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VOX
VOX
VOX - VOX Telecom Limited - Audited results for the year ended 31 August 2007
VOX TELECOM LIMITED
(formerly DataPro Group Limited)
(Registration number 1998/016433/06)
("Vox Telecom" or "the Company" or "the Group")
JSE Code: VOX
ISIN Code: ZAE000097234
AUDITED RESULTS FOR THE YEAR ENDED 31 AUGUST 2007
Revenue up 404% to R 990 million
Operating profit up 373% to R 83 million
Profit before taxation up 420% to R 77 million
Profit for the year up 416% to R 55 million
Cash generated from operations R 101 million
Earnings per share up 143% to 7.7 cents
Headline earnings per share up 126% to 7.7 cents
Consolidated Balance Sheet Audited Restated
2007 2006
R`000 R`000
ASSETS
Non-current assets 829 542 231 724
Plant and equipment 58 989 28 831
Goodwill 214 742 58 036
Other intangibles 542 009 137 471
Deferred taxation 13 802 7 386
Current assets 434 714 53 150
Inventories 14 174 2 263
Trade receivables and prepayments 227 825 32 944
Cash and bank balances 192 715 17 943
Total assets 1 264 284 874
256
EQUITY AND LIABILITIES
Capital and reserves 642 112 190 340
Share capital 884 484
Share premium 599 688 206 430
Reserves 3 198 -
Accumulated profis ( losses) 38 342 (16 574)
Total equity 642 112 190 340
Non-current liabilities 279 980 42 136
Non-current borrowings :
- interest - bearing 142 311 9 547
- interest free 397 5 189
Deferred taxation 137 272 27 400
Current liabilities 342 164 52 398
Trade and other payables 264 464 38 140
Provisions 5 791 -
Taxation 27 582 2 495
Current borrowings 44 327 11 763
Total equity and liabilities 1 264 284 874
256
Ordinary shares in issue at period 911 156 483 812
end (`000)
Net asset value per share (cents) 70.5 39.3
Consolidated Income Statement Audited Restated
2007 2006
R`000 R`000
Revenue 990 110 196 365
Cost of sales (745 (114
855) 730)
Gross profit 244 255 81 635
Other income 2 427 288
Depreciation and amortisation (19 (9 974)
726)
Employment costs (76 (28 470)
085)
Occupancy costs (4 100) (3 709)
Other operating costs (63 (22 181)
612)
Operating profit 83 159 17 589
Finance costs (14 (3 070)
296)
Finance income 7 816 230
Net finance costs (6 480) (2 840)
Profit before taxation 76 679 14 749
Taxation (21 (4 105)
763)
Profit for the year 54 916 10 644
Attributable to equity holders of the parent 54 916 10 644
Earnings per share (cents)
Basic EPS 7.67 3.16
Diluted basic EPS 7.49 3.16
Additional information:
Reconciliation of profit for the year to headline
earnings
Profit for the year 54 916 10 644
Adjustments for:
Impairment of assets - 828
Profit on sale of plant and equipment - (38)
Headline earnings 54 916 11 434
Headline EPS (cents) 7.67 3.40
Diluted headline EPS (cents) 7.49 3.40
Number of shares
In issue 911 156 483 812
Weighted average 716 166 336 383
Share options granted 16 818 -
Diluted weighted average 732 984 336 383
Condensed Consolidated Audited Restated
Cash Flow Statement 2007 2006
R`000 R`000
Cash generated from operating 101 296 21 769
activities
Net interest paid (6 480) (2 589)
Taxation paid (13 (2 087)
104)
Net cash inflow from operating 81 712 17 093
activities
Net cash outflow from investing (430 (58 361)
activities 283)
Net cash inflow from financing 523 343 59 244
activities
Net increase in cash and cash 174 772 17 976
equivalents
Bank balance/(overdraft)at beginning of 17 943 (33)
year
Cash and cash equivalents at end of 192 715 17 943
year
Consolidated Share Share Reserves Accumulated Equity
Statement of capital premium profits attributable
Changes in (Losses) to equity
Equity holders of
the parent
R`000 R`000 R`000 R`000 R`000
Balance as at 314 114 963 - (27 218) 88 059
1 September
2005
Equity (3 306) (3 306)
instrument
acquired
Expiry of 1 582 1 582
financial
liability
Disposal of 2 897 2 897
equity
instrument
for cash
Net income 1 173 1 173
(expense)
recognised
directly in
equity
Profit for 10 644 10 644
the year
Total 1 173 10 644 11 817
recognised
income and
expense
Share issue 170 90 294 90 464
