Arivia.kom defies market conditions

IT solutions provider arivia.kom announced its financial results with revenue of R1 728.2 million, a 14% increase over the past year.

The group achieved EBITDA of R214.9 million, a 23% increase on the previous year, and ended the year on a positive cash balance of R241.8 million, a huge 105.1% increase over the previous year.

This performance was achieved while local and global IT markets remained somewhat depressed, with no increased momentum in the IT services market.

Arivia.kom CEO Zeth Malele is satisfied that the group has, for the third consecutive year, exceeded industry expectations and demonstrated the soundness of its business case. Arivia.kom has shown a compound annual growth rate of 15% over the past three years.

Malele says the overall increase in financial performance is exceptional considering market conditions. "The general experience of the past year is that businesses are under pressure in every respect, and reacting in a very retrained manner to IT expenditure, focusing on getting back to basics and containing cost. In other words, very much a buyer`s market.

"In these circumstances, revenue growth in the IT services sector is a great challenge. Our financial performance is as a direct result of effective market strategies implemented by management to address the market conditions and our customers` requirements. All our lines of business are reporting improved profitability. This, despite our having made investments into intellectual capital and customer service initiatives."

[VIDEO]According to Hugo Knoetze, arivia.kom chief financial officer, the revenue growth was achieved in line with the group`s approach of avoiding low margin new business, and increased profitability is due to dedicated focus on operational efficiencies and cost management throughout the organisation. EBITDA translates into EBIT2 of R90.6 million, a 40.3% increase on the previous year.

This was achieved after investment in infrastructure development. Recorded margins for the year of 5% indicate a significant improvement over the 4.3% recorded in the previous financial year. The ongoing attention to cost containment saw the PBT3 increasing to R90.6 million, from the previous year`s R60.3 million.

Arivia.kom`s profitability, together with its focus on working capital management, facilitated a meaningful increase in cash generated from operating activities, with an increase of 38.9% to R277.8 million. Knoetze notes that the group`s positive cash balance of R241.8 million at year-end is attributed to a dedicated group-wide focus on working capital management, which facilitated a meaningful increase in cash generated from operating activities.

"We believe that `cash is king` and a strong indicator of the health of a company, so we are delighted that we ended the year on an extremely positive cash balance. This is due to the effort we all put into efficient billing and collection processes. Our systems are robust and our people never, ever take their eye off the ball." The group`s intention is that the cash balance will be used for strategic initiatives.

"In 2002 BMI-TechKnowledge rated arivia.kom as the IT services provider with the third-largest market share in their South African IT market report," says Malele. "The most recent BMI-T report on IT professional services rates arivia.kom as the company with the second largest market share, so we are en route to reaching our vision of being the dominant ICT solutions company in Africa.

"We work hard at improving the quality of our customers` service experience, and as a result we have renewed our service agreements, and expanded the scope of work, with our key customers in the past year. We also commissioned new contracts with large customers such as the Department of Water Affairs and Forestry, the South African Revenue Service, the Johannesburg City Council and the National Electricity Regulator."

According to Malele, arivia.kom has not delivered in Africa (outside of SA`s borders), at the level for which it had hoped. "However, we continue to progress. The revenue potential has grown significantly with a number of prospects expected to mature over the next financial year, and we have submitted a number of sizeable bids. We feel that market prospects for arivia.kom look favourable, and for arivia.kom, ICT dominance in Africa is still a strategic imperative and our long-term vision."

The distinctive quality of the solution sets that arivia.kom develops and manages for its customers will drive the group`s ability to penetrate other market segments and regions in the world, says the company. Arivia.kom`s commitment to offering innovative and industry-appropriate IT solutions to its customer base continued in the year under review. Specifically, the group has packaged its outsource solution into an end-to-end offering with specialised features, such as a carrier-class virtual private network, world-class contact centres, systems management, application support and desktop management. Malele says the IT services market is maturing and arivia.kom is well positioned to benefit from the increasing requirement for stringently cost-managed services, optimisation of existing IT systems, specialised service level agreement (SLA) management and the growth in outsourcing.

The group`s commitment to black economic empowerment (BEE) and transformation gained further momentum during the year under review. Of the group`s base of 1 533 permanent employees, 50.4% consist of black individuals and 31.6% of women. This past year, the total procurement spend on assignable business amounted to more than R119 million, of which more than R90.1 million (75.7%) was spent on BEE procurement. This year, Empowerdex, in its provisional report, gave arivia.kom an "A" rating for its BEE initiatives, which range from employment equity, through affirmative procurement, partnerships, human development, to corporate social investment.

Malele says that when considering all aspects of the business, he and his management team are confident they will match this year`s financial performance in 2005. "Next year`s focus will be on the further execution of the strategic imperatives set at the launch of the business, and which have, to date, worked very well for us."