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VOX
VOX
VOX - VOX Telecom - Provisional audited results for the year ended 31 August
2010
VOX TELECOM LIMITED
(Registration Number: 1998/016433/06)
("Vox Telecom" or "the Company" or "the Group")
JSE Code: VOX
ISIN Code: ZAE000097234
PROVISIONAL AUDITED RESULTS FOR THE YEAR ENDED 31 AUGUST 2010
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Audited Audited
Year ended Year ended
31 Aug 10 31 Aug 09
R`000 R`000
Revenue 2 070 755 2 082 533
Cost of sales (1 549 639) (1 559 576)
Gross profit 521 116 522 957
Other income 1 113 7 636
Depreciation and amortisation (78 330) (69 460)
Employment costs (198 092) (184 227)
Occupancy costs (22 530) (21 245)
Other operating costs (115 086) (123 664)
Operating profit 108 191 131 997
Finance costs (17 731) (40 437)
Finance income 8 866 8 433
Net finance costs (8 865) (32 004)
Profit before taxation and 99 326 99 993
exceptional item
Exceptional item (842 547) (11 585)
(Loss) profit before taxation (743 221) 88 408
Taxation 63 534 (27 628)
(Loss) profit for the year (679 687) 60 780
Other comprehensive (loss) income
Exchange differences on translating - (408)
foreign operation
Reclassification adjustments on 1 376 -
deregistration of foreign operation
Total comprehensive (loss) income (678 311) 60 372
for the year
Attributable to equity holders of (678 311) 60 372
the parent
(Loss) earnings per share ("EPS")
Basic EPS (cents) (61.32) 5.49
Diluted basic EPS (cents) (61.32) 5.49
Additional information:
Reconciliation of (loss) profit for
the year to headline earnings
(Loss) profit for the year (679 687) 60 780
Adjustments for:
Loss on sale of assets 159 869
Impairment of assets 956 9 749
Impairment of intangibles 328 553 -
Impairment of goodwill 512 618 -
Reclassification of FCTR 1 376 -
Tax effect (92 307) (2 973)
Headline earnings 71 668 68 425
Headline EPS (cents) 6.45 6.18
Diluted headline EPS (cents) 6.45 6.18
Weighted average number of shares
Weighted average 1 108 501 1 107 244
Diluted weighted average 1 108 501 1 107 244
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Audited Audited
As at As at
31 Aug 2010 31 Aug 2009
R`000 R`000
ASSETS
Non-current assets 571 974 1 450 595
Plant and equipment 128 763 131 340
Goodwill 86 803 599 358
Other intangibles 345 398 701 174
Finance lease receivable 1 529 1 943
Deferred taxation 9 481 16 780
Current assets 418 085 401 580
Inventories 28 941 41 481
Trade and other receivables 217 890 265 253
Tax receivable 6 324 1 975
Finance lease receivables 766 755
Cash and bank balances 164 164 92 116
Total assets 990 059 1 852 175
EQUITY AND LIABILITIES
Capital and reserves 491 564 1 165 352
Share capital 1 109 1 109
Share premium 1 018 876 1 018 876
Reserves 14 129 8 230
(Accumulated loss) retained earnings (542 550) 137 137
Total equity 491 564 1 165 352
Non-current liabilities 105 388 285 746
Borrowings - interest bearing 37 683 118 982
Borrowings - interest free 2 275 758
Deferred taxation 65 430 166 006
Current liabilities 393 107 401 077
Trade and other payables 283 904 292 070
Provisions 26 279 14 173
Taxation 2 824 12 010
Current borrowings 80 100 82 824
Total equity and liabilities 990 059 1 852 175
Ordinary shares in issue at year end 1 108 501 1 108 501
(`000)
Net asset value per share (cents) 44.3 105.1
CONSOLIDATED CASH FLOW STATEMENT
Audited Audited
Year Year
ended ended
31 Aug 10 31 Aug 09
R`000 R`000
Cash flow from operating activities
Operating cash before working 206 118 209 318
capital movements
Working capital movements 44 676 (24 241)
Cash generated from operations 250 794 185 077
Net interest paid (8 865) (32 004)
Taxation paid (43 278) (34 128)
Net cash inflow from operating 198 651 118 945
activities
Cash flow from investing activities
Additions to plant and equipment to (35 603) (62 430)
expand operations
Additions to other intangibles to (11 241) (2 719)
expand operations
Proceeds on disposal of plant and 3 945 2 817
equipment
Proceeds from finance lease 382 204
receivables
Additional vendor payments (63) (8 543)
Net cash outflow from investing (42 580) (70 671)
activities
Cash flow from financing activities
Repayments of long and short-term (84 023) (44 435)
