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VOX
VOX
VOX - VOX Telecom Limited - Unaudited results for the six months ended 29
February 2008
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
UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 29 FEBRUARY 2008
Revenue up 231% to R869 million
Operating profit up 313% to R67 million
Profit before taxation up 279% to R61 million
Profit for the year up 271% to R43 million
Earnings per share up 121% to 4.7 cents
Headline earnings per share up 121% to 4.7 cents
Consolidated Balance Sheet as at 29 February 2008
Unaudited Unaudited Audited
as at as at as at
29-Feb-08 28-Feb-07 31-Aug-07
R`000 R`000 R`000
Assets
Non-current assets 1,507,256 636,486 829,542
Plant and equipment 114,917 52,914 58,989
Goodwill 443,273 87,419 214,742
Other intangibles 907,986 491,148 542,009
Other financial assets 26,846 - -
Deferred taxation 14,234 5,004 13,802
Current assets 387,179 379,148 434,714
Inventories 22,483 11,065 14,174
Trade receivables and 274,227 150,641 227,825
prepayments
Taxation receivable 1,128
Cash and bank balances 89,341 217,443 192,715
Total assets 1,894,435 1,015,635 1,264,256
Equity and liabilities
Capital and reserves 1,107,436 595,641 642,112
Share capital 1,075 884 884
Share premium 1,020,037 599,688 599,688
Reserves 4,794 - 3,198
Accumulated profits/(losses) 81,530 (4,931) 38,342
Total equity 1,107,436 595,641 642,112
Non-current liabilities 465,595 198,437 279,980
Non-current borrowings:
- Interest-bearing 232,103 174,693 142,311
- Interest-free 397 397 397
Deferred taxation 233,095 23,347 137,272
Current liabilities 321,404 221,558 342,164
Trade and other payables 231,485 208,982 264,464
Provisions 5,412 411 5,791
Taxation 47,538 4,146 27,582
Current portion of non current 36,969 8,018 44,327
borrowings
Total equity and liabilities 1,894,435 1,015,635 1,264,256
Ordinary shares in issue at period 1,075,076 883,856 911,157
end (`000`)
Net asset value per share (cents) 103 67 70
Consolidated Income Statement for the six months ended 29 February 2008
Unaudited Unaudited Audited
29-Feb-08 28-Feb-07 31-Aug-07
R`000 R`000 R`000
Revenue 868,745 262,807 990,110
Sales 868,745 262,807 990,110
Cost of sales (672,648) (189,444) (745,855)
Gross profit 196,097 73,363 244,255
Other income 691 78 2,427
Depreciation and (17,757) (5,955) (19,726)
amortisation
Impairment of assets (12) - -
Employment costs (66,830) (25,864) (76,085)
Occupancy costs (6,407) (2,966) (4,100)
Other operating costs (38,235) (22,292) (63,612)
Operating profit 67,547 16,363 83,159
Finance costs (12,508) (2,705) (14,296)
Finance income 5,908 2,408 7,816
Net finance costs (6,600) (297) (6,480)
Profit before taxation 60,947 16,066 76,679
Taxation (17,759) (4,422) (21,763)
Profit for the year 43,188 11,644 54,916
Attributable to:
Equity holders of the 43,188 11,644 54,916
parent
Earnings per share (cents)
Basic EPS 4.72 2.14 7.67
Diluted basic EPS 4.61 2.14 7.49
Headline earnings 43,197 11,644 54,916
Headline EPS (cents) 4.72 2.14 7.67
Diluted headline EPS 4.62 2.14 7.49
(cents)
Number of shares `000 `000 `000
- In issue (after treasury 1,075,076 883,856 883,856
shares)
- Weighted-average 915,071 543,487 716,166
- Share options granted 18,349 - 16,818
- Contingent shares 2,409 - -
issuable
- Diluted weighted-average 935,829 543,487 732,984
Additional information:
Reconciliation of profit
