BCX revenue falls amid challenging operating climate

Sibahle Malinga
By Sibahle Malinga, ITWeb senior news journalist.
Johannesburg, 19 Jun 2024
Demand for storage and cloud computing boosted BCX’s dwindling revenues.
Demand for storage and cloud computing boosted BCX’s dwindling revenues.

While JSE-listed telecommunications firm Telkom Group has reported a surge in group revenue for the 2024 financial year, its IT services unit BCX’s revenue continues on a downward spiral.

This is according to the company’s group financial results for the year ended 31 March, released yesterday.

Telkom Group made good progress in the 2024 financial year, delivering a stronger operational performance as group revenue increased by 1.6% to R43 billion, it says.

BCX, on the other hand, reported a revenue decline of 2.3% to R12.9 billion, amid a highly-competitive market and inflationary pressures.

In its financial results for the third quarter of 2024, BCX reported a marginal revenue decline, at 0.7% against the prior quarter, to R3.5 billion.

According to the latest financial report, BCX’s IT revenue increased by 9.9% to R7.2 billion, largely due to a strong performance from the hardware and software business. This performance, albeit at lower average margins, was driven by new product deals, existing software contract renewals and record cross-border sales.

“BCX, operating in a highly-competitive market, focused on enhancing the quality and sustainability of its client base. IT services performed well, increasing revenue by 6.6% to R4 789 million,” says the report.

“Converged communications revenue declined by 14.5% to R5.6 billion, as we continued migrating customers to next-generation technologies. This was supported by strong cyber security growth and steady growth of the data centre and infrastructure solutions business as demand for storage and cloud computing continued to grow in the market.”

Consequently, EBITDA reduced by 28.4% to R1.29 billion at a margin of 10%.

“Revenue from next-generation services grew by 28.7%, while legacy products continued to decline as envisaged. While BCX reduced some operating costs, this was not sufficient to offset the combined effects of revenue mix at lower margins, the decline in higher-margin legacy revenue and higher expected credit losses on trade receivables,” according to the company.

Telkom is on the lookout for a strategic equity partner to invest in its BCX IT services unit, as it looks to unlock cash-flow to scale the business.