20 February 2018 The Manager Market Announcements Office Australian Securities Exchange Limited 20 Bridge St Sydney NSW 2000 ELECTRONIC LODGEMENT Dear Sir or Madam, 2018 HALF YEAR RESULTS AND REVISION OF FY18 GUIDANCE Vocus Group Limited (ASX: VOC) today releases its financial results for the half-year ended 31 December 2017. In accordance with the Listing Rules please find attached: • Appendix 4D – Half-year report • The Directors Report • Operating and Financial Review which forms part of the Directors Report • Half-Year Financial Statements The Operating Financial Review contains a revision to FY18 Guidance in Section 3. The Company will conduct an investor briefing commencing at 9.30am this morning. The briefing will be webcast and can be accessed through the Company’s website at www.vocusgroup.com.au. Registration for the webcast is available now via https://edge.media-server.com/m6/p/kotqk56j. A recording of the briefing will be available on the website later in the day. Yours sincerely Ashe-lee Jegathesan Company Secretary Vocus Group Limited vocusgroup.com.au HALF YEAR FINANCIAL RESULTS 20 FEBRUARY 2018 For the six months ended 31 December 2017 incorporating the requirements of appendix 4D Appendix 4D (ASX Listing Rule 4.2A.3) Half-Year Report for the half year ended 31 December 2017 Vocus Group Limited Six months ended 31 December 2017 ($m) 2017 2016 %chg Statutory Revenue and Other income 967.3 885.9 9 Underlying EBITDA 1 ² 188.8 187.2 1 Statutory EBITDA 188.1 168.3 12 Underlying EBIT ³ 4 119.7 142.8 (16) Statutory EBIT ³ 74.9 80.1 (6) Underlying NPAT 5 6 after minority interests 68.6 91.8 (25) Statutory NPAT 6 after minority interests 37.3 47.1 (21) Basic earnings per share - cents 6.00 7.72 (22) Diluted earnings per share - cents 5.99 7.71 (22) Fully Diluted Underlying EPS (¢)5 10.99 15.01 (27) Net tangible asset backing per share - cents 28.18 14.607 93 Interim dividend per share –cents - 6.0 - 1. Pre significant items of $0.7m ($18.9m in prior period) 2. EBITDA refers to earnings before net financing costs, tax, depreciation and amortisation 3. Statutory EBIT refers to earnings before net financing costs, impairment and tax 4. Pre significant items and below the line costs of $44.9m ($62.7m in prior period) 5. Pre significant items and below the line costs of $31.3m ($44.6m in prior period) 6. NPAT refers to net profit after tax 7. Net tangible asset backing per share shown is as at 30 June 2017 for comparative purposes The Vocus Board has made the decision not to declare an interim dividend for the half year ended 31 December 2017 in light of the opportunities for investment across the business including the ASC project; combined with the focus of the Board on reducing the overall leverage in the business. The half-year results commentary is unaudited. Notwithstanding this, the Appendix 4D, the OFR and results presentation all include certain financial data which is extracted or derived from the Half Year Financial report for the period ended 31 December 2017 that has been reviewed by the Group’s Independent External Auditor. Contents DIRECTORS' REPORT ................................................................................................................................... 1 OPERATING AND FINANCIAL REVIEW ....................................................................................................... 3 1. GROUP OPERATING PERFORMANCE ................................................................................................. 3 2. DIVISIONAL PERFORMANCE ............................................................................................................. 15 3. GROUP OUTLOOK ............................................................................................................................. 23 4. APPENDIX .......................................................................................................................................... 27 AUDITOR’S INDEPENDENCE DECLARATION .......................................................................................... 30 HALF-YEAR FINANCIAL REPORT ............................................................................................................. 31 DIRECTORS' DECLARATION ..................................................................................................................... 49 INDEPENDENT AUDITOR'S REVIEW REPORT TO THE MEMBERS OF VOCUS GROUP LIMITED .......................................................................................................................................... 