(net of
costs)
Restated 484 206 430 (16 574) 190 340
balance as at
31 August
2006
Profit for - - 54 916 54 916
the year
Total - - - 54 916 54 916
recognised
income and
expense
Shares issued 400 393 258 393 658
(net of
costs)
Shares issued 27 17 991 - 18 018
in terms of
employee
option scheme
Less: (27) (17 - (18 018)
treasury 991)
shares held
Share-based - - 3 198 3 198
payment
expense
Balance at 31 884 599 688 3 198 38 342 642 112
August 2007
COMMENTARY
The board of directors is pleased to present the Group`s results for the year
ended 31 August 2007. These financial statements have been prepared in
accordance with accounting policies and methods of computation that are
consistent with those of the prior year and with International Financial
Reporting Standards ("IFRS"). This announcement is prepared in accordance with
IAS 34 - Interim Financial Reporting. The annual financial statements from
which these results have been derived have been audited by Deloitte & Touche.
Their unmodified opinion is available for inspection at the registered office of
the company.
COMPANY PROFILE
Vox Telecom is a leading alternative, independent telecom operator. providing
voice and data services to the southern African market.
BUSINESS OVERVIEW AND FUTURE PROSPECTS
Vox Telecom has delivered another set of record results for the year ended 31
August 2007. In financial terms, the Group quadrupled revenues and profit for
the year to R990 million and R55 million respectively through a combination of
strong organic and acquisitive growth. The year has been characterised by
numerous acquisitions, organic growth across all our core business units,
improved operational efficiencies and a substantial increase in the Group`s
customer base including:
- the repositioning of the Group as the leading, independent alternative
telecom operator and the subsequent change of name to Vox Telecom Limited
from DataPro Group Limited;
- the establishment of the Group`s core" go to market" brands namely Orion
Telecom ("Orion"), DataPro and @lantic Internet Services ("@lantic");
- the acquisition of Orion which has been a step change for the company in
terms of revenue growth, profitability, sheer scale and strategic
positioning;
- The acquisition and integration of Dial and VoIP Telecoms, two leading
managed voice services suppliers which have a primary focus on government
business which has subsequently been integrated into Orion;
- The successful integration into Orion of Tema Telecom, a reseller of
Orion`s products, that will further improve Orion`s margins;
- The successful integration into @lantic of approximately 16 000 customers
from the acquisition of the customer bases of MJVnet Internet, Shisa`s and
Xsinet, with the resultant increase in its subscriber base from 40 512 to
61 000 subscribers;
- The introduction of new BEE shareholders with the Orion transaction in the
form of the Lereko Metier Capital Growth Fund ("LMCGF") and Thembeka
Capital, thereby increasing the BEE shareholding to 28.4%;
- the expansion into the SADC region with the acquisition of Definity Telecom
Namibia and the Group`s intention to further expand our presence in this
region.
- the continuing upgrading of our network infrastructure to support our
growing core data business as well as our VoIP platform, ultimately to
offer "carrier class" connectivity services;
- the conclusion of operational interconnect arrangements with Telkom,
Vodacom, Cell C and MTN;
- growth in the monthly contracted annuity base across the Group from R24
million per month as at 31 August 2006 to R140 million per month as at 31
August 2007;
- increase in our staff complement from 256 to 515 employees;
- the continued development of new initiatives in the form of @lantic
Exchange, a buying group focused on improving the positioning and strength
of our @lantic franchise and reseller base; and
- the imminent release of the Vox VoIP consumer phone, targeted for official
launch in the new business year.
