No cheap change

Con­tin­ues to throw money at ‘re­vi­tal­i­sa­tion’

Finweek English Edition - - Companies & Markets - SI­MON DIN­GLE si­mon.din­

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

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