Vonex continues its acquisition led growth strategy in 2021
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Vonex Limited (ASX:VN8) has released its interim financial report for the FY21 half year. Accompanied by a letter from the Chairman, the report highlights the company’s achievements over the six months and provides an outlook for the second half of the financial year.
The principal activities embodied the company’s acquisition-led growth strategy within its Retail and Wholesale Telco divisions, along with the full integration of 2SG Wholesale and the continuation of R&D projects including its own proprietary cloud hosted PBX system, Sign On Glass and Oper8tor App development.
This acquisition strategy was driven by Vonex’s appointment of TOR Corporate Advisory’s to seek out and evaluate complementary businesses for the company to acquire – this appointment has generated an immediate pipeline of potential acquisition opportunities which are subject to varying stages of review.
Vonex is seeking the right technical and financial partners to further develop and commercialise Oper8tor.
Operations updates are chronicled below:
Vonex Wholesale (2SG Wholesale)
Key to the company’s strong financial results achieved in H1 FY21 was the successful integration of 2SG Wholesale, which continued to provide further cross-selling and product expansion opportunities.
Successfully integrating 2SG Wholesale has allowed the Company to expand its offering to SME customers by developing and delivering new products.
2SG’s sales growth was strong across its new and existing Wholesale product suite in Q2 FY21, including an 88% increase in Mobile Broadband orders year-on-year for the quarter, Mobile Voice up 321% and NBN with 4G backup increasing by 107% over the same period.
The strong growth reflects Vonex beginning to capture the cross-selling opportunities Vonex identified prior to acquiring 2SG Wholesale.
Vonex expects the 2SG Wholesale offering to continue to improve in CY21, with the Company receiving commitment from Optus to open up its 5G network to the Company via 2SG. Vonex is now in the final stages of preparing to launch internet services that utilise 5G speeds powered by Optus.
Vonex’s Retail operations continue to expand, with Total Contract Value (TCV) of new customer sales in 2020 of $6.99 million, an increase of 32% on 2019.
Vonex’s SME user numbers demonstrated further growth, largely driven by the company’s relationship with Qantas Business Rewards (QBR), which has a base of more than 250,000 small to medium enterprise (SME) members.
QBR continues to drive new business for Vonex in the SME space, and the company looks forward to further developments from this partnership in CY21 and beyond.
Nextel Pty Ltd
Vonex’s plans to acquire established NSW-based telco service producer Nextel, including its business, operations and customer base were also announced during the period.
The acquisition, which completed in February 2021, has been highly accretive to earnings and cashflow and has boosted Vonex’s annualised recurring revenue to more than $18 million
Total consideration for Nextel’s business and operations is approximately $1.575 million, payable on completion of the transaction.
Development of Vonex’s multi-platform voice and message Oper8tor software concluded during the period.
Oper8tor is a multi-platform voice, messaging and social media app that is designed to allow users to connect with all social media friends, followers and contacts from a single app.
Oper8tor will now transition from a phase of Vonex funded research and development to focus on identifying and engaging the right technical and financial partners to guide Oper8tor's further development and commercialisation.
The company will continue to protect intellectual property related to Oper8tor during this process but do not expect to commit further development capital at this stage.
Non-Executive Chairman Nicholas Ong ended the letter with the following remarks:
“We ended the calendar year with a strong cash balance of $3.54 million. The addition of a recent refund of ~$541,000 for our latest Research and Development tax rebate further bolsters our position.”
“This year we will focus on the integration of Nextel’s operations with our own, delivering our unique product offerings to Orange Business Services and other wholesale customers, as well as continuing to investigate and pursue other opportunities for acquisitive and organic growth.”
“It continues to be an exciting period for our company as we execute on our strategy for growth, and I look forward to keeping you updated on our progress.”
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