We are confident that we have taken significant steps in the transformation of
Vox Telecom into a major telecommunications service provider in the South
African market. We have established strong platforms across our data and voice
businesses that enable swift and seamless integration of acquisitions and which
position us to rapidly grow our business as efficiently and effectively as
possible.
We will continue with our strategy to build Vox Telecom into the leading
independent, alternative provider of voice and data solutions to the southern
African market with our key goals and objectives, as stated below, remaining
unchanged:
- the continued growth of our core businesses organically via channel and
direct sales;
- the acquisition of companies that accelerate our growth strategy in
southern Africa and that are accretive to earnings;
- the ongoing investment in our infrastructure and our people to ensure we
continue to deliver innovative, cost effective solutions to all our
customers;
- continued focus on operational excellence across all our businesses,
ensuring the delivery of the highest levels of customer service; and
- the ongoing provision of comprehensive and innovative telecommunications
solutions that can truly deliver on the promise of convergence.
The future will continue to offer challenges, opportunities and change that we
will embrace as a group and set goals and objectives that will focus on
executing our strategy to the benefit of our shareholders, customers and
employees.
FINANCIAL OVERVIEW
Revenue, which includes seven months contribution of Orion, grew R794 million or
404% over the comparative period with the overall gross margins reducing to 25%
from the previous year evidenced by the fact that lower margin voice-based
services now account for over 80% of revenues. Voice gross margins approximated
20% on average while the data margins remain around 40%, buoyed by the sustained
demand and increased usage of bandwidth, which continues unabated. The Group
anticipates that voice margins will improve materially once incoming call
termination volumes increase.
In the data businesses ADSL contributions continues to grow strongly and gain
market share whilst the broadband market continues to offer numerous
alternatives to both consumers and the corporate market, with significant
increases in demand for wireless solutions being experienced. @lantic has
consistently been the leading reseller of iBurst and a major reseller of Vodacom
3G solutions. @lantic revenues grew to R76.5 million from R45 million in the
previous year indicating strong organic growth that was aided by the recent
acquisitions.
The Group has made a number of acquisitions in the year and has demonstrated
that this has had a minimal impact on the business units, with consistent
organic growth across all units reflecting a 32% organic revenue growth in
corporate ISP services, 53% organic revenue growth in consumer ISP services and
18% in voice services.
Operating profit increased by 373% to R83 million and profit before taxation
increased by 420% to R 77 million. Profit for the year reflected an increase of
416% to R55 million with earnings per share and headline earnings per share
increasing by 143% and 126% respectively.
Deferred tax of R23,5 million was not raised on the intangible assets that were
acquired as part of business combinations in the prior year. The resultant
adjustment to the purchase price allocations increased the goodwill raised on
acquisition. As a result, the negative goodwill of R1,6 million which was
incorrectly raised in the prior year has been reversed. In addition, a R1,2
million prior year impairment of plant and equipment was only identified in the
current year. Had this not been restated, earnings per share would have
increased by 100% and the headline earnings per share increase would be
unchanged. Both earnings and headline earnings per share reflected an increase
to 7.67 cents per share.
The adjustment in respect of share based payments in accordance with IFRS 2,
relating to options granted to key Vox Telecom management and employees,
amounted to R3.2 million.
Monthly contracted revenue increased by 483% to R140 million, from R24 million,
which includes R94 million from Orion, indicating strong performance in revenue
growth in real terms.
The balance sheet reflects a strong cash position of R193 million which includes
cash generated of R101 million from operations and balance of R170 million in
long term loan funding raised from Investec Bank Limited that has not yet been
fully deployed into funding increased working capital requirements. The large
increase in intangibles and goodwill, arises principally from the acquisition of
Orion and to a lesser extent the acquisitions of Dial and VoIP Telecoms and the
customer bases of Xsinet and Tema Telecom, which have been accounted for in
terms of IFRS 3.