borrowings
Net cash outflow from financing (84 023) (44 435)
activities
Net increase in cash and cash 72 048 3 839
equivalents
Bank balance at beginning of year 92 116 88 277
Cash and cash equivalents at end of 164 164 92 116
year
CONDENSED STATEMENT OF CHANGES IN EQUITY
Share Share Reserves Retained Equity
capital premium earnings attribu-
(Accumu- table to
lated equity
loss) holders
of the
parent
R`000 R`000 R`000 R000 R`000
Balance as at 1 101 1 002 384 5 428 76 357 1 085 270
31 August 2008
Total - - (408) 60 780 60 372
comprehensive
income for the
year
Shares issued 8 16 492 - - 16 500
(net of costs)
Share-based - - 3 210 - 3 210
payment expense
Balance at 1 109 1 018 876 8 230 137 137 1 165 352
31 August 2009
Total - - 1 376 (679 687) (678 311)
comprehensive
loss for the
year
Share-based - - 4 523 - 4 523
payment expense
Balance at 1 109 1 018 876 14 129 (542 550) 491 564
31 August 2010
COMMENTARY
The condensed consolidated financial information has been prepared in
accordance with the framework concepts and the measurement and recognition
requirements of International Financial Reporting Standards ("IFRS"), the AC
500 standards as issued by the Accounting Practices Board and the information
as required by IAS 34 Interim Financial Reporting. The report has been
prepared using accounting policies that comply with IFRS which are consistent
with those applied in the financial statements for the year ended, 31 August
2009 except for IFRS 3 Business Combinations, IFRS 8 Operating Segments, IAS
1 Presentation of Financial Statements, IAS 23 Borrowing Costs and IAS 27
Consolidated and Separate Financial Statements, which were implemented during
the year in accordance with the transitional provisions. The implementation
of these standards required no prior year restatement except for the
identification of additional reporting segments.
The annual financial statements from which these results have been derived
have been audited by Deloitte & Touche. A copy of their unmodified audit
opinion is available for inspection at the Company`s registered office. Any
reference to future financial performance included in this announcement, has
not been reviewed or reported on by the Company`s auditors. This announcement
has been prepared in accordance with the Companies Act and the JSE Limited
("JSE") listings requirements.
COMPANY PROFILE
Vox Telecom Limited, headquartered in Johannesburg, is a leading independent,
alternative telecom operator, providing voice and data services to the
Southern African market. The Group employs more than 780 people and competes
through its primary brands Vox Telecom, Vox DataPro, @lantic, Vox Orion, Vox
Amvia and Vox Telepreneur 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 REVIEW FOR THE PERIOD
The key financial highlights of the past year were:
- Revenue down 1% to R2,07 billion
- Gross profit largely unchanged at R521 million
- Cash generated from operations up 35% to R251 million
- Cash on hand increased by 78% to R164 million
- Profit before tax and exceptional items largely unchanged at R99 million
- Headline earnings per share up 4% to 6.45 cents per share
The following is a summary of key aspects of operational performance:
- The decline in revenue was largely due to the Group`s strategic decision
to reduce its dependence on SIMs in anticipation of converting customers
onto Cristal Vox, as well as the result of a drop in the Call
Termination Rates ("CTR") to 89c in March 2010 (refer to Revenue section
below for more detail);
- The staff complement has remained stable at 788 employees (31 August
2009: 781);
- Continued focus on cash flow generation has allowed the Group to invest
a further R36 million into its network and other fixed assets as well as
further reduce long term debt obligations by R84 million - which has
reduced net finance charges to R9 million (31 August 2009: R32 million);
and
- Goodwill and other intangibles were impaired in the current year by R513
million and R329 million (before tax) respectively. These impairments
are exceptional in nature and have been discussed in detail under the
Exceptional items section.
