Johannesburg, 28 Sep 2005
IT infrastructure, solutions and services provider, Datacentrix, has announced interim results for the period ended 31 August 2005. Revenue dropped by 7% to R411 million and operational profits (EBITDA) by 37% to R28 million.
Headline earnings per share (HEPS) fell 42% to 8.6c, while basic earnings per share (EPS) decreased by 50% to 6.3c. Operating cash flows stand at R32.9 million, with R168.9 million cash on hand with no interest-bearing debt.
According to Gary Morolo, chairman at Datacentrix, the board is disappointed with the organisation`s poor financial performance. "It is particularly disappointing in light of the company`s proud seven-year history of producing excellent results."
However, Morolo is confident the company remains strong and vibrant, with a robust balance sheet and strong prospects.
"There are three key reasons for the poor results for this period," he says. "No sales growth in comparison to the previously recorded period, and increased costs due to investment in technical, sales and managerial resources as part of Datacentrix`s organic growth strategy. Thirdly, we experienced challenges within the Solutions division, specifically regarding the ERP business unit, which affected expected top line growth."
At the beginning of this year, Datacentrix embarked on an aggressive growth strategy for the Infrastructure and related services division, involving more value-added, complex solutions, including outsourcing, managed print services (MPS) and enterprise systems. Typically, these types of offerings are distinguished by longer sales cycles and higher costs. With hindsight, it is also obvious that the company failed to simultaneously pursue its normal run-rate business of traditional infrastructure products with typical single-minded focus and vigour. Price competition and price deflation of technology have also affected Datacentrix`s ability to grow at expected rates within this period.
"The Development and Integration business unit within the Solutions division, on the other hand, has won major deals in the areas of workflow and data-mining, and the Optimisation business unit, serving in the areas of electronic content management and archiving, has also shown creditable performance. However, the Solutions division`s ERP business unit encountered difficulties with an ERP implementation project and incurred significant costs in the deployment of resources in this reporting period to ensure an acceptable outcome on this project.
"In addition, one of the company`s key outsource contracts has almost come to term and Datacentrix`s involvement has significantly scaled down. Despite these issues, management is confident in the business unit`s execution capability."
Says Morolo: "The reasons for the poor performance for the past six months are short-term, very specific operational issues, which are receiving management`s attention. Management is taking measures to reinforce focus on the areas of traditional infrastructure products, while the identified growth areas will be addressed separately through dedicated existing specialist resources. The group has also made significant headway with its technology partners to structure more cost-competitive offerings. In the ERP business unit, management`s focus is to enhance the unit`s contract management and project planning capability.
"Datacentrix retains its tight operational and financial controls, strong customer and partner focus and performance-driven culture, making it the ideal choice for vendors and customers looking for a long-term strategic partner."
Morolo also says the board will take steps to address the company`s capital structure and excess cash. "Options under consideration include adopting a more aggressive dividend policy, capital reduction by means of a share buyback programme, or a combination thereof."
He concludes that the board looks forward to more positive results for the balance of the financial year.
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