South Africa: Vox Telecom results a mixed bag

Mergers, Acquisitions and Financial Results

Vox Telecom released it’s results for the six months to the end of February 2011, claiming that although their financials are under pressure, the Group’s strategy is “on track.” The key financial results for the past six months, when compared to the six months ended 28 February 2010, are:

- 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

Faced with the impending end-of-life of cellular Least Cost Routing (LCR) and dial-up internet units, the company has to prove in the forthcoming period that it can retain these customer bases and convert them to alternate services on the Vox Telecom network.

The conversion of LCR customers to Vox Telecom’s Cristal Vox voice service is going well. “Ironically,” says Group MD, Douglas Reed, “both the LCR and dial-up services remain highly cash-generative, which is giving us the time we require to transfer these valuable customers to our platforms. Targeting a brand new customer base is a far more time consuming and expensive exercise.”

Despite an 11% drop in revenue, and Earnings per Share (EPS) being down by 6%, the Group achieved R257m in Gross Profit, up 9% when compared to the 6 months ended 28 February 2010. In addition, cash on hand increased by 15% to R122 million. The Group invested a further R32m into its network and fixed assets.

“We remain in a deflationary environment in terms of voice and data,” says Reed. “Under these circumstances, we are pleased with our ability to increase gross profits and look forward to next year when our growth will return to historical levels.”