FUTURE PROSPECTS
On 29 October 2010 ICASA issued a Government Gazette Notice 33698, Volume 544
that defines and addresses the wholesale call termination market that exists
within the borders of the Republic of South Africa.
ICASA have defined telecommunications services into two definitive
categories, namely call termination services to a mobile location ("mobile
services") as well as call termination services to a fixed location ("fixed
line services").
Within these categories, ICASA identified participants that are dominant and
have Significant Market Power ("SMP"). These participants have a share of
total minutes terminated in the respective markets of greater than 25% as of
June 2009. These identified participants are:
Mobile services:
Vodacom; and
Mobile Telephony Networks ("MTN").
Fixed line services:
Telkom.
Licensees not listed above may charge a maximum percentage above the ICASA
published rates (refer to rates section below), according to the following
table:
Maximum Percentage Above Rate
Set For Identified Licensees
Current 0%
From 1 March 2011 20%
From 1 March 2012 15%
From 1 March 2013 10%
The regulations require that any licensee offering mobile services, must
charge the wholesale voice call termination rates to a mobile location as
specified below:
Glide Path (March 2011 - March 2013)
Peak Mobile Call Off Peak Mobile Call
Termination Rate Termination Rates
From 1 March 2011 R0.73 R0.65
From 1 March 2012 R0.56 R0.52
From 1 March 2013 R0.40 R0.40
The regulations also impose that any licensee offering fixed line services,
must charge the wholesale voice call termination rates to a fixed location as
specified below:
Glide Path (March 2011 - March 2013)
Peak Fixed Line Off Peak Fixed Line
Call Termination Call Termination
Rate Within ON area Rates Within ON area
code code
From 1 March 2011 R0.20 R0.12
From 1 March 2012 R0.15 R0.12
From 1 March 2013 R0.12 R0.12
Peak Fixed Line Off Peak Fixed Line
Call Termination Call Termination
Rate Between ON Rates Between ON
area code area code
From 1 March 2011 R0.28 R0.19
From 1 March 2012 R0.25 R0.19
From 1 March 2013 R0.19 R0.19
Please note that these tables are an extract of the Government Gazette Notice
33698, Volume 544 issued on 29 October 2010.
The clarity Vox now has in the regulatory environment means the Company is
able to focus on its vision of striving to be the leading independent,
alternative provider of voice and data solutions to the Southern African
market with its key goals and objectives remaining unchanged. We anticipated
that interconnect rates would change and in this regard have been building
and developing our own network. The launch of Cristal Vox in 2009 is a direct
response to this change. Cristal Vox is the result of four years of
experience in the voice market and has resulted in the launch of a Telco
grade quality voice solution. Cristal Vox allows the Group to provide a
complete voice solution to service all of our customers` needs for both
inbound and outbound calls. The impact of this is reduced communication costs
for our customers and improved margins for the Group.
Vox Orion is affected by changes in the CTR environment as the majority of
its customers use cellular Least Cost Routing ("LCR") products. This service
has historically resulted in major savings when making outbound calls from
Telkom to one of the mobile operator networks. In response to anticipated
changes in CTR, a process was initiated in 2009 to convert Vox Orion
customers from LCR services to Cristal Vox. This conversion process requires
technical changes at customer sites and the signing of new contracts which
will take time.
This process has also been delayed due to the late implementation of Local
Number Portability ("LNP"). With LNP now available Vox has experienced an
increased take-up of Cristal Vox by the Vox Orion corporate customer base.
The change in the interconnect landscape now allows Vox Orion as well as
other subsidiaries within the Vox Group to offer competitive outbound and
inbound retail rates to their customers on all types of traffic, instead of
merely focusing on capturing a customer`s cellular traffic.
Vox Orion`s strategic reaction to the changes in CTR has had a medium term
negative impact on profitability of the Vox Orion business due to a reduction
in Connection Incentive Bonuses ("CIB") revenues in 2010 and continued margin
pressure from LCR customers that have not yet converted to Cristal Vox. Over
the longer term Vox Orion will benefit from margin improvements once their
major voice customers have been converted to the Cristal Vox solution.
