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VOX
VOX
VOX - Vox Telecom Limited - Reviewed results for the six months ended 28
February 2011
VOX TELECOM LIMITED
(Registration number 1998/016433/06)
("Vox Telecom" or "the Company" or "the Group")
JSE Code: VOX
ISIN Code: ZAE000097234
REVIEWED RESULTS FOR THE SIX MONTHS ENDED 28 FEBRUARY 2011
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Reviewed Unaudited Audited
As at As at As at
28 Feb 2011 28 Feb 2010 31 Aug 2010
R`000 R`000 R`000
ASSETS
Non-current assets 558 207 1 443 720 571 974
Plant and equipment 130 523 149 147 128 763
Goodwill 86 803 599 358 86 803
Other intangibles 330 272 678 717 345 398
Other financial assets 2 106 1 625 1 529
Deferred taxation 8 503 14 873 9 481
Current assets 369 474 375 761 418 085
Inventories 25 726 33 161 28 941
Trade receivables and 213 182 233 556 217 890
prepayments
Current tax receivable 8 764 1 960 6 324
Finance lease - 785 766
receivables
Cash and bank balances 121 802 106 299 164 164
Total assets 927 681 1 819 481 990 059
EQUITY AND LIABILITIES
Capital and reserves 517 727 1 193 143 491 564
Share capital 1 109 1 109 1 109
Share premium 1 018 876 1 018 876 1 018 876
Reserves 16 397 10 499 14 129
(Accumulated losses) (518 655) 162 658 (542 550)
retained earnings
Non-current 69 511 238 952 105 388
liabilities
Borrowings - interest 170 79 743 37 683
bearing
Borrowings - interest 2 141 988 2 275
free
Deferred taxation 67 200 158 221 65 430
Current liabilities 340 443 387 386 393 107
Trade and other 249 777 291 449 283 904
payables
Provisions 14 755 12 491 26 279
Taxation 739 10 257 2 824
Current borrowings 75 172 73 189 80 100
Total equity and 927 681 1 819 481 990 059
liabilities
Ordinary shares in 1 108 501 1 108 501 1 108 501
issue at period end
(`000)
Net asset value per 46.7 107.6 44.3
share (cents)
Net tangible asset 9.1 (7.7) 5.4
value per share
(cents)
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Reviewed Unaudited Audited
Six months ended Six months Year
28 Feb 11 ended ended
R`000 28 Feb 10 31 Aug 10
R`000 R`000
Revenue 925 026 1 044 277 2 070 755
Cost of sales (668 061) (809 406) (1 549 639)
Gross profit 256 965 234 871 521 116
Other income 1 915 2 388 1 113
Depreciation and (41 895) (37 146) (78 330)
amortisation
Employment costs (104 320) (95 830) (198 092)
Occupancy costs (12 516) (11 281) (22 530)
Other operating costs (64 263) (53 708) (115 086)
Operating profit 35 886 39 294 108 191
Finance costs (5 356) (8 293) (17 731)
Finance income 3 815 4 640 8 866
Net finance costs (1 541) (3 653) (8 865)
Profit before taxation 34 345 35 641 99 326
and exceptional items
Exceptional items - - (842 547)
Profit (loss) before 34 345 35 642 (743 221)
taxation
Taxation (10 450) (10 120) 63 534
Profit (loss) for the 23 895 25 521 (679 687)
period
Other comprehensive
income (loss)
Reclassification - - 1 376
adjustments on
deregistration of
foreign operation
Total comprehensive 23 895 25 521 (678 311)
income (loss) for the
period
Earnings (loss) per
share (cents)
Basic EPS 2.16 2.30 (61.32)
Diluted basic EPS 2.16 2.30 (61.32)
Additional
information:
Reconciliation of
profit (loss) for the
period to headline
earnings
Profit (loss) for the 23 895 25 521 (679 687)
period
Adjustments for:
Impairment of - - 328 553
intangibles
Impairment of assets - - 956
Impairment of goodwill - - 512 618
(Profit) loss on sale (259) - 159
of assets
Reclassification of - - 1 376
FCTR
Tax effect 73 - (92 307)
Headline earnings 23 709 25 521 71 668
Headline EPS ( cents) 2.14 2.30 6.45
Diluted headline EPS 2.14 2.30 6.45
(cents)
Number of shares
In issue and weighted 1 108 501 1 108 501 1 108 501
average (`000)
Diluted weighted 1 108 501 1 108 501 1 108 501
average (`000)
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Reviewed Unaudited Audited
Six months ended Six months Year