for the year to headline
earnings
Net profit 43,188 11,644 54,916
Impairment of assets 9 - -
Headline earnings 43,197 11,644 54,916
Condensed Consolidated Unaudited Unaudited Audited
Cash Flow Statement 29-Feb-08 28-Feb-07 31-Aug-07
R`000 R`000 R`000
Cash utilised in operating (9,878) 21,474 101,296
activities
Net interest paid (6,600) (297) (6,480)
Taxation paid (6,965) 11,392 (13,104)
Net cash outflow from (23,443) 32,569 81,712
operating activities
Net cash outflow from (569,404) (364,328) (430,283)
investing activities
Net cash inflow from 489,473 531,169 523,343
financing activities
Net decrease in cash and (103,374) 199,500 174,772
cash equivalents
Bank balance at beginning 192,715 17,943 17,943
of period
Cash and cash equivalents 89,341 217,443 192,715
at end of period
Consolidated Share Share Reserves Accumulated Equity
Statement of capital premium profits attributable
Changes in to equity
Equity holders of
the parent
(Losses)
R`000 R`000 R`000 R`000 R`000
Restated 484 206,430 - (16,574) 190,340
Balance as
at 1
September
2006
Profit for - - - 11,644 11,644
the period
Total - - - 11,644 11,644
recognised
income
Shares 400 393,258 - - 393,658
issued (net
of costs)
Restated 884 599,688 - (4,930) 595,642
balance as
at 28
February
2007
(unaudited)
Profit for - - - 43,272 43,272
the period
Total - - - 43,272 43,272
recognised
income
Shares 27 17,991 - - 18,018
issued in
terms of
employee
option
scheme
Less: (27) (17,991) - - (18,018)
treasury
shares held
Share-based - - 3,198 - 3,198
payment
expense
Balance as 884 599,688 3,198 38,342 642,112
at 31 August
2007
(audited)
Profit for - - - 43,188 43,188
the year
Total - - - 43,188 43,188
recognised
income and
expense
Shares 197 436,151 - - 436,348
issued (net
of costs)
Less: new (7) (16,493) - - (16,500)
treasury
shares held
Add: 1 691 - - 692
treasury
shares
issued
Foreign - - (3) - (3)
currency
movement
recognised
in equity
Share-based - - 1,599 - 1,599
payment
expense
Balance as 1,075 1,020,037 4,794 81,530 1,107,436
at 29
February
2008
(unaudited)
COMMENTARY
The board of directors is pleased to present the Group`s unaudited results for
the six months ended 29 February 2008. 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.
COMPANY PROFILE
Vox Telecom Limited is a leading alternative, independent telecom operator,
providing voice and data services to the Southern African market. The Group
competes through its primary brands DataPro, @lantic, Orion Telecom and Vox
Telecom and has offices in Johannesburg, Durban, Cape Town and Pretoria as well
as in Windhoek, Namibia. Vox Telecom is a listed company trading on the
Alternative Exchange (AltX), a division of the JSE Limited. Investor and
shareholder information is available at www.voxtelecom.co.za
BUSINESS OVERVIEW
Vox Telecom continues its strategy of increasing revenue and earnings through a
combination of organic and acquisitive growth, with revenues and earnings
increasing by 231% or R606 million to R869 million and profit increasing by 271%
or R 31, 5 million to R43 million. Earnings per share ("eps") and headline
earnings per share ("heps") increased by 121% to 4.72 cps from 2.14 cps over the
corresponding period respectively.
The group now comprises over 18 000 business customers across the Corporate
Voice and Corporate ISP business units, with approximately 160 000 Consumer ISP
customers.