At 31 October 2010 Vox Orion has 30 million monthly Cristal Vox minutes in
backlog, which are due to be implemented and 63 million minutes in proposals
outstanding.
None of the market conditions and prospects information contained in this
announcement have been reviewed or reported on by the Company`s auditors.
FINANCIAL OVERVIEW
Revenue
Revenues declined marginally by 1% to R2,07 billion (2009: R2,08 billion).
Vox Orion`s revenue declined by 9% to R1,2 billion (31 August 2009: R1,3
billion). This was mainly the result of the drop in CTR to 89c in March 2010,
which also impacted the LCR retail rates. The drop in CIB revenue was as a
result of the strategic decision of the Group taken in November 2009 to stop
the renewal of LCR SIMs with the networks as these SIMs come out of contract,
in anticipation of the proposed changes in CTR. The impact of this decision
was that R8 million was generated through CIBs compared to R96 million in the
comparable period. Vox Orion billed 34 million voice minutes terminated on
the Vox network, which was converted from their historical LCR customer base.
The impact of changes in CTR`s on Vox Orion is explained in the "Future
Prospects" section of this announcement.
Vox DataPro`s revenue has grown by 4% over the comparative period through a
combination of voice and data sales to R351 million (2009: R337 million).
Average Revenue Per User ("ARPU") decreased to R4 409 per month from R5 031
per month as at end of August 2009, derived from a base of 7 540 customers
(2009:7 876).
Vox DataPro`s revenue growth has been diluted in the current period due to
the re-allocation of certain wholesale business to Vox Core (refer to
footnote in the segmental analysis). The revenues from the successful launch
of Fishbone Linebonder and Eyeris continue to grow with current monthly
annuity from Fishbone totalling more than R1,5 million. Vox Datapro has also
responded positively to the recent price reductions in uncapped ADSL products
and is currently competitive with its ADSL product offering.
@lantic`s revenue remained constant at R199 million and ARPUs across the base
have grown to R157 per month (2009: R153 per month). The strategy remains to
drive ARPUs across the entire @lantic base to approximately R300 per month.
The number of customers declined to 123 306 (2009: 136 694).
Vox Amvia`s revenue increased by 15% to R36 million (2009: R31 million), and
annuity revenue now comprises 72% (31 August 2009: 70%) of total revenue.
Product sales have remained flat on the prior year sales whilst annuity
revenue has increased by 15% in comparison to the same period last year.
Vox Core`s revenue has increased by 115% to R234 million (2009: R109 million)
as a result of new wholesale business as well as the allocation of wholesale
business from Vox DataPro which is explained above under "Vox DataPro`s
revenue section".
Vox Telepreneur revenue increased by 67% to R34 million (2009: R20 million).
ARPUs have increased to R283 per month from R272 per month as at 31 August
2009.
Gross profit and gross profit margin
Group gross profit margins have remained constant at 25%.
Vox Orion`s gross profit margins have decreased to 16% in the current year
(2009: 18% gross profit margin). The drop in CIB revenue (refer Revenue
section) was neutralised by improved margins in the existing LCR base, as a
result of improved operational efficiencies and utilisation of contract
minutes.
Vox DataPro achieved gross profit margins of approximately 36% (2009: 32%)
and 30% (2009: 18%) in data and voice respectively.
@lantic`s gross profit margins have decreased to 33% from 36% in the prior
year. This is largely as a result of Telkom rebates which were discontinued
in the current year resulting in a loss of R7 million in rebates.
Vox Amvia`s gross margins have increased from 57% to 58% in the current year
due to increased annuity sales at higher margins than the traditional product
sales.
Vox Core`s gross margins have increased from 14% in the prior year to 16% in
the current year. This is as a result of improved efficiencies through
economies of scale with new wholesale customers.
Vox Telepreneur`s gross margins have decreased marginally from 16% to 15%.
This is due to accelerated depreciation on ADSL phones from a life of 5 years
to a new revised life of 3 years, as well as a subsidised price drop to its
clients before the other networks dropped the interconnect charges in March
2010.