28 Feb 11 ended ended
R`000 28 Feb 10 31 Aug 10
R`000 R`000
Cash flow from
operating activities
Operating cash before 83 564 78 709 206 118
working capital
movements
Working capital (38 356) 32 955 44 676
movements
Cash generated from 45 208 111 664 250 794
operations
Net interest paid (1 541) (3 653) (8 865)
Taxation paid (12 226) (17 736) (43 278)
Net cash inflow from 31 441 90 275 198 651
operating activities
Cash flow from
investing activities
Additions to plant and (31 854) (27 448) (35
equipment to expand 603)
operations
Additions to other (5 164) - (11 241)
intangibles to expand
operations
Proceeds on disposal 5 467 - 3 945
of property, plant and
equipment
Proceeds on finance 189 - 382
lease receivables
Additional vendor - - (63)
payments
Net cash outflow from (31 362) (27 448) (42 580)
investing activities
Cash flow from
financing activities
Repayments of long and (42 441) (48 645) (84 023)
short-term borrowings
Cash outflow from (42 441) (48 645) (84 023)
financing activities
Net (decrease) 72 048
increase in cash and (42 362) 14 182
cash equivalents
Cash and cash 164 164 92 117 92 117
equivalents at
beginning of period
Cash and cash 121 802 106 299 164 164
equivalents at end of
period
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share capital Share Reserves
premium
R`000 R`000 R`000
Unaudited six months
ended 28 February 2010
Balance as at
31 August 2009 1 109 1 018 876 8 230
Total comprehensive - - -
income for the period
Share-based payment - - 2 269
expense
Balance as at
28 February 2010 1 109 1 018 876 10 499
Reviewed six months
ended 28 February 2011
Balance as at
31 August 2010 1 109 1 018 876 14 129
Total comprehensive - - -
income for the period
Share-based payment - - 2 268
expense
Balance at
28 February 2011 1 109 1 018 876 16 397
Audited year ended 31
August 2010
Balance as at
31 August 2009 1 109 1 018 876 8 230
Total comprehensive - - 1 376
loss for the year
Share-based payment - - 4 523
expense
Balance as at
31 August 2010 1 109 1 018 876 14 129
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (Continued)
Retained Equity
earnings attributable
(accumulated to equity
losses) holders of
the parent
R`000 R`000
Unaudited six months ended 28 February
2010
Balance as at 31 August 2009 137 137 1 165 352
Total comprehensive income for the period 25 521 25 521
Share-based payment expense - 2 269
Balance as at 28 February 2010 162 658 1 193 143
Reviewed six months ended 28 February
2011
Balance as at 31 August 2010 (542 550) 491 564
Total comprehensive income for the period 23 895 23 895
Share-based payment expense - 2 268
Balance at 28 February 2011 (518 655) 517 727
Audited year ended 31 August 2010
Balance as at 31 August 2009 137 137 1 165 352
Total comprehensive loss for the year (679 687) (678 311)
Share-based payment expense - 4 523
Balance as at 31 August 2010 (542 550) 491 564
COMPANY PROFILE
Vox Telecom Limited, headquartered in Johannesburg, is a leading, independent
telecom operator, providing voice and data services to the Southern African
market. The Group employs 775 people and competes through its primary brands Vox
Telecom, Vox Datapro, @lantic, Vox Orion, Vox Amvia, Vox Core 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 ("the JSE").
Investor and shareholder information is available at www.voxtelecom.co.za
BASIS OF PREPARATION
These condensed financial statements have been prepared in accordance with the
framework concepts and the measurement and recognition requirements of
International Financial Reporting Standards ("IFRS"), Schedule 4 of the
Companies Act and the AC 500 standards as issued by the Accounting Practices
Board or its successor. The financial statements are in accordance with IAS 34
Interim Financial Reporting, using accounting policies that have been
consistently applied to prior periods.
