Interims a mixed bag for Huge Group
Alt-X listed holding company, Huge Group has reported mixed results for the six months ending August 2013, noting a drop in revenue, but a jump in profits.
The group – which holds and draws most of its revenue from telecoms companies, Huge Telecom, Huge Mobile and Huge Cellular – saw revenue decline 31.6% to R106.7 million, from the R156.0 million in 2012.
However, group operating profit increased 102.4% from R4.1 million to R8.3 million, driven by a drop in mobile termination rates (MTRs).
Headline earnings per share declined to 6.07 cents, from 10.01 cents in 2012.
On 1 March 2013, MTRs dropped from 56 cents to 40 cents, pushing gross profit up by 21.9% from R37.9 million to R46.2 million.
Huge Telecom, a wholly-owned subsidiary of Huge and the principal trading operation of the Group, provides wireless, GSM-based, fixed-cellular, last-mile connectivity services for voice, messaging, and data.
Operating off a base 75% wholesale, the effect of MTRs pushed margins up 78.2% to 43.3% for the six month period.
“The profit and cash flow benefits were material and immediate,” the group said.
Revenue time delay
According to the group, its telecom segment experiences a significant time delay in the revenue effect of sales activity of about about twelve months – meaning, revenue recorded in the current six month period is a function of the sales activity in the six month period, a year ago.
From 1 March 2013 to 31 August 2013, Huge Telecom said it acquired in excess of 500 new clients and grew net connections by more than 2,100 lines.
“In the last twelve months Huge Telecom has also experienced a substitution of higher revenue, lower margin clients for lower revenue, higher margin clients and this has also exacerbated the extent of the decline in revenue,” it said.
The group expects the revenue results of its current reporting period (which will reflect next year) to trend upwards.
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