Operating expenses
Operating profit was 18% lower than the prior year at R108 million (2009:
R132 million), with operating profit margins of 21% (31 August 2009: 25%).
Depreciation and amortisation increased 19% as a result of capital
expenditure amounting to R47 million (2009: R65 million). Employment costs
increased 8% to R198 million (2009: R184 million) due to the slight increase
in staff to 788 employees (2009: 781), as well as inflationary increases in
salaries. Occupancy costs increased 6% to R23 million (31 August 2009: R21
million).
The recoverability of trade debtors has been impacted by the change in the
economic climate resulting in a net R9 million increase in the allowance for
doubtful debts. In the current year R4 million was written off in bad debts
(2009: R12 million) which was provided for in full as at 31 August 2009. The
Group maintained the bad debt policy to provide for all amounts greater than
90 days unless mitigated by specific circumstances. This has increased the
provision for bad debts to R32 million (2009: R23 million). The Group`s
continued focus on working capital has resulted in approximately 82% of trade
receivables being aged less than 30 days, which has had a noticeable
improvement in working capital management and cash flows.
The Vox Telecom Limited 2009 Share Plan ("the Plan") was adopted by
shareholders at a general meeting held on 20 August 2009. In the current year
this has resulted in a charge of R4,5 million in terms of IFRS 2 Share based
payments. In the years ahead the following anticipated amounts in terms of
IFRS2 will be charged to the income statement for the years ending 31 August:
- 2011: R4,5 million
- 2012: R4,0 million
- 2013: R2,2 million
- 2014: R0,9 million
Net finance charges
The Group was able to repay R84 million in long term debt in the current
year. Therefore the net financing costs decreased to R9 million (2009: R32
million).
Cashflow and capital expenditure
Cash generated from operations has improved by 35% from R185 million to R251
million at year end. Considerable effort has been placed on the optimisation
of cash collection and the management of accounts receivable and working
capital.
This has been applied in meeting capital expenditure commitments of R36
million of which approximately R28 million has been invested in network and
similar IT equipment. Debt repayments of R84 million have also been made with
total debt reducing to R118 million at year end (2009: R 202 million). The
debt to equity ratio was 24% at 31 August 2010. This has increased from 17%
in 2009 largely as a result of the impairments of goodwill and customer
bases, reducing retained earnings by R680 million.
Capital expenditure is expected to increase to facilitate the roll out of
Cristal Vox. Expenditure incurred will mainly be driven by increased traffic
on the Vox Core network.
Exceptional items
In terms of IFRS the Group is required to assess at the end of each reporting
period whether there is any indication that an asset may be impaired. If any
such indication exists, the entity shall estimate the recoverable amount of
the assets.
With reference to the Future Prospects section of this document, ICASA has
proposed significant changes to wholesale interconnection rates to be
implemented via a glide path over a number of years.
As a result of these changes, the Group has performed a valuation of the LCR
business and certain acquired @lantic Internet ISP customers which,
independently of the change in interconnect rates, indicated a potential
impairment.
These valuations, which were based on management`s best estimate of future
cash flows, have resulted in a R809 million impairment for Vox Orion which
has been applied against goodwill (R480 million) and the acquired customer
bases (R329 million). Similarly, @lantic Internet`s goodwill has been
impaired by R33 million. These impairments are seen as exceptional items and
have been added back for headline earnings.
Goodwill and other intangibles
As detailed above R513 million of goodwill has been impaired together with
R329 million of the Vox Orion acquired customer base.
These impairments have resulted in a loss for the year of R679,7 million and
similarly a basic loss per share of (61.32) cents. However, as these
impairments are added back from a headline earnings perspective, the headline
earnings have increased to R72 million with a 4% increase in headline
earnings per share to 6.45 cents per share.
Going concern
The Directors believe that the Group is well placed to manage its business
risks successfully. The Directors have a reasonable expectation that the
Group has adequate resources to continue to operate for the foreseeable
future, despite the current uncertain economic and legislative environment.
Accordingly, they continue to adopt the going concern basis of accounting in
preparing the annual financial statements.
