• Productive
    capital

    Performance snapshot

  • Achievements

    Increase
    in next-generation
    voice and data access
    revenues, driven by
    migration from legacy
    to next-generation
    solutions

    Sustainably reduced
    our cost base

    Challenges

    Fixed-voice legacy
    business continues
    to decline

    Overall growth
    impacted by a
    weak economy

  • Performance summary

    Revenue was resilient and declined by 4.3% to R18 742 million, despite a 15.8% decline in fixed-voice business as we shift from legacy voice to next-generation voice and from voice to data. This was partially offset by the growth in IT business of 2.3% to R9 089 million, due to specialised solutions as we drive and grow industry-specific owned IP. These results include divestments of international subsidiaries whereas excluding the international operations, the IT business revenue growth is 3.7%. We took advantage of hardware refresh cycles. Hardware sales will improve opportunities to cross-sell other ICT services and increase our share of the customer wallet.

     

     

     

     

    * Excludes the impact of IFRS 16, VSP and VERP costs and the additional impairment of trade receivables and contract assets as a result of COVID-19.

  • IT services revenue was negatively impacted by the disposal of the Tanzania and Nigeria businesses. There were also downward pressures on original equipment manufacturers’ application solutions, especially SAP, and a decline in hosting services revenues as demand for traditional hosting platforms diminishes. Cloud revenue saw a marginal increase, as we continue to see convergence to cloud and consumption as a service.

    Through the optimisation process, BCX reduced costs, resulting in a year-on-year cost reduction of 3.9%*. Employee costs are down 7.4%*, underpinned by an 8.1% permanent headcount reduction.

    Excluding the impact of once-off adjustments, BCX’s underlying EBITDA declined 6.9%* to R3 016 million* with an EBITDA margin of 16.1%*.

    IT solutions revenue
  • Material trade-offs
    considered in FY2020
    KPIs and key measures
    B-BBEE
    2.3%
    16.1%*
    Level 2
    rating
    down    		 IT business
    revenue
    up    		 Underlying
    EBITDA
    margin at
         
  • Key strategic focus areas

    Drive revenue growth

    Improve operational efficiencies

    Drive digital transformation


 

Drive revenue growth

In defending fixed-voice revenue decline, pay per user and call centres, we launched on-demand products to competitively position BCX and win back some contact centre contracts. We launched competitive customer value propositions to arrest churn.

Three key initiatives were identified to defend the core revenue streams and grow connectivity:

  • Defended fixed-voice revenue decline through the Innovative Voice campaign, launched in December 2019
  • Launched the software-defined wide area network (SD-WAN) solution suite in August 2019
  • Launched a network security service in March 2020

We developed vertical industry frameworks for industries in financial services, government, healthcare, mining and energy, and retail – which created integrated solutions for client needs. These solutions were shared through various forums with clients and show positive results in securing future business in contract renewals and new business. Furthermore, it resulted in mid-market and corporate customer base revenue growth.

Three key initiatives were identified to defend the core revenue streams and grow connectivity:

1. Defend fixed-voice revenue decline through the Innovative Voice campaign launched in December 2019

2. Launched SD-WAN solution suite in August 2019

3.Launched network security service in March 2020

In defending fixed-voice revenue decline, pay per user and call centre, we launched on-demand products to competitively position BCX and win back some contact centre contracts. Competitive customer value propositions were launched to arrest churn. The COVID-19 pandemic has accelerated the need for our contact centre on-demand solutions from government departments and corporates as they put measures in place to curb the spread of this coronavirus.

Improve operational efficiencies

Improving operational efficiencies entailed fundamentally changing the way the business unit works and reinventing the way we serve our clients and their customers. With a relentless focus on improving the customer experience, we improved back-office efficiency through a reduction of human intervention while maintaining service levels, as well as introducing new cloud-based service technologies. BCX is also developing a customer insights engine that will provide a 360̊ view for and of our customers’ IT environments.

Total expense
  • Margin expansion due to 3.9%* reduction in costs, with 4.3% reduction in revenue
  • 7.4%* decrease in employee expenses, due to headcount reduction of 8.1%
  • 3.8% decrease in selling, general and administration costs due to cost optimisation programme
  • EBITDA margins declined from 16.5% to 16.1%*
* Excludes the impact of IFRS 16, VSP and VERP costs and the additional impairment of trade receivables and contract assets as a result of COVID-19.

We focused on streamlining the product portfolio, driving the automation of IT operations and processes and reducing product overheads. Part of this focus is enhanced monitoring that enables proactive problem resolution in complex IT environments to reduce the cost to serve.

Drive digital transformation

BCX leverages digital transformation to innovate solutions for value realisation. This resulted in the incubation of the robotic process automation and artificial intelligence business, which will scale in the next few years. A fundamental component of digital transformation is the cybersecurity that underpins it. Hence, we made an investment in operationalising the security operations centre using in-house IP and vendor technologies. This is a hub for managed cybersecurity operations and monitoring services within the group and for serving customers going forward.

Data centre infrastructure

Looking forward

BCX’s ambitions are to be a leading provider of end-to-end digital solutions in Africa and a provider of core industry solutions in retail, health, mining and energy, financial services and government. Given evolving customer needs, we want to deliver unique differentiated business-to-business to customer experience. BCX aims to become a home for top industry talent and expertise.

To this end, our strategy is to continue managing the decline of our voice revenue and reducing churn by focusing on driving revenue through our next-generation voice solutions. We will continue to focus on growing our own IP solutions as well as driving cost efficiencies and preserving our cash.

The COVID-19 crisis has accelerated digital transformation in South Africa and the world. It has brought the change the technology industry has been preparing for. BCX, as a technology company, is now an essential service and our employees are impactful and vital corporate citizens. We are playing our part in the national effort in the battle against COVID-19 on many fronts. Before the lockdown, we enabled our clients, for instance, to operate call centres remotely and to service their customers with the same level of expertise. BCX set up a contact centre for the National Institute of Communicable Diseases and the national Department of Health as they dealt with an overwhelming number of calls that is growing exponentially.

Internally, we have challenged our employees to continually innovate solutions and to be ahead of the curve across the digital landscape. It is no longer good enough to just be a technology company, we must be able to provide a comprehensive and flexible package that will ensure the success and security of our customers and society on this digital transformation journey. Workspaces have changed, automation has increased, and industries are becoming decentralised. A new normal is being created.

We are in the midst of a revolution – the fourth industrial revolution in real time. It has presented us with the opportunity to help businesses thrive and grow. Technology is an essential entity in everything: healthcare, the delivery of crucial services, co-ordinating the national emergency task force, keeping businesses working, and ensuring we can speak to family and friends online.