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VOX - Vox Telecom Limited - Reviewed results for the six months ended 28

Release Date: 19/04/2011 16:43
Code(s): VOX
Wrap Text

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 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.

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