Vita Group interim financials enables acquisition of five more Telstra stores

Vita Group interim financials enables acquisition of five more Telstra stores

IT reseller delivers group revenue of $344.1 million for the six months ending 31 December 2016.

Vita Group (ASX:VTG), has delivered group revenue of $344.1 million for the six months ending 31 December 2016, up eight per cent from the same time last year.

The IT reseller said, in its interim financials statement on the ASX, that its “strong performance” has enabled the company to continue its investment into its business and reward shareholders with higher dividends.

The board has declared an interim dividend of $0.92 per share, a 60 per cent increase on the prior year, which will be be paid on 7 April to shareholders on record as 10 March.

"With no net debt at the end of the half, Vita retains significant flexibility to invest in growth opportunities in line with its strategy,” it said in a statement.

The company added that the results reflect its “continued execution of its strategy” to optimise its retail channel and transform and scale its business channels, while exploring further opportunities for growth with its evolution.

Its growth momentum will also result in the purchase of five Telstra stores, which takes its Telstra licensed store portfolio to 107 in the short-term.

“Further optmisation of the portfolio is expected, with acquisitions, divestments, and closures likely. Vita’s clustered network of stores enables an intensity of leadership to drive greater productivity and exceptional customer experiences,” the company said.

There was growth across all of its business segments, with its retail channel revenues increasing five per cent. It said its growth in fee income was offset by slower growth in low margin device sales.

“The group continued to focus on improving the productivity of its existing store portfolio and reducing performance viability, whilst at the same time lifting average store earnings through targeted additions to the store network,” it said.

On 28 November last year, the company expanded its footprint of Telstra-branded stores around Australia, following remuneration changes to the telco’s licensed channel network. It acquired three stores during the period and has since closed one of them.

Its SMB channel division achieved a 35 per cent increase in revenue, with the company reporting growth across all key product categories. The company mentioned it is working with Telstra to evolve the strategy for this channel, with the expectation that retail points of presence and enterprise expertise will play a more prominent role in servicing SMB customers in future.

Its enterprise channel business revenue grew 16 per cent off the back of “key account wins”, with the company indicating that with the channel building a “solid customer pipeline” will deliver future returns.

It also added that its Sprout business revenue increased by 28 per cent, with growth coming from both internal distribution channels and from the expansion of the third party customer base.

“We are pleased to deliver a strong result, in line with our clear strategy. We intend to continue to use our core competencies to evolve and deliver sustainable value now and into the future,” Vita Group CEO, Maxine Horne, said.

“We will continue to explore other new opportunities. As we enter the second half, our proven ability to execute will assist in sustaining the performance momentum we have created. Moving forward, we’re excited about the next phase of our strategy.”

Subsequent to agreeing to changes in commercial with Telstra, the company said there will likely be some “softening in profitability” on a per connection basis in the second half of the financial year. However, it expects to deliver productivity from its retail network and is targeting momentum in the performance of its business channels.

“As well as continuing to drive returns from our telecommunications business, we are actively looking for opportunities to take what we’re good at and apply them in other categories, in addition to those that we are already in,” Horne added.

At the time of writing, Vita’s shares were trading at $3.18.

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