SOUTH AFRICA’S INTERCONNECTIVE SERVICES RISES ON BIGGER OFFERING, MARGINS

Mergers, Acquisitions and Financial Results

Voice and data specialist Interconnective Solutions has inched its way further into profitability by broadening the range of services it offers and concentrating on those with a fatter profit margin.

In the past it has swung between profit and loss as the take-up for some of its services proved slower than expected.

Yesterday it posted results for the year to June 30 showing revenue up from R30,5m to R33,1m and net profit of R2,5m, up from R1m a year ago. Headline earnings a share doubled to 2,5c.

CEO Mark Smith said lower-margin activities had been replaced with businesses that attracted higher margins. That saw a modest 8% growth in revenue while gross profit as a percentage of revenue rose 17% to 52,4%.

The group's FoneWorx subsidiary provides business and "infotainment" services to Vodacom, MTN, Cell C and Telkom. It has hosted more than 500 interactive campaigns for television shows including Strictly Come Dancing and Generations, and has been appointed as a sole provider of such services to the SABC.

In the past year the group spent almost R1m on research and development, with the pay-back from that not yet reaching the balance sheet. Some of the cash went into developing new software that enables clients such as radio and television stations launch their own SMS services.

Another offering is a Fax-to-e-mail conversion service, which grew its revenue by 250%. Since that service is bandwidth intensive, Interconnective bought 40% of the internet service provider ALTONet so it could use ALTONet's network and benefit from those earnings. It also established a new company, SurveyOnline, to conduct electronic surveys using e-mail, websites and SMS.

Business Day