JSE-listed Reunert says incorporating ECN into its Nashua stable is paying off, as ECN delivered a "pleasing result" in both revenue growth and operating profit.
While Reunert did not strip out ECN's contribution in its results for the year to September, Nashua Communications and Nashua ECN are expected to have a combined turnover of more than R1 billion a year and 600 staff. The units were merged on 1 October as Reunert aims to offer converged communications to its customers.
Nashua Communications has been transformed from being a provider of voice networks to a converged information technology solutions provider. Its acquisition of KSS Technologies for R19.8 million during the year will add to the converged service offering in the next year, it says.
Nashua ECN continued moving least-cost routing (LCR) clients from Nashua Mobile onto its voice over IP solution and is pursuing new clients. So far, the business is moving almost 3.5 million business call voice minutes a day.
Slowing revenue
Reunert says the shift away from LCR helped Nashua Mobile's performance, which it described as satisfactory, despite the reduction in the interconnect rates and the loss of LCR customers.
In 2010, the Independent Communications Authority of SA decreed that cellular interconnect costs had to drop to 73c at peak and 65c during off-peak times, from March 2011. This year, rates dropped to 56c and 52c, respectively. By March 2013, wholesale mobile termination rates will drop to 40c, regardless of the time the call is made.
Nashua Mobile's post-paid customer base grew 6%, to 897 534 customers, while the average revenue per customer declined 19%, to R337. Reunert says that while revenue declined slightly, as expected, cost controls allowed operating profit margins to remain constant.
Nashua Mobile is being "restructured from top to bottom" under newly-appointed CEO Mark Taylor, who returned to the company after a four-year tenure with one of its main partners, Vodacom.
Nashua, which is Reunert's biggest contributor to revenue, turned over R7.2 billion, a 4% gain, and reported R838.6 million in operating profit, a 6% improvement. In the results commentary, Reunert says Nashua performed well in quiet market conditions, as revenue was bolstered by the acquisition of franchises. However, its operating profit was affected by the rand's sharp weakening.
Total revenue gained 7%, to R11.7 billion, while operating profit moved up 10%, to R1.7 billion. The group reported after tax profit of just over R1 billion, a 20% decline, and declared a 275c dividend, which was an improvement on 2011's 253c.
Reunert says normalised headline earnings per share gained 9%, to 644.4c, but basic earnings dropped 9%, because of last year's non-recurring gain of R346 million on the sale of its minority stake in Nokia Siemens Networks.
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