
Business Connexion (BCX) is bullish about the year ahead. It has signed new contracts valued at over R130 million in SA and more than $5 million on the rest of the continent for the current financial year.
This is despite rising operating costs, amid the global economic downturn.
In the company's interim results announcement, for the six months ending 30 November 2008, CEO Benjamin Mophatlane says BCX continues to grow its African business and expanded into Nigeria at the end of last year.
“The investment in this business will position Business Connexion to become a meaningful participant in the rapidly expanding ICT sector in that country,” he notes.
Showing growth
During the period under review, revenue grew 10.3%, from R2 billion to R2.2 billion, and operating profit rose 16%, from R41.9 million to R48.7 million. Growth in the company's operating expenditure was contained to 1.5%.
The group's operating margin increased from 2.1%, for the first half of the previous year, to 2.2%. When these costs are excluded, the operating margin increases to 3.3%. BCX says it hopes to achieve an operating margin of 8% for the 2011 financial year.
Headline earnings fall
BCX saw headline earnings plummet by 34.4%, from 14.8c to 9.6c per share, for the period. This was due to tax of R15.7 million on a special dividend of 60c per share, declared for the financial year ended 31 March 2008, and costs stemming from a R24 million revitalisation programme last year.
Mophatlane claims the revitalisation programme will see cost savings in the next 12 to 18 months. However, BCX says in a statement it expects to incur further costs of between R15 million and R25 million in the current financial year in relation to this programme.
Lindsey Mc Donald, Frost & Sullivan analyst, says the revitalisation programme came at a good time. “The revitalisation programme was a once-off cost they had to implement to optimise operations and make them stronger for growth. I think a lot of shareholders will be looking to see whether Business Connexion's financial results will improve and whether their revitalisation programme will bear fruit.”
Irnest Kaplan, MD of Kaplan Equity Analysts, says it's a wait-and-see scenario. “The results were disappointing. The margins were low and their costs have increased significantly. Having said that, they've got promises that they're making and we will see if they can make any headway with that. The technology and the US and UK sectors were not profitable. We have to see how they will improve things over the next year and it's going to be a challenge in the economic downturn.”
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