Datacentrix, IT solution provider, has announced its interim financial results for the six months ended 31 August 2012. The Group showed 7% organic revenue growth from R913 million to R977 million. Earnings declined from R52.2 million to R37.5 million. Operating margin deteriorated from 7.6% to 5%. Headline earnings per share (HEPS) decreased from 26.8 cents to 19.2 cents.
Datacentrix maintained sound financial and operational disciplines, with cash generated from operating activities amounting to R52.7 million, reflecting a closing cash balance of R288 million, with no interest-bearing debt.
Datacentrix CEO, Ahmed Mahomed explains that the combination of a constrained economic environment and the Group’s organic growth strategy has impacted short-term performance. “The Group has seen a significant improvement in trading conditions during the second quarter of the fiscal year after a particularly constrained first quarter. Revenue was stronger in the commercial sector, whilst performance in the public sector deteriorated further. Furthermore, Datacentrix has made considerable investments in growing competencies and capabilities organically, bearing a significant portion of the investment costs during the reporting period.”
“The Group’s business mix has changed over this reporting period with Managed Services now contributing 44% to group’s earnings. The Infrastructure division contributed 40%, while the Business Solutions division contributed 16%.”
The Managed Services and Business Solutions divisions generated margins of 11.1% and 12.3% respectively.
Revenue in the Infrastructure division showed marginal growth, and earnings were impacted by competitive market forces.
Revenue in the commercial segment of the market showed growth, albeit with tighter margins. The Group is experiencing continued decline in public sector revenue with little prospect for an upturn in the fiscal year. Sizeable tenders have been submitted in this field, but it is no longer a significant contributor to Datacentrix’ revenue or profitability. The revenue and profitability in this division is primarily from the private sector.
Significant investment in the technical capabilities of the Infrastructure division has been made to take the division up the value curve, away from the commoditised end of the market.
“We have confidence that our investments in this division will begin to contribute to profitability and operational effectiveness.
“The strategic shift in the Infrastructure division from being largely a transactional commodity player to a solutions provider is ongoing. It continues to be a leading supplier of total, integrated IT solutions and related services, from consulting, designing, provisioning, deployment, through to maintenance and support.”
The Business Solutions division, which comprises the Enterprise Resource Planning (ERP), Business Intelligence (BI) and Enterprise Content Management (ECM) business units, achieved revenue growth of 40%. Earnings in the ECM segment were under margin pressure as new entrants joined this market. The ECM business is making inroads in providing specialised solutions to the government healthcare industry.
The Group believes its organic growth strategy and consequent investments have positioned it well to compete effectively in the selected areas of development. As and when new opportunities arise, the Group will consider acquisitions to complement its growth strategy.
“Datacentrix is now rated a Level Two (AAA) B-BBEE Contributor, with 125% procurement recognition, to become one of only two JSE-listed IT companies to reach this position. Our exceptional performance, with particular reference to the areas of skills development, preferential procurement and enterprise development, were aptly reflected by the updated scorecard.”
The Datacentrix board is pleased to announce the appointment of Antony Ball and Peter Backwell as independent, non-executive directors. Both individuals bring a wealth of experience and their appointment is expected to complement the skills and experience base of the board.
The company has declared an interim gross cash dividend of 11.25 cents for the six months ended 31 August 2012, in line with the dividend policy of two times cover on HEPS.