No cheap change
Continues to throw money at ‘revitalisation’
THE MIXED BAG of communications and telecommunications heavyweight Business Connexion (BCX) results is tricky to interpret but does suggest its revitalisation plans are having a positive effect – even if they don’t come cheap. The company, which has released its interim results for the six months to end-November 2008, says it needs to spend a further R15m to R25m on its “revitalisation” plan after already spending R24m on it. BCX has also moved its financial year-end to end-August from end-May.
Its revitalisation plan aims to improve the group’s operating margin to 8% by 2011. It’s currently on a 2,2% operating margin, but CEO Benjamin Mophatlane says he’s confident its 2011 goal will be met. “One thing that will keep us going as a business is the fact that the bulk of our revenue is in annuity income. The revitalisation plan is working and we will continue to implement it.”
Mophatlane, who has been at the helm at BCX since replacing Peter Watt in July 2007, adds that public sector spending should offset the slowdown in the private sector. He says BCX is making progress in Nigeria, Africa’s fastest-growing market, where it recently bought 35% of Hawkstone iSolutions for R6m.
The further costs associated with revitalisation are expected in second half 2009.
BCX’s results also reveal its headline earnings have fallen by more than a third due to a tax payment and the costs of its turnaround plan. BCX told the market headline earnings fell 34,4% to R24,6m, or 9,4c/share, for the six months to end-November 2008. The company said a R15,8m secondary tax on companies payment and a one-off cost of R24m relating to the group’s revitalisation programme affected the headline earnings figure. Revenue for the period grew by 10% to R2,2bn when compared with the same period in 2007. Basic earnings rose 7% to R39,3m, benefiting from the profit on the sale of a property in Faerie Glen, Pretoria, for R14,4m.
BCX’s revitalisation plan – implemented last year – was designed to “align it for the future, improve quality of earnings and bolster operations in terms of performance and accountability”. It was devised following analysts’ criticism of BCX for weak results and questions about the quality of its leadership.
Last year BCX entered negotiations to sell its Business Connexion Communications unit but failed to dispose of it. The division has now merged with BCX’s Services Group and the company says it’s “a fundamental part of Business Connexion’s services on-demand offering”.
Making progress. Benjamin Mophatlane