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Vita Group bets on Telstra's new SMB strategy for 2019

Vita Group bets on Telstra's new SMB strategy for 2019

Posts record revenue but profit slides 44 per cent

Vita Group is betting on a new strategy proposed by Telstra which would see the telco's retail licensee operate fewer points of presence across significantly expanded territories.

The publicly-listed company, which operates 105 Telstra licensed stores and 23 Telstra business centres, told shareholders on 17 August it entered a process to transition from the Telstra Business Centre model to become  part of a new, premium Telstra Business Technology Centre (TBTC) model in FY19.

According to Vita Group, TBTCs will service small-to-medium businesses with more complex technology needs,  offering whole-of-business solutions through highly trained consultants.

"Small business customers with relatively simpler needs will be serviced by the retail channel, utilising existing infrastructure, but with whole of business solutions," the company stated. "This represents a significant opportunity for Vita’s retail channel.

"In enterprise, the group will continue to focus on improving product mix and profitability across its key accounts."

This is a response to the company's financial results for the year ended 30 June 2018 - Vita Group has posted a record revenue of $684.5 million, a 2.6 per cent increase from the previous financial year.

However, Vita group's net profit after tax (NPAT) was down 44 per cent, posting $22 million.

Earnings before interest, tax, depreciation and amortisation (EBITDA) also fell 37 per cent in the 2018 financial year, with the company's EBITDA closing at $41 million.

During the past financial year, Vita Group added seven Telstra retail stores and two Telstra Business Centres, while seven Telstra retail stores were sold or closed, in line with the group's optimisation strategy.

"I’m very pleased with Vita Group’s performance in FY18, which once again proves our ability to adapt and evolve in a challenging environment," said Maxine Horne, CEO of Vita Group.

"By leveraging our core competency of expert consulting, our team has continued to drive profitability across our increasingly diverse network of brands.

"As a result, we are well-positioned for the future as we continue to deliver greater value for our customers, team members, the communities we operate in, and of course our shareholders."

In the previous financial year Vita Group had decided to consolidate the SMB [small and medium business] and enterprise channels into one business ICT division.

“With the business channels now representing 13 per cent and 15 per cent of the group's revenue and gross profit respectively, the focus in the coming year and beyond will be to continue to grow revenues, deliver improved profitability and partner with Telstra to drive consolidation in what remains a fragmented market,” it said at the time.

The new focus, the company explained at the time, came as it reached a new agreement with its licensing partner, Telstra, which sees a number of changes in the remuneration it receives from the telco.

Vita Group revealed on 11 August 2017 that its renegotiated Master License Agreement with Telstra saw it forego some remuneration factors in exchange for a greater store presence.

Under that arrangement Vita is able to own and operate 110 Telstra stores in the 2018 financial year and 115 in FY2020.

These changes, however, would result in a $25 million impact in FY18.

In January, Vita Group updated the market saying it expected the company EBITDA to be around $20 million, about $4 million more than the guidance issued on 27 October 2017. 


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