SEGMENTAL REPORTING
Primary business segments
The Group operates through its six main operating businesses, namely Vox
Orion, Vox DataPro, @lantic Internet, Vox Amvia, Vox Core (Wholesale) and Vox
Telepreneur. Other areas include corporate head office and the other early
stage businesses. The Group`s principal product offerings are as follows:
Vox Orion Includes Vox Namibia and Corporate voice and
data.
Vox DataPro Corporate voice and data with the main focus on
the SME market. (DataPro also includes the
Service Centre).
@lantic Internet Consumer data and voice services.
Vox Amvia Fax services and related products.
Vox Core Wholesale voice and data. All purchases of
minutes and data bundles are done through Vox
Core. Vox Core is a new segment that was
previously included in "Corporate and other".
Vox Telepreneur Consumer VOIP through sales of Vox Supafone.
Vox Telepreneur is a new segment that was
previously included in "Corporate and other".
Corporate and other Includes Vox Exchange and corporate head
office.
CONDENSED CONSOLIDATED SEGMENT REPORT FOR THE YEAR ENDED 31 AUGUST
2010
Total Intercompany Vox Orion
eliminations
R`000 R`000 R`000
2010
Revenue (external) 2 070 755 - 1 214 535
Revenue (internal) - (579 906) 66 406
Cost of sales (1 540 339) 579 906 (1 070 937)
Gross profit 530 416 210 004
Other income 1 113 159
Employment costs (198 092) (84 000)
Occupancy costs (22 530) (8 372)
Other operating costs (115 086) (30 476)
Earnings before interest, 195 821 87 317
taxes, depreciation and
amortisation
Depreciation and (87 630)
amortisation
Net finance costs (8 865)
Profit before taxation 99 326
and exceptional
Exceptional items (842 547)
Loss before taxation (743 221)
Taxation 63 534
Loss for the year (679 687)
Inventory 28 941 7 820
Goodwill 86 803 -
Intangible assets 325 765 190 017
(excluding software)
Other segment assets 548 550 271 195
Total assets 990 059 469 032
Total liabilities 498 495 220 033
CONDENSED CONSOLIDATED SEGMENT REPORT FOR THE YEAR ENDED 31 AUGUST
2010 (Continued)
Vox DataPro @lantic Vox Amvia
R`000 R`000 R`000
2010
Revenue (external) 351 170 199 221 36 039
Revenue (internal) 20 307 5 201 4 140
Cost of sales (267 744) (136 851) (16 896)
Gross profit 103 733 67 571 23 283
Other income - 307 22
Employment costs (27 983) (12 765) (7 701)
Occupancy costs (1 413) (1 541) (632)
Other operating costs (17 528) (22 580) (4 117)
Earnings before interest, 56 809 30 992 10 855
taxes, depreciation and
amortisation
Depreciation and
amortisation
Net finance costs
Profit before taxation
and exceptional
Exceptional items
Loss before taxation
Taxation
Loss for the year
Inventory 144 2 522 866
Goodwill 40 142 15 779 29 357
Intangible assets 26 811 76 419 14 655
(excluding software)
Other segment assets 67 838 16 695 17 696
Total assets 134 935 111 415 62 574
Total liabilities 99 021 35 443 12 173
CONDENSED CONSOLIDATED SEGMENT REPORT FOR THE YEAR ENDED 31 AUGUST
2010 (Continued)
#Vox Core Vox Corporate
Telepreneur and Other
R`000 R`000 R`000
2010
Revenue (external) 234 428 33 676 1 686
Revenue (internal) 481 267 2 424 161
Cost of sales (604 406) (23 161) 50
Gross profit 111 289 12 939 1 897
Other income 1 108 2 757 (3 240)
Employment costs (22 555) (3 496) (39 592)
Occupancy costs (6 508) - (4 064)
Other operating costs (19 710) (9 867) (10 808)
Earnings before interest, 63 624 2 333 (55 807)
taxes, depreciation and
amortisation
Depreciation and
amortisation
Net finance costs
Profit before taxation
and exceptional
Exceptional items
Loss before taxation
Taxation
Loss for the year
Inventory 8 937 8 652 -