Capital expenditure on premises and equipment , primarily invested in upgrading,
improving and maintaining the IP network infrastructure amounted to R37.2
million in the current year and is forecast to be marginally higher in the
financial year ahead.
SEGMENTAL REPORTING
Primary business segments
The Group has been organised into three operating businesses, namely Orion,
DataPro and @lantic for operational and management purposes. Other areas include
corporate head office and the other early stage businesses. The Group`s
principal product offerings are as follows:
Corporate Voice - includes Orion Telecom and Definity Telecom. All voice
acquisitions have been incorporated into this segment
Corporate ISP - DataPro (Pty) Ltd and ProFax
Consumer ISP - @lantic Internet Services
Other - includes @lantic Exchange and corporate head office:
Audited Total Corporate Corporate Consumer Other
Voice ISP ISP
2007 R`000 R`000 R`000 R`000 R`000
990 110 1747 766 2162 292 376 585 3 467
Revenue
83 159 78 146 15 311 11147 (21.445)
Operating
profit
Net finance (6 480) 420 (3 840) (2) (3 058)
(costs)/
income
Profit 76 679 78 565 11 471 11 146 (24 503)
(loss)
before
taxation
14 174 7 774 2 426 3 974 -
Inventory
1 264 256 363 888 83 724 29 803 786 841
Total assets
622 144 291 892 73 624 18 609 238 019
Total
liabilities
Depreciation 19 726 3 463 8 940 473 6 850
and
amortisation
1 - Definity Telecom was integrated into Orion and as a result it is
impracticable to split out the revenue and profit.
2 - There were no acquisitions in Corporate ISP in the current year therefore
the full growth is organic.
3 - R7 million of total revenue is from new acquisitions, it is however
impracticable to split out the profit.
Restated Total Corporate Corporate Consumer Other
Voice ISP ISP
2006 R`000 R`000 R`000 R`000 R`000
196 365 25 120 125 012 45 329 904
Revenue
17 589 4 633 10 462 4 859 (2 365)
Operating
profit
Net finance (2 840) 26 (2 847) (18) (1)
(costs)/
income
Profit 14 749 4 659 7 616 4 841 (2 367)
(loss)
before
taxation
2 263 1 493 494 276
Inventory
284 874 54 181 6 456 198 839
Total assets 25 398
94 534 20 348 39 140 3 161 31 885
Total
liabilities
Depreciation 9 974 72 6 753 271 2 878
and
amortisation
Secondary geographic segments
The Group`s businesses operate in two principal geographical areas - South
Africa and Namibia.
Total South Namibia Total South Africa Namibia
Audited Africa Restat
ed
2007 2007 2007 2006 2006 2006
R`000 R`000 R`000 R`000 R`000 R`000
990 110 983 453 6 657 196 196 365 -
Sales 365
Segment 1 264 256 1 261 609 2 647 284 284 874 -
assets 874
ACQUISITIONS AND ISSUE OF SHARES FOR CASH DURING THE YEAR
With effect from 11 September 2006, Vox Telecom acquired the Namibian-based
Definity Telecom for a purchase consideration of R4 million. Definity Telecom
is one of two Least Cost Routing ("LCR") businesses that supply telephony
services to medium and large corporations in Namibia. The acquisition represents
an important entry point into Sub-Saharan Africa for Vox Telecom.
Vox Telecom acquired Orion with effect from 1 February 2007. Orion is a leading
supplier of Least Cost Routing ("LCR") and VoIP telephony services to corporate
South Africa. The purchase price was R398 million settled by way of a vendor
placement of an issue of 381 473 214 shares to the sellers of Orion, 175 000 000
of which were then placed on behalf of the vendors at 85 cents to BEE
shareholders being the market price at the time and the balance subsequently to
various other institutions at 112 cents.
