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Vita Group expects earnings to reach up to $46.5M

Vita Group expects earnings to reach up to $46.5M

A 13 per cent increase from the previous reporting year

Credit: Telstra

Vita Group expects its earnings before tax to reach up to $46.5 million for the year ending 30 June 2019.

This would mean up to a 13 per cent increase from its previous year EBITDA of $41 million, a result of "strong performance" of both its retail ICT and Sprout accessory businesses.

Furthermore, the ASX-listed company advised that new remuneration arrangements with Telstra related to the introduction of new mobility plans will be in effect this month. This should result in higher remuneration from the sale of devices, but Vita expects to see lower remuneration from sales of connections to the Telstra network.

Vita Group is also expecting a reduction of up to $13 million in its annual remuneration as a result of previous arrangements with Telstra.

Vita Group announced 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.

The company told shareholders it is to early to determine the financial impacts this will have on the business.

The new arrangement would see the number of stores Vita is able to own and operate under the Telstra branding expand to 110 in the 2018 financial year and 115 in FY20.

But this came at the cost of some legacy remuneration components, amounting to approximately seven to eight per cent of retail remuneration, which is expected to be partly offset by a further expansion to 115 stores from this date.

“We have seen many changes to plan construction and channel remuneration, which have been necessary as markets, channels and products evolve," Vita CEO Maxine Horne said.

"Whilst the FY20 changes are structurally significant, I am confident in the Vita team’s ability to adapt to change. Our team will continue to consult with our customers to understand their needs and provide multi-product solutions."

Vita Group introduced a new operating model in which it will operate larger format Telstra Business Technology Centres (TBTC) across four significantly expanded geographic territories, delivering a broader range of ICT products and services to larger, higher value customers, and with a lower cost to serve.

TBTCs are expected to service small-to-medium businesses with more complex technology needs, offering whole-of-business solutions through highly trained consultants.

In March, Telstra launched its first TBTC in Townsville, which is run by Vita Group. This is part of the Telstra's strategy and will result in the closure of 78 existing business centre, as reported by The Sydney Morning Herald. Vita Group is currently in charge of 23 of those 78 centres.

Soon after, a second TBTC was launched in Melbourne under the management of IT services provider Oreta. 

"With this new venture Oreta can offer a whole new range of solutions to our customers ranging from mobility, unified comms, security to cloud," Oreta MD Sachin Verma said in a LinkedIn post.

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