REVIEW
These results have been reviewed by independent external auditors, Deloitte &
Touche, and their unmodified review report is available for inspection at the
registered office of the company. The review was performed in accordance with
the JSE Listings Requirements and ISRE 2410 Review of Interim Financial
Information Performed by the Independent Auditor of the Entity.
BUSINESS REVIEW FOR THE PERIOD
The key financial results of the past six months, compared with the six months
ended 28 February 2010 were:
- Gross profit up 9% to R257 million on H1 of 2010
- Cash on hand increased by 15% to R122 million
- Profit before taxation and exceptional items down 4% to R34 million
- Headline earnings per share ("HEPS") down 7% to 2.14 cents per share
The following is a summary of key aspects of operational performance:
- The Group continued its focused conversion of existing Least Cost Routing
("LCR") customers onto Cristal Vox, thereby decreasing the risk of margin
pressure on the Group through the drop in call termination rates ("CTR")
(refer future prospects section);
- the Group invested a further R32 million into its network and other fixed
assets as well as further reduced long term debt obligations by R42 million
- this has had the positive impact of reducing net finance charges to R2
million down from R4 million for the comparable period;
- The implementation of the changed interconnect rates resulted in decreased
revenue and profit and placed further pressure on our consumer divisions;
and
- The staff complement decreased slightly to 775 employees (2010: 781).
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.
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.
Cristal Vox, which is a direct response to this change, is the result of four
years of experience in the voice market and has positioned 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 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 these 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.
Over the longer term Vox Orion will benefit from margin improvements once their
major voice customers have been converted to the Cristal Vox solution.
None of the market conditions and prospects information contained in this
announcement have been reviewed or reported on by the Group`s auditors.
FINANCIAL OVERVIEW
(Note all comparatives relate to 28 February 2010)
The past six months has been focused on improving margins and Average Revenue
Per User ("ARPU`s"), reducing costs and maximising cash flow generation. The
Group has also continued with its strategy of reducing its dependence on
cellular LCR.
As a result profit for the six months ended 28 February 2011 is down 6% to R24
million (2010: R26 million). HEPS is down 7% to 2.14 cents per share (2010: 2.30
cents per share).
Revenue
Revenues declined by 11% to R925 million (2010: R1,04 billion).
Vox Orion`s revenue declined by 16% to R552 million (2010: R659 million). This
was mainly the result of the 29% drop in CTR in March 2010, which also impacted
the LCR retail rates.
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 decreased by 5% over the comparative period to R210
million (2010: R222 million). However, in the prior year R59 million wholesale
revenue was included in Datapro`s segmental revenue which is now being billed by
Vox Core. The number of customers decreased slightly to 7 619 customers (2010:7
712).
@lantic`s revenue declined by 10% to R93 million (2010: R103 million), although
ARPUs across the base have grown to R178 per month (2010: R145 per month).
@lantic is experiencing an extensive decline in its current "dial-up" base which
the group is mitigating by means of more attractive replacement products with
competitive price points. The number of customers declined to 123 407 (2010:
130 356). A new direct sales division was created to assist franchisees and
resellers with sales.
Vox Amvia`s revenue increased by 30% to R19 million (2010: R15 million), and now
largely constitutes annuity revenue. The focus largely remains on continuing to
develop unique products for consumers and corporate customers in the faxing
arena, as well as cross selling the products within the groups customer base to
drive further growth.
Vox Core`s revenue has increased by 139% to R33 million (2010: R14 million).
However, in the prior year R59 million wholesale revenue was included in
Datapro`s revenue which is now included under Vox Core`s revenue.
Vox Telepreneur revenue increased by 9% to R17 million (2010: R15 million).
ARPUs have increased to R275 per month from R265 per month as at 28 February
2010, largely brought on by the implementation of the new "Supaphone", which had
the result of improving the customer experience thereby driving increased usage.
Earnings before interest, tax, depreciation and amortisation ("EBITDA")
EBITDA for the group has increased 2% to R78 million (2010: R76 millon)
Vox Orion`s EBITDA has increased 26% to R44 million in the current period (2010:
R34 million). This is a direct result of higher margins on traffic converted to
Cristal Vox and improved operational efficiencies and utilisation of contract
minutes.