Key highlights of the latest six months include:
- organic growth across the core operating business units of Orion Telecom
("Orion"), DataPro ("DataPro") and @lantic Internet Services ("@lantic"),
with a continued focus on operational excellence across all businesses to
ensure the delivery of the highest levels of customer service;
- positive results from some of our new business initiatives, including
@lantic Exchange, Bizcall and the launch of the Vox ADSL consumer phone;
- the acquisition and integration of Absa Internet Access ("AIA"), effective
1 December 2007, a leading supplier of internet service provision ("ISP")
to the ABSA customer base;
- the acquisition and integration of Storm, effective 1 February 2008, into -
the business units of Orion, DataPro and @lantic. The full consolidation
benefits are only expected to be realized in the second half of the current
financial year;
- the acquisition of Amvia, effective 1 December 2007, a leading provider of
corporate faxing solutions that has been integrated with ProFax, to
establish a business that will offer superior corporate faxing solutions
and services;
- the regional expansion into the SADC region has also been enhanced through
the acquisition of Telkom Ericsson, a PABX reseller with 30 years of
trading in Namibia. This has been incorporated into Definity Telecom
Namibia, both renamed Orion Namibia. This acquisition is expected to
enhance voice revenues in Namibia;
- the BEE shareholding has increased to 41.87% following the Storm
acquisition with the Lereko Metier Capital Growth Fund ("LMCGF") now
holding 23.6%, Mvelaphanda Group Limited 12.42%, Regiments Capital 4.24%
and Thembeka Capital 1.61%. This has firmly established Vox Telecom as the
largest, black owned telecommunications company in South Africa;
- The acquisition of Online Digital Solutions ("ODS") into DataPro, a
`reseller` of DataPro ISP products and hosting solutions that will
immediately enhance DataPro`s margins from the synergies derived;
- the continued upgrade of our network infrastructure to support the growing
data and voice business at the major centres of Johannesburg, Cape Town and
Durban;
- growth in the monthly contracted revenue across the Group from R140 million
per month as at 31 August 2007 to R170 million per month as at 29 February
2008;
- increase in our staff complement from 515 to 578 employees to support
organic growth and as a result of the Storm acquisition; and
- completed the license conversion process and are now under consideration
for one of the five Electronic Communication Network Services ("ECNS")
licenses to be issued by ICASA that will enable Vox Telecom to compete as a
fully fledged Telecommunications operator with the likes of Telkom Limited,
MTN Limited and Vodacom;
FUTURE PROSPECTS
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, remaining unchanged.
The remaining six months will be focused on, but not limited to:
the continued growth of all core business divisions through strong organic
growth;
- strategic acquisitions of businesses that allow Vox to further scale its
voice and data business or that enable the expansion into complimentary
markets that improve Vox`s strategic positioning;
- successfully securing an ECNS license;
- growth in the volume of incoming voice minute traffic ,terminating on the
Vox Telecom network via our 087 number range, to be driven primarily by (a)
Vox`s positioning as a `wholesale` Telco operator and (b) the anticipated
growth and acceptance of the Vox ADSL consumer product offering;
- maximizing synergies and economies of scale on Vox`s voice and data
platforms following the recent acquisitions.
FINANCIAL OVERVIEW
Revenues increased by 231% or R606 million to R869 million and profit increased
by 271% or R31,5 million to R43 million over the comparative period. Operating
profit and profit after taxation increased by 313% to R67 million and 271% to
R43 million, respectively, over the previous period. Net profit margins
approximated 5% and we anticipate that they will remain at this level for the
remainder of the year.
Earnings per share ("eps") and headline earnings per share ("heps") increased by
121% to 4.72 cps from 2.14 cps over the corresponding period respectively.
Monthly contracted revenue increased to R170 million per month from R140 million
per month as at 31 August 2007.
Revenues include three month`s contribution from ABSA Internet Access ("AIA"),
Amvia and Telkom Ericsson (`Namibia`) as well as one month`s contribution from
Storm Telecom ("Storm"). The revenues of the Group are traditionally affected
by the seasonal downturn over the December and early January holiday period
including the Telkom "freeze" and we anticipate that the revenue growth for the
second half of the fiscal year will exceed that of the prior six months.
