Superloop completes strategic transformation in FY23

Superloop Limited has announced strong performance for the financial year ended 30 June 2023, with underlying EBITDA from continuing operations improving by 82.2% from AU$20.5 million to AU$37.4 million, exceeding guidance of AU$33 million to AU$36 million.

The result was driven by double-digit revenue growth in each of the company's three operating segments, reflecting a 52.8% increase in connected customers utilising the Superloop network.

The company reported total revenue from continuing operations was AU$323.5 million versus AU$249.7 million in the Prior Corresponding Period (PCP), an increase of 29.5% (including the impact of acquisitions). The organic increase in revenue from continuing operations was 17.9% compared to the PCP.

Overall gross margin from continuing operations was AU$116.9 million (or 36.1% of revenue, up from 32.6% in the PCP), increased from AU$81.5 million in the PCP. Gross margins have improved across all three customer segments.

Operating costs (excluding marketing) as a percentage of revenue decreased to 20.1%, reflecting ongoing cost discipline and the benefits of the company's digital transformation initiatives.

The company also reported an operating cash flow over the reported underlying EBITDA, supported by a one-off change to NBN billing timing. And a strong balance sheet with a Net Debt Position of AU$13.3 million plus an undrawn debt capacity of AU$49 million as of 30 June 2023.

The company achieved a significant financial milestone, transitioning to NPATA and Free Cash Flow positive in the second half of FY23. An on-market buyback program was completed, purchasing 11.2 million shares for a net consideration of AU$8.6 million.

"In what has been a watershed year, Superloop has delivered strong financial performance for 2023, with all segments contributing to the Company's 82.2% growth in Underlying EBITDA from continuing operations," says Paul Tyler, CEO and Managing Director of Superloop.

"Our strong financial performance reflects the significant turnaround that has been delivered from the successful execution of our '3-in-3' strategy over the last three years. Set in early 2021, this strategy was designed to grow the business three-fold in three years, and I am pleased to report that we have achieved that. Superloop now has a clear strategic direction, solid financial foundation, and a strong platform for consistent growth."

"In the 2023 financial year, we achieved well above industry subscriber growth and have increased our market share in the NBN market from 2.0% to 3.1%5. Complementing our organic growth, the acquisitions of both VostroNet and MyRepublic subscriber base also provided a solid contribution to our result."

"Our investment in the Superloop brand and increased marketing and advertising efforts during the financial year provided strong momentum from which to accelerate organic growth and this momentum is continuing as we enter the 2024 financial year from a position of strength."

Tyler also shared some of the operational highlights for the company in the last financial year. 

"The VostroNet acquisition added a wholesale Fibre-to-the-Premises (FTTP) access network and purpose-built student accommodation broadband offering to the portfolio. The MyRepublic subscriber transfer agreement added an additional 50,000 NBN customers. The company entered a 3-year mutual Preferred Network Partnership Agreement with Uniti Group Limited."

"The company commenced a program of work to rationalise and optimise its fixed wireless network, including partial divestment of assets and the refocus of remaining infrastructure.
 Significant progress was made on a digital transformation strategy designed to deliver ongoing operating cost control and enhanced customer experience. The Superloop brand was reimagined and relaunched to drive organic growth further."
 
In the second half of FY23, two new Non-Executive Directors, Helen Livesey (Chair of the Remuneration and Nomination Committee) and Gareth Turner (Chair of the Audit Committee) were appointed to Superloop's Board of Directors, bringing to the Board significant ASX experience and considerable skills across a range of disciplines.

"Superloop has responded to detailed investor feedback in relation to its remuneration approach and transparency of disclosures. Over the course of FY23, we have undertaken a comprehensive review of the remuneration framework and disclosures, implementing a series of important changes in conjunction with advice from Ernst & Young. Further information on this in contained in the Consolidated Financial Report released now," adds Tyler. 

"Further progress has also been made on the ESG front, with the development of an ESG framework that focuses on the material sustainability topics that are important to both our business and our stakeholders; and guides our decision-making and reporting processes."
 
"On 21 July 2023, the Group successfully refinanced its three-year revolving facility with its syndicate banks (currently Westpac, HSBC and ANZ), increasing the committed funding to AU$100 million (comprising a AU$96.0 million revolving debt facility and a AU$4 million bank guarantee facility) with a maturity date of 30 September 2026. The Group is required to adhere to customary financial covenants, including leverage ratio, minimum capital requirement and interest cover ratio."

"The strong momentum gathered in FY23 has accelerated in the first quarter of FY24. In the Consumer segment, the broader awareness of the Superloop brand has underpinned our outsized share of the NBN fibre upgrade footprint, and the company projects its net growth in broadband services for the first two months of FY24 to be approximately 10k services," adds Tyler. 

"On the business and wholesale front, we have launched an innovative new 'biz' product suite, and the strength of our offering in the SD-WAN and SASE market has led to new contracts with a number of high-profile customers such as Baptcare."

Notably, Superloop announced on 1 August 2023 a non-binding indicative proposal to acquire all of Symbio's shares via a scheme of arrangement (Proposal) and the entry into 4 weeks of exclusivity to complete confirmatory due diligence.

"Discussions and due diligence are continuing, and the parties have agreed to extend exclusivity by an additional two weeks. Superloop notes that the proposal is preliminary and incomplete and there is no guarantee that any agreement will be reached or that a transaction will eventuate," concludes Tyler.