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Datacentrix announces year-end results


Johannesburg, 16 Apr 2013

IT solution provider Datacentrix has fortified its position as one of South Africa's leading empowered services-led solution integrators, by investing substantially in the skills capacity and related delivery infrastructure needed to take the company into its next growth phase.

Announcing its annual results for the year ended 28 February 2013, the group showed R1.919 billion in revenue growth, earnings of R77.3 million and headline earnings per share (HEPS) of 39.6 cents. It maintained sound financial and operational disciplines, with cash generated from operating activities amounting to R57 million, reflecting a closing cash balance of R274 million, with no interest-bearing debt.

In respect of the current year, the directors declared a gross final dividend of 12.02 cents, bringing the total annual gross dividend to 23.27 cents. Datacentrix has seen an improvement in trading conditions in the second half of the fiscal year, after a particularly constrained first quarter, and consequently, first half of the year.

Revenue was stronger in the commercial sector, while performance in the public sector continued to decline. The Infrastructure division contributed 35% of group profit after tax ("PAT"), while the Managed Services and Business Solutions divisions added 38% and 22% respectively. The change achieved in business mix, with Managed Services and Business Solutions contributing 60% of PAT from 19% four years ago, bears testimony to the successful implementation of the group's strategy.

While group revenue remained resilient, resource and capital project investments and sustained gross margin pressures, resultant from a dip in the industry cycle, have weakened operating margins. The group's Infrastructure division produced an operating margin of 2.8%, while the Managed Services and Business Solutions divisions achieved 10.7% and 17.9% in turn.

According to Ahmed Mahomed, Datacentrix CEO: "Datacentrix has strategically invested in both capital expenditure and resources over the last four years, moving it from a pure hardware supplier to a fully-fledged systems integrator and solutions provider. This investment phase is by-and-large drawing to an end, with our capability significantly boosted, placing us in an enviable position as an end-to-end integrated infrastructure IT partner." Revenue in the Infrastructure division showed growth of 2.4%.

In contrast, the division's earnings declined due to competitive market forces, but improved compared to the first half of the year. Costs grew at a higher rate because of strategic resource investments. Mahomed adds: "The Infrastructure division's revenue and profitability now come primarily from the private sector, which showed growth despite tighter margins.

"Assuming these competitive pressures stabilise, we anticipate that operating margins should improve as the newly established businesses begin contributing to profitability, and our share of government spend starts improving. We retain an adequate sales and delivery infrastructure for public sector business and have submitted several sizeable tenders."

Datacentrix's Managed Services division, which encompasses the Outsourcing, Managed Print Services (MPS) and Resourcing businesses, achieved a 26% revenue growth and contributed 38% to group earnings for the financial year. The division has implemented a tier 3 cloud-ready data centre, a command centre and improved its service desk capabilities.

Says Mahomed: "Datacentrix's investments in this division have contributed to operational efficiencies and effectiveness as well as enhanced offerings. Our excellent execution capacity, together with this new enhanced capability, has contributed to a strong, positive reputation in the market." The Business Solutions division, comprising the Enterprise Resource Planning (ERP), Business Intelligence (BI) and Enterprise Information Management (EIM) business units, achieved revenue growth of 53% and contributed 22% to group earnings. In addition, Datacentrix acquired EIM specialist, Nokusa Engineering Informatics, in December 2012. The acquisition positions the EIM business unit as a leader in this space.

Profitability was positively impacted by the acquisition. Business Solutions' implementation of specialised solutions has resulted in clients receiving multiple awards for innovation and excellence. This includes the recent Ministerial Award presented to the Western Cape Provincial Government, Health'sKhayelitshaHospitalin recognition of its drive, through EIM, to ensure that it delivers a world-class, patient-centric clinical service.

The group also realised a number of corporate achievements. Datacentrix is now a level two (AAA) B-BBEE contributor, with 125% procurement recognition. This resulted in the company being recently ranked as the 18th most empowered organisation from a group of over 100 JSE-listed companies. Datacentrix has solidified its vendor partnerships over the past year, having received some of the industry's top vendor awards, including: HP's gold level partner with the highest overall revenue; HP's individual award for Outstanding Services Channel Champion; IBM's solution provider with the highest revenue growth of all local business partners; IBM's top growth contributor for maintenance services for excellence in storage, as well as for excellence in the area of System Z, more commonly known as the mainframe; OpenText's local partner of the year (ECM solution); and Africa's first Riverbed Accredited Support Partner (RASP).

"The market can expect a number of noteworthy developments from the group over 2013 and beyond," Mahomed states. "Datacentrix is a systems integration partner that has the required skills to successfully compete in providing a range of solutions - from basic infrastructure provisioning through to complex specialised solutions. This capability is further enabled through our consulting, design, deployment, management expertise and comprehensive vendor networks. Importantly, we have laid the framework to provide our own cloud offering, enhancing the group's position within this space.

"Our current organic growth strategy and significant investments have positioned the company well to compete effectively in the selected areas of growth. We will continue to consolidate the transition into an integrated solutions and services-based business, backed by top level vendor accreditations and technical capability, adding further business value to our clients. Our focus on reinforcing our skills base is already evident in the Technology and Outsourcing business units, with two new senior management appointments. "We maintain our view that benefits could be derived from targeted acquisitions and will continue exploring suitable opportunities," Mahomed concludes.

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Datacentrix

Since listing on the JSE Stock Exchange in 1998, Datacentrix has become one of South Africa's leading empowered services-led solution integrators. The company's focus is the provision of infrastructure and business solutions, including cloud computing, high-end storage and security, as well as outsourcing and other related IT services, to the country's public and private sectors. Datacentrix is currently one of the most highly skilled and certified business partners for a number of leading international and local vendors.

For more information, please visit www.datacentrix.co.za.

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