Corporate ISP (DataPro) continues to grow strongly off its own customer base as
well as gain market share via new sales. We anticipate that the Storm data
revenues will be highly earnings enhancing via the `network effect` as very
little cost is associated with these data revenues and they are entirely
serviced off existing DataPro infrastructure platforms.
@lantic continues to be a leading reseller of iBurst and Vodacom 3G solutions.
The AIA acquisition has contributed approximately R21m to Consumer ISP revenue
(@lantic) over the last six months period, effective 1 December 2007. The
average value of monthly revenue derived from the AIA customer base is
increasing rapidly from the acquired R49 per month towards the @lantic average
of approximately R150 per month.
Storm is the only acquisition that has not yet been completely integrated into
the Group. We anticipate that voice revenues will take slightly longer than the
data revenues to integrate into Orion, given that there are materially more
voice customers than data. Orion continues to trade well and in line with budget
expectations and along with DataPro is expected to derive significant synergies
once the Storm customer base has been fully integrated.
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 R1.59 million for the six months.
Cash generated from operations was impacted by a working capital movement
resulting from the payment of R45 million relating to acquired payable balances
resulting in a `temporary` negative balance of cash utilised in operations of
R9.8 million. If the acquired balance had not been paid this would have
resulted in positive cash generated from operations of R35 million. In
addition, the change of a service provider to take advantage of certain
discounts and incentives delayed the receipt of these incentives at the February
balance sheet date. These funds have subsequently been received and we expect
cash balances on hand to grow steadily by year end given the cash generative
nature of the business.
A further R70 million of long term loan funding provided by Investec Bank
Limited was raised to fund the acquisitions of AIA, Storm, Amvia, Telkom
Ericsson and Amvia.A portion of the cash investment in the Vox ADSL phone of R18
million has been refinanced by Innovent, on terms considered highly favourable,
with the purpose of freeing up working capital in the group.
The large increase in intangibles and goodwill, arises principally from the
acquisition of Storm and the customer base of AIA (and to a lesser extent the
acquisitions of Amvia, Telkom Ericsson and the customer base of ODS which have
been accounted for in terms of IFRS 3).
Capital expenditure on premises and equipment invested in upgrading, improving
and maintaining the IP network infrastructure amounting to R40m has been
incurred in line with expectations and is not expected to exceed the budgeted
R50m in the current financial year. A further R30m has been invested to date in
the Vox ADSL consumer offering which predominantly comprises handsets.
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 all voice acquisitions, namely
Definity, Dial and Voip Telecoms, Orion Namibia (includes Telkom Ericsson) and
Storm Telecom from 1 February 2008 (voice only) have been incorporated into this
segment
Corporate ISP - DataPro and ODS and Storm Telecom (data only) from 1 February
2008
Consumer ISP - @lantic Internet Services including AIA
Other - includes Amvia (incorporating `ProFax"), @lantic Exchange and
corporate head office:
Unaudited Total Corporate Corporate Consumer Other
Voice ISP ISP
Feb-08 R`000 R`000 R`000 R`000 R`000
1 2 3
Revenue 88,745 670,047 93,390 73,730 31,578
Operating 67,547 55,947 22,864 15,507 (26,770)
profit
Net finance (6,600) 3,102 - 13 (9,716)
(costs)/
income
Profit (loss) 60,947 59,049 22,864 15,520 (36,486)
before
taxation
Inventory 2,483 16,165 3,035 1,721 1,563
Total assets 1,894,435 614,708 109,079 129,526 1,041,122
Total 786,999 431,532 251,407 33,024 71,036
liabilities
Depreciation (17,757) (11,210) (160) (833) (5,553)
and
amortisation
1 - Voice revenues for Storm Telecom have been included from 1 February 2008.
2 - Data revenues for Storm Telecom have been included from 1 February 2008.
