Strong Vita Group earnings marred by Apple business

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Strong Vita Group earnings marred by Apple business

Vita Group's Next Byte business continues to negatively impact the company's financial performance, marring what was otherwise a strong increase in profit for the 2014 financial year.

A solid performance by the company's Telstra stores and growing B2B division helped push Vita Group to a 66 percent increase in underlying net profit after tax to $10.3 million.

Vita Group's revenue also increased, up four percent to $450.1 million.

However, the overall result was dragged down by the Next Byte business. A $19.4 million non-cash impairment charge against Next Byte announced in February dragged that profit into a $4.6 million net loss after tax.

Next Byte revenues also fell 17 percent to $75.2 million, which was blamed on the closure of older stores, a lack of new Apple product launches and softer like-for-like performance.

Despite the decline in revenues, Next Byte's second half improved to nearly a break even underlying EBITDA.

The Next Byte earnings loss was also smaller than the previous year, with an EBITDA loss of $1 million compared with a $1.8 million loss in earnings the previous year.

Next Byte expansion plans remain on hold, with 14 Next Byte stores at the end of the financial year, down from 17 the year before.

Store closures included Next Byte's Brisbane store shut down, after Apple opened a new outlet in the city.

The outlook for Next Byte in the 2015 financial year is better, with Vita Group expecting an improved result due to tighter management controls and Apple product launches. Apple is widely expected to announce a new, larger iPhone in early September.

The picture looks a lot better outside the Apple business. Capital investment by Vita Group is now being directed to its telecommunications division - where the company is firing on all cylinders.

The telecommunications division is almost five times bigger than computing in terms of revenue, totalling $374.9 million.

The company continues to add stores, with 10 more Telstra stores and two Telstra Business Centres added to its tally in the last financial year - bringing its total to 109 Telstra stores.

It's not hard to see why, with the company's Telstra stores achieving like-for-like earnings growth of 23 percent over the year.

Not all of this growth is coming from consumers. B2B sales in the telco division rose by 29 percent, with strong growth in sales from Telstra Business centres in particular.

Vita Group is also talking up efforts to broaden its enterprise focus beyond mobility, particularly in cloud, UC and professional and managed services via Camelon ICT Solutions, which it acquired last year.

CEO Maxine Horne this week called the business channel a "significant opportunity".


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