The acquisition of Orion is significant when considering the milestones achieved
by Vox Telecom. This has not only contributed significant revenues, earnings
and cash flows to the Group in the past year, but also provides an enlarged
customer base that will present significant opportunities into which all data
and voice products offered by the Group can be sold. The purchase price was
allocated to net assets of R8 million intangible assets of R350 million,
deferred taxation of R101 million and goodwill of R142 million.
The Orion capital raising was approximately five times oversubscribed and, the
Vox Telecom board of directors deemed it prudent to raise additional capital of
R170 million through a combination of long term debt and by issuing an
additional 18 570 558 shares for cash at the same price of 112 cents per share,
thus providing additional funds for working capital requirements and further
planned acquisitions. Some of this additional capital has already been utilised
for a few smaller acquisitions, details of which include
* the acquisition by @lantic of the ISP customer bases of MJVnet Internet,
Shisa`s and Xsinet for R16 million with the resultant increase in
approximately 16 000 consumer ISP customers, effective 1 April 2007;
* the acquisition of the reseller voice services base of Tema Telecom for R17
million into Orion Telecom, effective 1 July 2007; and
* the acquisition of Dial and VoIP Telecoms, a smaller voice services
provider, for R25m, effective 1 April 2007 that has now been integrated
into Orion Telecom.
The total funding raised in the Orion capital raising process amounted to R550
million with an additional 400 043 772 new Vox Telecom ordinary shares being
issued. The total number of shares in issue on fully dilutive basis is 911 155
693 after including the 27 300 000 share options issued to the share incentive
trust during the year as at 31 August 2007.
SUBSEQUENT EVENTS
Acquisition of ABSA Internet Services ("`AIA")
Vox Telecom announced on 5 October 2007 that the Company has entered into a
binding agreement, through its wholly owned subsidiary, @lantic, to acquire
customer contracts and certain computer hardware from Absa Bank Limited ("ABSA")
with effect from 1 December 2007 ("the AIA Acquisition").
The purchase price for the AIA Acquisition is to be settled by Vox Telecom from
existing cash resources and is still subject to a condition precedent being the
approval of the Competition Authorities of South Africa. AIA was launched in
2001 as a free internet service provider ("ISP"), exclusively to ABSA clients.
Some time after AIA`s initial launch it was decided to terminate the free
subscription service and charge a monthly fee for internet access. Services
were also offered and rolled out to non-ABSA clients at this time.
AIA currently has over 68,000 active subscribers and offers its customers
internet access by means of analogue, ISDN and ADSL connections. Value added
services to customers include Web Mail, 10 megabytes of Web Space for personal
websites, Anti-spam and 5 e-mail addresses per mailbox. Vox Telecom intends
integrating the AIA customer base into Atlantic which will solidify @lantic`s
consumer ISP positioning as the third largest ISP in this market domestically.
Acquisition of Storm Telecom (Pty) Ltd
Vox Telecom announced on 10 October 2007, that the Company has entered into a
binding agreement to acquire the entire issued share capital and claims on loan
account in STWS Limited and its wholly owned subsidiaries, Storm Telecom (Pty)
Limited ("Storm Telecom") and Storm Internet (Pty) Limited ("Storm Internet")
(collectively, "Storm"), ("the Storm Acquisition"), with effect from 1 December
2007, from Storm`s shareholders ("Vendors").
The purchase price is R360 million to be settled by a combination of Vox
Telecom`s own cash resources, term loan facilities available to the Company as
well as a placement of Vox Telecom shares to the Vendors, which in turn Vox
Telecom will be obliged to place in the market through a vendor consideration
placement.
The Storm Acquisition remains subject to the approval of the Competition
Authorities of South Africa and the consent of the Exchange Control Department
of the South African Reserve Bank of the Vendors to remit their share of the
purchase consideration offshore.
