Dealstream theft clouds Vox results

By Paul Vecchiatto, ITWeb Cape Town correspondent

Cape Town, 20 Nov 2008

The Dealstream debacle clouded Vox Telecom's latest annual results, causing earnings per share to slump 51%, to 3.78c, and profit before taxation to tumble 32%, to R137 million, despite a surge in operating profit of 64%, to R137 million.

As the company warned a month ago, headline earnings per share were sliced by 47%, to 3.78c.

The AltX-listed company posted its results for the year ended 31 August yesterday. Its directors say they feel vindicated that, despite the R60.8 million once-off loss attributed to the collapse of financial derivatives trading house Dealstream, in September, the company's operations have been unaffected.

“We are sorry about the value that has been destroyed, but the company is doing well. This issue with Dealstream was theft pure and simple,” says Vox CEO Douglas Reed.

Revenue for the year rocketed up 87%, to R1.847 billion, and profit before taxation and exceptional items advanced 47%, to R113 million.

Taking action

Vox has filed a charge against the former owner of Dealstream with the Office of Serious Economic Offences, but will now leave the matter to the authorities, says executive chairman Tony van Marken.

The collapse of Dealstream wiped out Reed's shareholdings and a total of 29 million shares were “misappropriated”.

Dealstream's former CEO, Russell Leigh, fled to the UK and is now believed to be in Israel, a country with which SA has no extradition treaty.

“We have to focus on the company and its operations,” Van Marken says.

He says a new share incentive scheme will be discussed with shareholders and it will be detailed in a circular to go out early next year. Shareholders will be asked to approve it at a special meeting.

In good health

Van Marken says other indicators of the healthy state of the company are that it has managed to sustain a 25% profit margin despite moving into the voice market, which is characterised by low margins, and that its earnings before income tax depreciation and amortisation climbed 76%, to R181 million.

“We are now the largest aggregator of traffic between the various value-added network services, and our monthly annuity income has now risen to R175 million on the contracts we have with our corporate customers.”

Van Marken adds that the company has seen strong organic growth and it has managed to increase the average revenue per user in the corporate space.

Reed and Van Marken say the liberalisation of the market, due to the Altech court action against communications minister Ivy Matsepe-Casaburri, has levelled the playing field. However, they do not see Vox going head to head with the likes of Neotel and Telkom.

“We will be a hybrid type of operation, meaning that we will build infrastructure as we need it, but our main strategy is to partner, but, more importantly, to get customers,” Reed says.

He says the real cost for a telecommunications company is not building the infrastructure, but gaining a customer base.

Inventory for the period rose to R52.859 million, from R14.174 million. Van Marken says this is because the company has stock of 20 000 handsets that it is selling to customers. He says this inventory will probably increase over the year to come.