Goodwill - - 1 525
Intangible assets - - 17 863
(excluding software)
Other segment assets 100 482 30 326 44 318
Total assets 109 419 38 978 63 706
Total liabilities 109 273 19 617 2 935
CONDENSED CONSOLIDATED SEGMENT REPORT FOR THE YEAR ENDED 31 AUGUST
2009
Total Intercompany Vox Orion
eliminations
R`000 R`000 R`000
2009
Revenue (external) 2 082 533 - 1 340 533
Revenue (internal) - (665 595) 79 569
Cost of Sales (1 555 638) 665 595 (1 160 975)
Gross profit 526 895 259 127
Other income 7 635 1 453
Employment costs (184 227) (80 287)
Occupancy costs (21 245) (9 552)
Other operating costs (123 664) (30 172)
Earnings before interest, 205 394 140 569
taxes, depreciation and
amortisation
Depreciation and (73 397)
amortisation
Net finance costs (32 004)
Profit before taxation and 99 993
exceptional
Exceptional items (11 585)
Profit before taxation 88 408
Taxation (27 628)
Profit for the year 60 780
Inventory 41 481 10 877
Goodwill 599 358 480 212
Intangible assets 686 364 541 837
(excluding software)
Other segment assets 524 972 298 680
Total assets 1 852 175 1 331 606
Total liabilities 686 823 213 553
CONDENSED CONSOLIDATED SEGMENT REPORT FOR THE YEAR ENDED 31 AUGUST
2009 (Continued)
* Vox @lantic Amvia
Datapro
R`000 R`000 R`000
2009
Revenue (external) 336 539 199 446 30 852
Revenue (internal) 88 264 4 051 4 818
Cost of Sales (326 285) (131 080) (15 493)
Gross profit 98 518 72 417 20 683
Other income - - 79
Employment costs (24 411) (10 922) (6 909)
Occupancy costs (1 467) (1 190) (571)
Other operating costs (12 490) (17 789) (3 205)
Earnings before interest, 60 150 42 516 10 077
taxes, depreciation and
amortisation
Depreciation and
amortisation
Net finance costs
Profit before taxation and
exceptional
Exceptional items
Profit before taxation
Taxation
Profit for the year
Inventory - 2 940 1 313
Goodwill 40 142 48 185 29 357
Intangible assets 28 018 81 370 15 401
(excluding software)
Other segment assets 78 604 27 495 15 037
Total assets 146 764 159 990 61 108
Total liabilities 48 101 21 220 6 559
CONDENSED CONSOLIDATED SEGMENT REPORT FOR THE YEAR ENDED 31 AUGUST
2009 (Continued)
Vox Core Vox Head Office
Telepreneur and Other
R`000 R`000 R`000
2009
Revenue (external) 98 388 20 215 56 559
Revenue (internal) 449 009 1 581 38 303
Cost of Sales (478 514) (18 217) (90 669)
Gross profit 79 567 3 579 (6 996)
Other income 610 3 832 1 661
Employment costs (20 500) (3 095) (38 103)
Occupancy costs (6 508) - (1 957)
Other operating costs (8 969) (1 734) (49 305)
Earnings before interest, 44 200 2 582 (94 700)
taxes, depreciation and
amortisation
Depreciation and
amortisation
Net finance costs
Profit before taxation and
exceptional
Exceptional items
Profit before taxation
Taxation
Profit for the year
Inventory 11 526 14 825 -
Goodwill - - 1 462
Intangible assets - - 19 738
(excluding software)
Other segment assets 79 259 25 896 1
Total assets 90 785 40 721 21 201
Total liabilities 67 818 24 821 304 751
Secondary geographic segments
The Group`s businesses operate in two principal geographical areas - South
Africa and Namibia.
Total South Africa Namibia
year year year
ended ended ended
Aug 10 Aug 10 Aug 10
R`000 R`000 R`000
Sales 2 070 755 2 037 230 33 525
Segment assets 990 059 968 690 21 369
Total South Africa Namibia
year year year
ended ended ended
Aug 09 Aug 09 Aug 09
R`000 R`000 R`000
Sales 2 082 533 2 051 834 30 699
Segment assets 1 852 175 1 823 919 28 256
* - Vox DataPro`s wholesale business, which includes revenue of R81,7 million
and EBITDA of R11,9 million for the year ended 31 August 2009, has been re-
allocated to Vox Core in 2010.
