TELECOMMUNICATIONS company Huge Group fell 9.9% to R1 on Friday despite reporting a nine-fold rise in headline earnings per share for the six months ended August to 10.03c from 1.09c.
The AltX-listed company put the earnings growth down to its focus on improved operational efficiencies, treasury management and cost containment.
The group’s total interim revenue decreased 26.6% to R155.9m from the R212.3m generated during the six months to the end of August last year. Most of the revenue was generated by the Huge Telecom division.
The decrease in group revenue was attributed to the loss of upper-segment clients. Huge said competition was especially fierce at the upper segment of the market.
"Given the price compression at this end of the market, gross margins are very small. Huge Telecom has no desire to use price to differentiate its offering," the company said.
The lower segment of the market was less sensitive to price, margins were higher and other factors, such as good service and differentiated offerings, helped generate profitability.
Huge Telecom would focus on the lower segment of the market.
The group’s gross margins were up 5.13% when comparing gross margins of 24.33% for the six months to August with gross margins of 19.20% for the 12 months to February.
"Huge Telecom continues to focus on cost containment. Accordingly, this has translated into lower operating expenses, which are down a further 9.41% when comparing operating expenses of R34.6m to August 31 2012 with operating expenses of R38.2m to August 31 2011," the group said.
The company said it believed the telecommunications activities industry in South Africa would be both a dynamic and challenging arena, characterised by continuing regulatory changes, together with innovative product development.
"Huge Telecom will continue to focus on introducing alternative revenue streams that complement its business," the company said.
"It will also pursue opportunities to increase its client base to enhance capacity utilisation and further improve gross and operating profit margins."