The Group is a distributor of virtual and physical prepaid airtime on behalf of the network
operators, as well as of electricity on behalf of the utilities. Commodities are purchased and
taken into inventory where they are warehoused until resold at a later stage. The Group
accounts for these sales at their full face value as reflected in the revenue line.
Economic slowdowns have seen many postpaid consumers migrate towards prepaid in
order to enhance their financial flexibility and control spend. In general, prepaid consumers
are purchasing airtime in lower denominations, while also benefiting from price reductions
and variable call discounts introduced by the major mobile networks.
There is an increasing trend for the Group to act as an agent on the sales of certain products and services.
Commissions earned for acting as agent are not included in the revenue line, but are accounted for in gross profit.
The distribution of “PINless top-ups”, as an alternative mechanism for the vending of prepaid airtime,
continues to escalate. This shift in consumer buying patterns impacts the treatment of the revenue
generated, as only the gross profit earned is accounted for. Therefore, the effective growth in Group revenue would
have equated to 6% for the year.
The same approach applies to accounting for electricity sales, where the Group acts as the agent on
behalf of the utilities and not as principal. Only the commissions earned and not the face
value of these sales is included in gross profit.
In our business model, the metrics for measuring growth should be gross profit and gross
margin achieved, as revenue is not necessarily a proxy for the Group’s growth. |