# - During the current year, Vox Core transacted with a single customer which
exceeded 10% of the segments revenue.
- Included in cost of sales was depreciation on ADSL phones and computer
hardware to the value of R9,3 million (2009: R3,9 million).
The prior year comparatives have been amended to reflect the first time
adoption of IFRS 8 Operating Segments, which requires that the information be
presented "through the eyes of management". The changes include the
disclosure of two additional segments, namely Vox Core and Vox Telepreneur,
the disclosure of inter-group revenue as well as the presentation of results
net of inter-group charges.
ACQUISITIONS AND ISSUE OF SHARES FOR CASH DURING THE YEAR
There were no acquisitions or further issue of shares in the period under
review.
The total number of shares in issue as at 31 August 2010 is 1 108 501 698
(2009: 1 108 501 698). The total number of shares in issue on a weighted
average fully diluted basis as at 31 August 2010 is 1 108 501 698.
GENERAL UPDATE
Vox Telecom Limited 2009 Share Plan
The Vox Telecom Limited 2009 Share Plan ("the Plan") was adopted by
shareholders at general meeting held on 20 August 2009. The Plan incorporates
the following elements: share appreciation rights ("SAR"), performance shares
and bonus shares. The Plan serves to align shareholder interest and long-term
sustained performance. The Plan allocation will initially only consist of
SAR. Provision is made for the award of performance and bonus shares that
may be awarded in the future.
The SAR economic interest is equivalent to 77 595 119 Vox Telecom shares. The
first SAR award representing 38 797 559 SAR was effected on 31 August 2009.
The remaining SAR award of 38 797 559 SAR is still to be effected.
Update on Dealstream Events
The liquidators have confirmed the Group`s claim. However, legal counsel for
the Group has indicated that any liquidation dividend for proven claims is
remote. There is no further exposure to the Group or the employees. The Group
may continue to incur legal expenses as a result of interaction with the
liquidator, which will be expensed in full as incurred.
DIRECTOR CHANGES
Dr NN Gwagwa resigned as an alternate non-executive director of the Company
on 28 January 2010. Dr Gwagwa was the alternate non-executive director for
current non-executive director, Mr Thierry Dalais. Mr Dalein van Zyl has been
appointed as an alternate non-executive director of the Group for Mr Thierry
Dalais from the same date.
Mr C M Von Holdt, the Group`s Chief Financial Officer, resigned with effect
from 31 March 2010 and Mr G J Koen has succeeded Mike with effect from 1
April 2010.
DIVIDENDS
In the view of a focus on the repayment of debt and further anticipated
investment in network infrastructure and new initiatives, the directors have
decided not to declare a dividend for the year under review.
SUBSEQUENT EVENTS
The directors have assessed any events that have occurred between year-end
and the date that the financial statements were authorised for issue and the
only event material to the financial statements was the decision to terminate
The Casey Share Incentive Scheme ("the scheme").
The Casey Share Incentive Scheme fully vested in 2009 with a total IFRS 2
Share based payment impact of R9,6 million having been expensed over the
three preceding years.
At year end the scheme consisted of 17 984 000 share options that were still
outstanding but "underwater" as the strike price was 66 cents per option. The
Board resolved to terminate the scheme; the impact of which is that the R9,6
million share-based payments reserve will be recycled into retained earnings
in 2011.
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 Group over
the past year.
By order of the Board
AP van Marken GJ Koen
Chief Executive Officer Chief Financial Officer and
Company Secretary
24 November 2010
Johannesburg
Registered Office
Block D, Rutherford Estate,1 Scott Street, Waverley, 2090
Directors
AP van Marken, DG Reed, GJ Koen, VW Cuba*#, D Wallace*#,
RT Dalais*, E Roth*, P Joubert*, AD van Zyl
* Non-executive
# Independent
Alternate
Designated Advisor Transfer Office
Grindrod Bank Limited Computershare Investor Services Pty) Ltd
Date: 24/11/2010 17:11:03 Produced by the JSE SENS Department.
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