Vox Datapro achieved an EBITDA of R27 million (2010: R25 million), 8% higher
than the prior period and continues to build a strong annuity customer base with
healthy margins. The margins were slightly down for the six months under review
due to a "once-off" wholesale transaction at lower than normal margins as well
as investments into new products.
@lantic`s EBITDA has decreased 40% to R12 million from R19 million in the prior
period. This is largely as a result of discontinued Telkom rebates, declining
volumes as well as margins and increased expenses.
Vox Amvia`s EBITDA has increased 113% to R8 million in the current period (2010:
R4 million) due to increased annuity sales at higher margins than the
traditional product sales.
Vox Telepreneur`s EBITDA has decreased 26% to a loss of R2,3 million (2010: R1,8
million loss). The focus is now on continued growth in customers as well as
increased usage by each customer.
Operating profit
Operating profit was 9% lower than the prior period at R36 million (2010: R39
million), with operating profit margins of 4% (2010: 5%).
Due to the impairments processed at the end of last year the Group re-assessed
the useful lives of the acquired customer bases in Vox Orion and @lantic and
these increased rates/shorter useful lives contributed to the 13% increase in
depreciation and amortisation in the current period. Employment costs increased
9% to R104 million (2010: R96 million) in line with industry salary inflation.
Occupancy costs increased 11% to R13 million (2010: R11 million).
Net finance charges
The Group was able to repay R42 million in long-term debt in the current year to
date. Therefore the net financing costs decreased to R2 million (2010: R4
million).
Cashflow and capital expenditure
Cash generated from operations has declined by 60% to R45 million at half-year
(2010: R112 million). Operating cashflows before working capital movements
improved by 6%, however, this has been offset by the negative working capital
movement which is a function of the significant reduction in the call
termination rates payable to the mobile service operators.
Cash generated by operations has been applied in meeting capital expenditure
commitments of R44 million of which approximately R27 million has been invested
in network and similar IT equipment. Debt repayments of R42 million have also
been made with total debt reduced to R77 million at period-end (2010: R 154
million). The debt to equity ratio was 15% at 28 February 2011. This has
decreased from 24% at 31 August 2010.
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.
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
reviewed results.
SEGMENTAL REPORTING
Primary business segments
The Group operates through its four main operating businesses, namely Vox Orion,
Vox Datapro, @lantic, and Vox Amvia. Other areas include corporate head office
and the other early stage businesses. The Group`s reportable segments are as
follows:
Vox Orion - Corporate voice and data.
Vox Datapro - Corporate and consumer voice and data.
@lantic - Consumer voice and data services.
Vox Amvia - Fax services and related products to corporate market.
Vox Core - Wholesale voice and data
Vox Telepreneur Consumer voice and data services
Other - Corporate head office, consolidation entries including the
amortisation of customer bases, Vox Telecom Service Centre and various smaller
entities including the dormant entities.
REVIEWED: 6 MONTHS ENDED 28 FEBRUARY 2011
Total Vox Orion Vox Datapro
R`000 R`000 R`000
Revenue 925 026 551 569 210 448
Earnings (loss) before 77 808 43 642 27 450
interest, tax, depreciation
and amortisation
Depreciation and (41 895)
amortisation
Operating profit 35 886
Net finance costs (1 541)
Profit before taxation 34 345
Taxation (10 450)
Profit for the period 23 895
Total assets 927 681 418 677 119 862
Total liabilities 409 954 155 027 29 482
REVIEWED: 6 MONTHS ENDED 28 FEBRUARY 2011 (Continued)
@lantic Vox Amvia Vox Telepreneur
R`000 R`000 R`000
Revenue 92 533 19 081 16 936
Earnings (loss) before 11 681 7 949 (2 299)
interest, tax, depreciation
and amortisation
Depreciation and
amortisation
