance to begin with" all along …
Time for a large slice of humble pie: the man we called the Ridge Forrester of the public market, James Spenceley, was right.
