Vonex Outlines Success of Acquisition Growth Strategy

By Hannah Goldman. Published at Apr 30, 2021, in Technology

Telecommunications innovator Vonex Limited (ASX:VN8) has provided an update on its activities for the quarter ended 31 March 2021.

Supported by organic growth and a strong cash position of $3.9 million and nil debt, Vonex continued its proactive approach to acquisition opportunities during the quarter.

Having successfully demonstrated an ability to rapidly integrate 2SG Wholesale and Nextel in a way that adds value for vendors, staff and shareholders, Vonex remains very well positioned to augment its strong organic growth via selective acquisition to accelerate its growth plans.

Financial Overview

Vonex reported $630k in operating cashflow generated in Q3 FY21 from $4.1 million in receipts from customers (+45% YoY), including receipt of R&D tax offset payment of $542k.

The Nextel business, of which Vonex completed its acquisition on 3 February 2021, contributed unaudited revenue of $0.26 million during the period, which is in line with expectations.

The $315k cash component for the purchase of Nextel paid during the quarter was more than covered by the $542k R&D tax offset received in the period.

Wholesale Growth & Orange Business Service Agreement

The period marked strong continued growth and operational progress for the Wholesale Division.

In February 2021, a three year wholesale supply agreement signed with the enterprise division of European telco giant Orange Group, the Paris-listed communications and technology multinational.

The service agreement outlines the supply of business- grade mobile broadband services as part of their rollout strategy throughout Australia, serving to elevate the profile of Vonex in the market and underpins a positive growth outlook for the Company in CY21.

Orange Business Services delivers enterprise connectivity to customers in a range of industries such as the automotive, mining, oil & gas and public sectors, including Internet of Things (IoT) connectivity for transport, logistics and smart cities.

Vonex has grown to 82 mobile broadband customers through 2SG and with the addition of Orange, highlighting the Wholesale division’s growth trajectory.

Vonex’s rising brand recognition and business development profile were also supported by the integration of all wholesale services under the 2SG Wholesale name, an initiative implemented from the start of the quarter.

Alongside Orange, there was rapid growth across the Wholesale division, with orders of mobile voice services up 242% year-on-year (YoY); mobile broadband orders rising 72% YoY, and orders of NBN with 4G Backup services 101% higher than the same period last year

The company's ongoing efficiency drive has seen the Wholesale business unit identify and remove excess network costs and inefficiencies to the tune of ~$500k per annum. VN8 expects these efficiencies to take full effect in June 2021.

Looking forward, the expanding product and service range on offer for wholesale customers adds to Vonex’s ability to capture market share in a growth industry benefiting from the rise in remote workforces and the interconnectivity between traditional and home offices which provides flexibility to both employees and employers.

Nextel Acquisition

New South Wales telco, Nextel, officially joined the Vonex group on 29 January 2021.

The addition builds on Vonex’s relationships with tier-1 carriers with a list of prominent customers, including LJ Hooker, Endemol Shine Australia and Lifeline.

Acquired without debt, the financial contribution from Nextel during the quarter provided an immediate boost to earnings and annualised recurring revenue.

With Nextel having landed an infrastructure contract valued at $140k during the quarter, the business is on target to perform ahead of the revenue and profit expectations which were set when the acquisition was announced in December 2020.

The equity component of the purchase highlights the belief that the Nextel vendors have in Vonex continuing to grow the combined businesses and generating attractive returns for shareholders.

Vonex is focused on replicating the success of the integration of 2SG Wholesale into the group as it seeks to build on the immediate contribution made by Nextel. Nextel's established presence in verticals including Aged Care and Education in NSW allows Vonex to identify other needs among enterprises in these critical industries where the group can offer value. The broadened product mix and cross-selling opportunities are levers that Vonex is using to gain additional ground in the market and elevate its competitiveness.

Vonex Retail

Vonex Retail has delivered another quarter of growth. Vonex grew its number of small to medium enterprise (SME) customers by 32% year-on-year.

Total contract value (TCV) for new customer sales added in the first nine months of FY21 was $6.4 million. Although this result represents only slight growth from the same period last year, it also reflects a shortening of contract durations post-COVID.

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