Business Connexion has announced increased revenue for the six months ended 28 February 2015.
Revenue grew by 16% to R3,556-billion compared to the prior period. This growth was underpinned by organic revenue growth of 15,1% resulting from new client wins. This trend continues to reflect the group’s focus on an improved sales culture and cross-selling.
Gross profit margins at 27,4% (2014: 30,0%) remain largely unchanged despite continuing tough economic conditions as well as market and client pricing pressures.
The focus on operating expenses and balance sheet management continues, with normalised operating expenses remaining flat and reduced capital expenditure.
The group recorded a normalised operating profit margin of 5,6% (2014: 5,2%). The tax charge in the prior period included the provision for capital gains tax on the sale of QLink of R25,7-million.
The group generated diluted earnings per share (EPS) of 17,6 cents for the period (2014: 52,0 cents) and diluted headline EPS for the period of 17,7 cents (2014: 15,6 cents). On a normalised basis, excluding primarily the profit on the sale of QLink and the impact of the amortisation of intangibles, diluted headline EPS is 25,9 cents (2014: 20,7 cents).
The group continued to generate strong operating cash flows of R282-million (2014: R259-million).
In order to respond to the changing business environment, the operating model has been aligned to better support and deliver value to its clients. The operating model simplifies the business and enables improved decision making across the group’s geographical footprint.
Effective 1 September 2014, the new operating model comprises:
* The Solutions and Service Delivery division, which includes what was previously known as Services, UCS and Innovation.
* The Technology and Sourcing division comprising the Technology and Canoa businesses.
* The Investments division, which is made up of the Group’s strategic investments and partnerships, including its investments in Nanoteq, African Arête, Appzone and Northgate Arinso.
* The results of the International division have been incorporated into the above divisions.
* To reflect the new operating model, reportable segments have been restated accordingly.
During the six months ended 28 February 2015, Business Connexion entered into an agreement to dispose of a 15% interest in Nanoteq Proprietary Limited, to a black economic empowerment consortium. Nanoteq is the group’s encryption technology service provider. Following the transaction, the group will retain a controlling interest of 60%. The transaction is subject to the fulfilment of certain conditions precedent.
Isaac Mophatlane, Business Connexion CEO, adds: “Consolidation is driving the need for automation and analytics across industries, underpinning the global move towards the Internet of Things. Business Connexion has a number of the building blocks and is therefore well positioned to play a leading role in the Internet of Things across multiple markets and diverse technology domains.”
In March 2015, the group acquired 100% of Joint Venture Pump Services Proprietary Limited (JVPS). JVPS’s comprehensive portfolio includes fuel dispensing and forecourt automation equipment, an environmental management solution for the forecourt, all of which allows the Solutions and Services Delivery division to provide leading technology capable of enabling the Internet of Things.
On 11 August 2014, shareholders voted in favour of the offer by Telkom to acquire the entire share capital of Business Connexion. The proposed transaction is now awaiting a recommendation from the Competition Commission of South Africa to the Competition Tribunal and therefore the Long Stop date was extended from 31 March 2015 to 30 April 2015 to cater for this regulatory approval and ICASA if applicable.
Mophatlane comments: “The regulatory approval of the Telkom transaction will mark the beginning of a new chapter for Business Connexion and provide the platform for further strengthening of its offerings and new strategic partnerships.”
Approval from the Common Market for Eastern and Southern Africa (COMESA) Commission was received on 16 March 2015.