JSE-listed ConvergeNet, which went through a change in control earlier this year, has reported a loss after tax for the full year, reversing 2011's profitable position.
However, the company has impaired several assets, which led to the loss, and expects the results of its change in strategy to start being seen in the second half of the year. The group expects to bolster revenue 30% in the 2013 year.
On Friday, ConvergeNet published results for the 12 months to August and said revenue dropped slightly, to R1.017 billion from R1.029 billion, but it made a headline loss of R46.3 million, compared with a profit of R30.9 million a year ago.
Operating expenditure grew 29.8%, to R286.6 million, partially due to the costs of starting up Simat Management Company SA, a site management entity focused on Africa.
Because of the higher operating expenses, the group made an operating loss of R7.1 million compared to last year's operating profit of R27.3 million. Apart from the operating loss, ConvergeNet also re-valued its book assets and adjusted fair value down by R2.8 million, while impairment of goodwill and other financial assets contributed R30 million to its headline loss.
However, its gross profit margin gained from 23.9% to 25.5%, mostly due to a change in the business mix.
Targeting growth
CEO Sandile Swana says the operating loss of R7.1 million was mostly due to the start-up costs, which ConvergeNet cannot capitalise. He explains that the bulk of the net loss is due to the write-offs as the group did a "bit of tidying up" and valued its assets conservatively.
ConvergeNet is building towards a 30% gain in revenue at the end of the 2013 year, says Swana. He says the company is strengthening its sales team and making strong progress towards its African expansion.
During the year, the company established Simat, a site maintenance entity, to service the mobile operators in Africa in partnership with Matla Group. ConvergeNet has a 51% stake in the company.
Simat has started wholly-owned entities in Mauritius, Gabon and Congo Brazzaville, and started operating in March after being awarded a contract by an unnamed mobile operator. Swana says by the second half of the year, the company will be in Malawi and will then look at Nigeria in 2014.
Swana adds that by the end of the first half of the new financial year, shareholders will see a change in ConvergeNet's direction. The group's shares closed flat at 18c on Friday.
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