Listed outsourcing company Business Connexion (BCX) has reported its highest ever interim earnings since its 2004 merger with Comparex.
Bouncing back from the global recession that hit companies worldwide hard at the end of 2008, the company also reported a threefold surge in headline earnings per share and almost doubled its operating profit margin for the half year to February.
BCX, in its current form, came into existence in 2004, when Comparex merged with Business Connection, creating a listed empowered ICT company with annual revenue of more than R3 billion.
CEO Benjamin Mophatlane says the earnings are the best since the 2004, which shows how much work needed to be put into the merged entity to remove inefficiencies and structure the business properly. “The team has done a great job... it's a credit to our people.”
The company is on track to meet its operating profit margin target of 8%, in the 2011 financial year, after reporting a margin of 6.1% in the first half of the year, almost double what it was in the six months to November 2008. However, Mophatlane says the “last stretch will be hard”.
BCX's operating profit margin was 2.4% at the end of 2009, down from the 4% the company reported in 2008 and the 4.7% it reported in 2007. In 2005, BCX had an operating profit margin of 11.8%.
Solid numbers
BCX's revenue slowed as companies held back on refreshing technology, and public sector spending has yet to be felt as government's financial year starts this month.
CFO Vanessa Olver says government spending is expecting to start picking up in the second half. BCX traditionally grows revenue faster in the second half of the year.
However, despite the slowdown in revenue, headline earnings per share jumped threefold - moving from 9.6c in the half year to November 2008 to 28.7c. Mophatlane says the growth in earnings is off a low base. “One has to be modest about it.” At the end of 2009, net profit fell 16%, to R96 million, despite revenue growth of 33% to R5.5 billion.
Mophatlane explains that the company's revitalisation programme is paying off, despite the initial scepticism in the market about its potential to turn the company around.
BCX implemented its turnaround programme in the beginning of 2008, ahead of when the recession saw companies cut back on spending in ICT, opting to rather make existing hardware and software last longer.
The company plans to save R106.5 million a year through tougher contract negotiation, and saving on outsourcing. So far for the year, it has saved R51.2 million.
Looking ahead, Mophatlane says BCX aims to expand its African business and is focused on making an 8% operating profit margin. The company also wants to move more firmly into the services space, leveraging its data centre capability to take advantage of the growing move to cloud computing.
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