Operating profit
Net finance costs
Profit before taxation
Taxation
Profit for the period
Total assets 103 899 54 849 31 544
Total liabilities 12 778 8 705 6 376
REVIEWED: 6 MONTHS ENDED 28 FEBRUARY 2011 (Continued)
Vox Core Head office
and other
R`000 R`000
Revenue 33 246 1 214
Earnings (loss) before interest, tax, 19 298 (29 912)
depreciation and amortisation
Depreciation and amortisation
Operating profit
Net finance costs
Profit before taxation
Taxation
Profit for the period
Total assets 134 915 63 937
Total liabilities 112 487 85 099
UNAUDITED: 6 MONTHS TO 28 FEBRUARY 2010
Total Vox Orion* Vox Datapro#
R`000 R`000 R`000
Revenue 1 044 277 658 770 221 637
Earnings (loss) before 76 440 34 535 25 530
interest, tax, depreciation
and amortisation
Depreciation and (37 146)
amortisation
Operating profit 39 294
Net finance costs (3 653)
Profit before taxation 35 642
Taxation (10 120)
Profit for the period 25 522
Total assets 1 819 481 1 280 445 121 409
Total liabilities 626 338 209 266 22 326
UNAUDITED: 6 MONTHS TO 28 FEBRUARY 2010 (Continued)
@lantic Vox Amvia Vox Telepreneur
R`000 R`000 R`000
Revenue 103 023 14 672 15 482
Earnings (loss) before 19 417 3 736 (1 827)
interest, tax, depreciation
and amortisation
Depreciation and
amortisation
Operating profit
Net finance costs
Profit before taxation
Taxation
Profit for the period
Total assets 159 116 56 775 39 466
Total liabilities 28 269 5 398 21 749
UNAUDITED: 6 MONTHS TO 28 FEBRUARY 2010 (Continued)
Vox Core# Head office
and other*
R`000 R`000
Revenue 13 886 16 807
Earnings (loss) before interest, tax, 20 929 (25 880)
depreciation and amortisation
Depreciation and amortisation
Operating profit
Net finance costs
Profit before taxation
Taxation
Profit for the period
Total assets 103 351 58 917
Total liabilities 73 561 265 769
* - Vox Orion Namibia revenue of R16.4m was included under Corporate and other.
In 2011, Vox Orion Namibia is included under Vox Orion.
# - Included in Datapro`s revenue is R58.8m which is wholesale revenue, and in
2011 is being billed out of Vox Core.
Secondary geographic segments
The Group`s businesses operate in two principal geographical areas - South
Africa and Namibia.
Total South Namibia
Six months Africa Six months
ended Six months ended
Feb 11 ended Feb 11
Feb 11
R`000 R`000 R`000
Sales 925 026 909 907 15 119
Segment assets 927 681 907 621 20 060
Total South Namibia
Six months Africa Six months
ended Six months ended
Feb 10 ended Feb 10
Feb 10
R`000 R`000 R`000
Sales 1 044 277 1 027 918 16 359
Segment assets 1 819 481 1 796 400 23 081
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 28 February 2011 is 1 108 500 699 (31
August 2010: 1 108 500 699).
DIRECTOR CHANGES
As announced on the Securities Exchange News Service of the JSE on 18 February
2011, Mr. A P van Marken ("Tony"), the Company`s Chief Executive Officer,
resigned with effect from 31 March 2011 to pursue personal interests.
Management and the board would like to thank Tony for his dedicated contribution
to the development of the Company and wishes him well in his future endeavours.
The board advises that Tony`s responsibilities will be assumed by the Group
Managing Director (Mr. D G Reed) and the executive management committee of Vox.
DIVIDENDS
In 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 six months under review.
SUBSEQUENT EVENTS
Save for the changes to the Board as detailed above, no events material to the
understanding of this report have occurred in the period between the period-end
date and the date of this report.
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 6 months.
By order of the Board
DG Reed GJ Koen
Managing Director Chief Financial Officer
and Company Secretary
19 April 2011
Johannesburg
Registered Office
Block D, Rutherford Estate,1 Scott Street, Waverley, 2090
Directors
DG Reed, GJ Koen, VW Cuba*#, D Wallace*#, RT Dalais*, E Roth*,
P Joubert*, AD van Zyl+
* Non-executive
# Independent
+ Alternate
Designated Advisor
Grindrod Bank Limited
Transfer Office
Computershare Investor Services (Pty) Ltd
Date: 19/04/2011 16:43:02 Produced by the JSE SENS Department.
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