Storm Telecom is considered one of South Africa`s leading alternative telephony
service providers, offering voice services via a variety of technologies
including: VoIP, cellular least cost routing and international call back. Vox
Telecom intends integrating the Storm Telecom business into its wholly owned
subsidiary responsible for corporate telephony solutions, Orion Telecom and the
Storm Internet business into its wholly owned subsidiaries responsible for
corporate ISP services, namely DataPro and consumer ISP services, @lantic.
Subject to the final conditions precedent being met, Vox Telecom has concluded
the vendor consideration placement to discharge its obligations in respect of
the Storm Vendors, simultaneously increasing its Black Empowerment credentials
to approximately 41,53% on a fully diluted basis through a combination of
transactions as set out below. This series of transactions has an aggregate
investment value of R686 410 000 and on conclusion of the Storm transaction will
result in the issue of 190 million Vox Telecom shares with net proceeds to the
Company of R402 800 000:
* Mvelaphanda Group will hold approximately 12.31% of the enlarged issued
share capital of Vox Telecom immediately following the vendor consideration
placing and the acquisition of existing shares from Vantage Capital Group
(Pty) Ltd (the "Vox Share Purchase");
* LMCGF will increase its current Vox Telecom shareholding from approximately
19.2% to approximately 23.41% of the enlarged issued share capital of Vox
Telecom immediately following the vendor consideration placing and the Vox
Share Purchase; and
* Regiments Capital will hold approximately 4.21% of the enlarged issued
share capital of Vox Telecom immediately following the vendor consideration
placing and the Vox Share Purchase
Further details of these transactions were announced on SENS on 8 November 2007.
Shareholders are also advised that Vox Telecom has entered into a binding
agreement to acquire the entire issued share capital and claims on loan from
Amvia (Pty) Ltd ("Amvia") with effect from 1 December 2007. The purchase
consideration is undisclosed and is not required in terms of JSE regulations.
Amvia is a leading provider of corporate faxing solutions and we intend
integrating ProFax with Amvia to establish a business that will offer superior
corporate faxing solutions and services.
CHANGE IN NAME OF COMPANY
The company changed its name to Vox Telecom Limited with effect from 31 August
2007 and commenced trading on the JSE under its new name, share code VOX and
ISIN Code ZAE000097234 on 21 September 2007.
DIRECTOR CHANGES
YT Moerane and S Wentzel resigned as non-executive chairperson and executive
director on 19 November 2006. AP van Marken was appointed as executive chairman
on 19 November 2006. MJ Krastanov resigned as a non- executive director on 15
February 2007. JA du Toit was appointed executive director and RT Dalais and NN
Gwagwa, principals of LMCGF, were appointed on 15 February 2007 on conclusion of
the acquisition of Orion.
CHANGE IN AUDITORS
During the year under review Vox Telecom appointed Deloitte & Touche as auditors
to the Group.
DIVIDENDS
With the application of cash generated from operations being focussed on the
acquisition of annuity income streams and the continued investment in VoIP
infrastructure and new initiatives, the directors have decided not to declare a
dividend for the year under review.
GENERAL
The board of directors would like to thank the management and all employees for
the contribution they have made to the continued growth in the Company which has
resulted in the successes of the past year.
By order of the Board
AP van Marken DG Reed
Chairman Chief Executive Officer
14 November 2006
Johannesburg
Registered Office
Arcay House, Number 3 Anerley Road, Parktown, Johannesburg,
2193
PO Box 62397, Marshalltown, Johannesburg, 2107
Directors
AP van Marken, DG Reed , CM von Holdt, GP Sweidan, JA du Toit,
RT Dalais*, NN Gwagwa*, MC Mogase* (Alternate CM Lister-James)
* Non-executive
Designated Advisor Transfer Office
Arcay Moela Sponsors Computershare Investor Services 2004
(Pty) Ltd (Pty) Ltd
Date: 15/11/2007 07:42:00 Produced by the JSE SENS Department.
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