3 - Revenues for AIA have been included from 1 December 2007.
Unaudited Total Corporate Corporate Consumer Other
Voice ISP ISP
Feb-07 R`000 R`000 R`000 R`000 R`000
Revenue 262,807 158,290 74,756 29,760 -
Operating 16,363 10,183 2,420 5,599 (1,839)
profit
Net finance (297) 826 (1,963) 1 839
(costs)/
income
Profit (loss) 16,066 11,009 457 5,600 (1,001)
before
taxation
Inventory 11,065 9,414 947 704 -
Total assets 1,015,635 195,696 234,333 8,206 526,777
Total 396,984 169,861 227,619 (495) -
liabilities
Depreciation 5,955 269 3,967 212 1,508
and
amortisation
Secondary geographic segments
The Group`s business operates in two principal geographical areas - South Africa
and Namibia.
Total South Namibia Total South Namibia
Africa Africa
Unaudite Unaudite
d d
Feb-08 Feb-08 Feb-08 Feb-07 Feb-07 Feb-07
R`000 R`000 R`000 R`000 R`000 R`000
Sales 868,745 859,888 8,857 262,807 256,105 6,702
Segment 1,894,43 1,874,80 19,628 965,012 963,479 1,533
assets 5 7
ACQUISITIONS AND ISSUE OF SHARES FOR CASH DURING THE YEAR
With effect from 1 December 2007, Vox Telecom, through its wholly owned
subsidiary, @lantic, acquired the customer contracts and certain computer
hardware from Absa Bank Limited ("ABSA") for a purchase consideration of R72.5
million. This was settled through a combination of cash on hand and a secondary
debt facility of R70m raised with Investec Bank limited to fund this acquisition
and the acquisition of Storm.
Vox Telecom acquired Storm with effect from 1 February 2008. 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. The purchase
price of R365 million was settled by a combination of debt raised from Investec
as mentioned above and by way of a vendor placement of an issue of 184 301 524
shares to the sellers of Storm, 149 538 462 of which were then placed on behalf
of the vendors at 212 cps to BEE shareholders being LMCGF and Mvelaphanda Group
Limited and the balance of 34 763 062 to approximately 160 Vox Telecom employees
via a combination of own funds and funds loaned to employees specifically for
the purchase of these shares.
Amvia was acquired for a purchase consideration of R36 million, effective 1
December 2007, which price has been settled by a combination of cash of R6
million and a further amount by way of a new issue of 5 869 564 ordinary shares
at a price of 230 cps. A further 7 173 913 ordinary shares have been issued to
the Vox Telecom Share Trust as treasury shares at 230cps, which will be
allocated to the Amvia vendors on the attainment of certain profit warranties at
31 August 2008 and 31 August 2009.
The remaining acquisitions of Telkom Ericsson and ODS were settled in cash, with
a final nominal amount of approximately R3m still payable to the ODS vendors.
The total number of shares in issue is 1 108 501 698 after including the Storm
and Amvia shares issued as well as 1 048 000 share options exercised to date by
employees as at 29 February 2008.
DIRECTOR CHANGES
Mr Mutle Mogase and Mr Chris Lister James ("alternate") resigned as non
executive directors on 21 November 2007. Mr Tshakalisa Matiwaza was appointed
executive director on 30 January 2008, representing Mvelaphanda Group Limited on
conclusion of the acquisition of Storm.
DIVIDENDS
With the application of cash generated from operations being focussed on the
acquisition of annuity income streams and the continued investment in our
network 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
their contribution they have made to the continued growth in the Company over
the past six months.
By order of the Board
AP van Marken D G Reed
Chairman Chief Executive Officer
23 April 2008
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*,T Matiwaza*
* Non-executive
Designated Advisor
PSG Capital (Pty) Ltd
Transfer Office
Computershare Investor Services 2004 (Pty) Ltd
Date: 23/04/2008 17:26:06 Produced by the JSE SENS Department.
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