Huge Telecom parent Huge Group has lifted headline earnings per share year on year by 51,5% for the six months ended August 2014. However, revenue has fallen to R99m from R106,7m before.
Operating profit was R8,9m, up from R8,3m a year ago, while net profit was R7,4m, up sharply from R3,2m before.
Profits relating to derivative instruments lifted operating profit by nearly R1,6m in the six-month period, compared to a loss of more than R1,3m in the comparative prior period.
Despite the fall in revenue, Huge Telecom’s sales outlook reflects “positive growth trends”, the company tells shareholders.
“The compounding effect of annuity sales has started to come through in September and October 2014, with revenue for these two months exceeding the revenue for the comparable two months in the prior year by 10%.”
The company says its “transformation” from a least-cost routing business to one focused on distribution, providing enhanced telephony products, has “changed its fortunes and prospects substantially”.
“The distribution capability built by Huge Telecom in the last two years has laid the foundation for significant growth in both revenue and profits. Coupled with the future delivery of data services and asset-backed financing, it is possible to increase revenues at a rate faster than what has been achieved historically.”
Huge Telecom now has in excess of 380 distribution partners and its value lies in its distribution capability, it says.
In the six-month reporting period, Huge Telecom acquired 1 800 new clients and grew net connections by 5 300 lines.
It adds that Huge Telecom has increased its fixed to variable annuity ratio. Fixed annuity consists of channel management fees, on-account fees, site management fees and line rentals, which, it says, are largely protected from price compression.
“The current monthly annuity book of fixed annuity charges is in the order of about R2,8m as at 31 October 2014, against R1,6m as at 28 February 2014.”
The company reduced operating expenses by 16,1%. Cost reductions will continue to be a big focus.
In September, Huge Group raised R20m through a rights offer that was 43% oversubscribed. Subsequent to the rights offer, it issued a further 1m ordinary shares under the general authority given to it by shareholders at the AGM held in August.
In October, Huge Telecom closed out contracts for difference which it held over the ordinary shares of Huge at an underlying reference price of 170c/share. “This had the effect of releasing the restriction on R6,6m of cash held as initial margin.”
In August, the company reached a settlement agreement over a dispute with MTN in which it agreed to pay the mobile operator R10m. This month, its subsidiary, Huge Software, raised a R20m loan from the AfrAsia Special Opportunities Fund.
Huge Group’s share price was last trading at R2,20, down by 2,2% on the session. The counter has added 267% in the past 12 months. — © 2014 NewsCentral Media