50 1 DIRECTORS' REPORT The directors present their report, together with the financial statements, on Vocus (referred to hereafter as the 'Consolidated Entity’ or ‘Vocus') consisting of Vocus Group Limited (referred to hereafter as the 'Company' or 'Parent Entity') and the entities it controlled for the half-year ended 31 December 2017. Directors The following persons were Non-Executive Directors of Vocus Group Limited during the whole of the financial half-year and up to the date of this report, unless otherwise stated: Vaughan Bowen Non-Executive Chairman (appointed Non-Executive Chairman 3 October 2017) Robert Mansfield AO Non-Executive Deputy Chairman (appointed Deputy Chairman 3 October 2017) Craig Farrow Jon Brett Rhoda Phillippo David Wiadrowski (appointed 24 July 2017) John Ho (appointed 8 January 2018) Julie Fahey (appointed 2 February 2018) David Spence (resigned 26 October 2017) Christine Holman (appointed 24 August 2017, resigned 13 November 2017) Principal activities Vocus Group Limited (ASX: VOC) ('Vocus') is a vertically integrated telecommunications service provider, operating in the Australian and New Zealand markets. The Company owns an extensive national infrastructure network of metro and back haul fibre connecting all capital cities and most regional centres across Australia and New Zealand. Vocus offers both consumer and wholesale NBN services through all 121 permanent NBN points of interconnect and 100% coverage of the UFB network in New Zealand. Vocus owns a portfolio of brands targeting the enterprise, small business, government and residential market segments across Australia and New Zealand. Vocus also operates in the wholesale market providing high performance, high availability and highly scalable communications solutions which allow service providers to quickly and easily deploy new services for their own customer base. Review of operations Please refer to the Operating and Financial Review for further details relating to Vocus operations and results for the half- year ended 31 December 2017. The Operating and Financial Review includes information that Vocus shareholders would reasonably require to make an informed assessment of Vocus’ operations, financial position, business strategies and prospects for future financial years. This Operating and Financial Review is to be read in conjunction with, and forms part of, the Directors’ Report. Significant changes in the state of affairs There were no significant changes in the state of affairs of the Vocus during the financial half-year. Rounding of amounts The Company is of a kind referred to in ASIC Corporations (Rounding in Financial / Directors’ Reports) Instrument 2016/191, issued by the Australian Securities and Investments Commission, relating to 'rounding-off'. Amounts in this report have been rounded off in accordance with that Corporations Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar. 1 Auditor's independence declaration A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out immediately after this Directors' report. This report is made in accordance with a resolution of Directors, pursuant to section 306(3)(a) of the Corporations Act 2001. On behalf of the Directors ___________________________ Vaughan Bowen Chairman 20 February 2018 Sydney 2 OPERATING AND FINANCIAL REVIEW 1. GROUP OPERATING PERFORMANCE 1.1 Overview of Operations Vocus Group Limited (ASX: VOC) (Vocus) is a vertically integrated telecommunications service provider, operating in the Australian and New Zealand markets. The Company owns an extensive national infrastructure network of metro and back haul fibre connecting all capital cities and most regional centres across Australia and New Zealand. Vocus now offers both consumer and wholesale NBN services through all 121 NBN points of interconnect and 100% coverage of the UFB network in New Zealand. Vocus owns a portfolio of brands targeting the enterprise, small business, government and residential market segments across Australia and New Zealand. Vocus also operates in the wholesale market providing high performance, high availability and highly scalable communications solutions which allow service providers to quickly and easily deploy new services for their own customer base. For the six months ended 31 December 2017, Vocus was managed from a financial and operational perspective as three operating segments; Enterprise & Wholesale Australia, Consumer Australia, and New Zealand. It was announced in January 2018 that the existing Enterprise & Wholesale Australia division will in future operate as two separate operating segments: Enterprise & Government and Wholesale & International, resulting in four reportable operating segments. Enterprise & Wholesale Australia Provides telecommunications products and services to the enterprise, small business (including the Commander SMB business) and wholesale segments of the Australian