Johannesburg, 05 Oct 2011
Datacentrix has announced its interim financial results for the six months ended 31 August 2011. The group showed good, organic growth of 9% from R836 million to R913 million, a creditable performance in light of the anticipated revenue drop-off following the once-off FIFA World Cup event last year.
Excluding World Cup income, group revenue line grew by 19%. Earnings declined from R55 million to R52 million for the six-months. According to Datacentrix CEO, Ahmed Mahomed, this was as a consequence of increased pressure on transactional business leading to a decline in margins from 9% to 8%, and a greater investment in key technical competencies. Headline earnings per share (HEPS) decreased accordingly from 27.9 cents to 26.8 cents.
Datacentrix continues to maintain sound financial and operational disciplines across the business, with cash generated from operating activities amounting to R47 million, reflecting a closing cash balance of R330 million, up from R294 million shown in the 2010 interim results, and R321 million at financial year end. The group has no interest-bearing debt. The group continues to invest in skills in new business areas; these costs are being absorbed by the income statement and support the group's organic growth strategy. Net asset value increased by 9% from 214.5 cents to 233.6 cents.
“The group is satisfied with the overall performance of its divisions, despite a negative comparison to last year's windfall profits from the FIFA World Cup event,” states Mahomed. “The Infrastructure division contributed 52% of group earnings, while the Managed Services and Business Solutions divisions added a healthy 28% and 16% respectively, with a total contribution of 44% of group earnings.”
Both the Managed Services and Business Solutions divisions produced solid margins of 12% and 20% correspondingly. The Business Solutions division grew divisional earnings by 54%, supported by strong performances in the Enterprise Content Management (ECM) and the Business Intelligence (BI) business sectors.
“From an Infrastructure division perspective, the nature of the group's business activities has changed and will continue to do so in order to keep apace of changing industry trends and client expectations,” Mahomed explains. “This division, which is the largest within Datacentrix, is migrating from being mainly a transactional commodity player to a solutions provider in the infrastructure segment of the market.”
As expected, the Infrastructure division reflected a decline in earnings (18%) for the six months post World Cup activities, but revenue for the division grew by a healthy 18%.
Datacentrix is recognised as the largest and most broadly certified HP integrator, not only in South Africa, but also the Middle East, Mediterranean and African (MEMA) region, winning this year's awards as HP's service partner of the year for South Africa and runner-up in the MEMA category.
Datacentrix has also attained platinum level partnership status with Symantec, as well as Storage Management and High Availability specialisations, and has strengthened its position with IBM and VMware (where it boasts some of the highest certified virtualisation skills in the country).
According to Mahomed, the commercial segment of the market continues to be buoyant. “While the group has seen marginal improvement in the public sector performance, this is still far from pre-downturn levels. Activities in this space continue to be subdued and unpredictable but we will maintain our investment in resources in the sector in order to benefit optimally from IT spend as it arises.
“Datacentrix's Managed Services division had an expected performance decline on the Managed Print Services (MPS) side, following the benefits brought in by this sector following the World Cup,” he adds. “The Outsourcing business, however, showed healthy double digit growth for the period.” The Business Solutions division has shown an excellent growth of 54% over the period under review, generated in particular by the ECM business unit, which has one of the largest services capabilities in the market and is focused on the ECM, Business Process Management (BPM) and Information Life Cycle Management (ILM) spaces. The BI business unit has also shown good results for the period after a skills injection last year, albeit from a low base.
Mahomed believes that industry consolidation will continue on both a local and global level. “From Datacentrix's perspective, our strategy to grow our total solutions portfolio will continue.
“We finalised the establishment of a Security Operation Centre (SOC), which incorporates leading technologies to address the security needs of our clients on a proactive basis. In addition, we offer a mail cloud solution and are in the process of expanding our cloud offering. As cloud technology matures, the group will continue to evaluate opportunities closely and will make the necessary investment.
“In addition, we believe that wins in the Outsourcing business have substantially strengthened our market positioning. To this end, Datacentrix will continue developing solutions in order to deliver tangible business value to our clients.”
The group has withdrawn the cautionary relating to its BEE shareholding, but continues to explore ways of improving its BEE equity holding. The company has flagged this issue as critical, particularly the challenge it has had in augmenting its black shareholding in line with anticipated ICT Charter requirements.
The board is pleased to declare an interim dividend of 13.4 cents per share, in line with the dividend policy of two times cover on HEPS.
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