MGX Holdings has grown its revenue thanks to its exposure to DiData (UK), but has increased debt with the acquisition of CCH.
JSE-listed MGX`s interim results show turnover up by 78% to R325.2 million from R183.2 million for the same period last year.
The group attributes the strong growth in turnover to its investment in DiData (UK) and local company Drive Control Corporation.
Operating profit increased 29% from R36.7 million to R47.4 million, but the operating margin dipped from 15.9% for the year to June to 14.7% for the six-month period to December.
This has been attributed to exposure to Drive Control`s high volume business.
The gearing ratio for MGX is currently 30%, with total borrowings standing at R135.8 million.
After the acquisition of CCH, debt will increase to around R210 million with a debt-equity ratio of 28%.
Management says it was a considered decision to take on a "reasonable level of debt, with the objective of maximising future earnings per share on a conservative basis, given the strong cash generating capabilities of the group companies".
MGX says its R6.8 million income from associates was lower than would have been expected due to below expectation performance of both CCH and EC-Hold.
While MGX`s management seems satisfied with the fit of the CCH acquisition, there are still some niggles with the EC-Hold purchase.
A complaint by certain EC-Hold shareholders with the Securities Regulation Panel (SRP) has resulted in MGX seeking senior council advice and the board says it will vigorously defend any allegations.
MGX says once it has refuted any allegations of misconduct, it will be in position to review what it intends to do with its holding in EC-Hold.
MGX group MD Chris Hills says EC-Hold has proved a major distraction for the group and if the SRP findings do not go in favour of MGX, the company is prepared to take it to appeal and to court if necessary.
Shortly after the interim figures were released, MGX executive director Graham Hamilton announced his resignation. Hills says this is part of an Optiplan management buy-out, which is amicable and entirely with the group`s blessing.
Commenting on the future, Hills says there is still a lot of work to be done to bed-down the CCH acquisition, but he remains optimistic on the future financial outlook of the new group.
An earning of 80.1c per MGX share was reported for the period, up from 66.5c reported in the comparable period.
No dividend has been declared.
The MGX share today bounced 90c in early morning trade after news of the results, pushing the price to 810c. CCH tracked its movements, rising 35c to 275c. However, EC-Hold dipped 5c to 115c.
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