Remgro earnings decline as Vumatel acquisition weighs

Remgro on Tuesday reported results for the six months ended December 2018, which included details relating to Vumatel’s acquisition by The CIV group, in which Remgro has a 54.5% stake.

The CIV group, which is active in the telecommunications and information technology (ICT) sector, also includes the likes of Dark Fibre Africa, and Seacom within its stable of companies.

For the period under review, headline earnings decreased by 3.3% from R4 406 million to R4 259 million, while headline earnings per share (HEPS) also decreased by 3.3% from 777.5 cents to 752.1 cents.

The CIV group’s contribution to Remgro’s headline earnings amounted to a loss of R104 million (2017: profit of R32 million). The results were negatively impacted by the acquisition of a 34.9% stake in Vumatel, which was implemented during June 2018.

Included in the CIV group’s results were finance costs amounting to R136 million, relating to the financing of the Vumatel acquisition, as well as Vumatel’s equity accounted losses amounting to R41 million.

Excluding the aforesaid Vumatel impact, the contribution to headline earnings decreased from a profit of R32 million to a loss of R11 million mainly due to Dark Fibre Africa Proprietary Limited’s (DFA) higher depreciation and finance costs as a result of the expanding network.

Despite the decrease in earnings, DFA’s revenue increased by 18.2% to R1 067 million (2017: R903 million) mainly due to strong growth in annuity revenue, Remgro said.

Vumatel’s FTTH network spans over 8 000 km over a residential area footprint which it leases to Internet Services Providers (ISPs), who in turn sell internet products to the consumer. DFA also has a 90.0% investment in an FTTH operator, South African Digital Villages (SADV), and a 100% share in Sqwidnet, an Internet-of-Things (IOT) network provider.

The CIV group has a March year-end and therefore its results for the six months ended 30 September 2018 have been included in Remgro’s results for the period under review. The CIV group’s contribution to Remgro’s headline earnings for the period under review amounted to a loss of R104 million (2017: R32 million profit).

Included in the CIV group’s results are finance costs amounting to R136 million, relating to the financing of the Vumatel acquisition, as well as Vumatel’s equity accounted losses amounting to R41 million.

Excluding the Vumatel impact, the contribution to headline earnings decreased from a profit of R32 million to a loss of R11 million mainly due to higher finance costs and depreciation as a result of the expanding network, Remgro said.

DFA’s revenue for the six months ended 30 September 2018 increased by 18.2% to R1 067 million (2017: R903 million) mainly as a result of solid growth of 24.1% in annuity revenue. DFA’s EBITDA for the period under review increased by 9.5% to R597 million.

The current book value of the fibre-optic network is in excess of R9 billion (30 June 2018: R8 billion). DFA has thus far secured a healthy annuity income of R152 million per month, with the majority thereof being on long-term contracts with customers, Remgro said.

DFA owns fibre network in all major metropolitan areas, as well as a number of smaller metropolitan areas, including East London, Polokwane, Tlokwe, Emalahleni, George and Pietermaritzburg.

At 30 September 2018, a total distance of 11,190 km (September 2017: 10 138 km) of fibre network had been completed in the major metropolitan areas, small towns and on long-haul routes. The SADV network adds another 2,500 km of fibre network, Remgro said.

Remgro has an effective interest of 30.0% in Seacom, which operates Africa’s largest international data network connecting Southern and Eastern Africa with Europe and Asia.

Seacom has a December year-end and its results for the six months to 31 December 2018 have been included in Remgro’s results for the period under review. Seacom contributed a loss of R1 million (2017: headline profit of R32 million) to Remgro’s headline earnings for the period under review.


Read: Vumatel acquired by Remgro’s CIVH

Latest news

Partner Content

Show comments

Follow us

Recommended

Remgro earnings decline as Vumatel acquisition weighs