Business Connexion (BCX) is downsizing its underperforming African operation in a bid to cut expenses.
The group`s revenue for the six months to November 2005 rose 25.2% to R1.71 billion from R1.36 billion for the same period the previous year.
BCX`s revenue had remained relatively flat during the preceding three financial years, and CEO Peter Watt attributes the growth to successes with new outsource clients and small acquisitions.
"The group has invested significant resources and sacrificed margin in order to win long-term contracts, grow revenue and provide the platform for further expansion in the outsource market," he says.
While the South African operations increased operating profit from R74.6 million to R84.4 million on revenue of R1.61 billion (2004: R1.28 billion), the rest of Africa recorded an operating loss of R12 million (R10.2 million loss) on revenue of R81.5 million (R66.8 million).
"We geared ourselves for Africa via the Intrinsic acquisition, and that really hasn`t come to the party, to put it simply," Watt says.
"The African market is very interesting. There are a lot of opportunities, but few result in orders. We felt we could be more successful if we put more feet on the ground, but the pace has remained the same. So the model didn`t work because expenses went up with more people working on bids."
Watt says the group has opted to downsize the operation rather than dispose of it, as parts of it - such as the Zambian office - are successful. The Angolan branch has been disposed of and the group is disposing of its branch in Mauritius.
Staff are being absorbed into other parts of the group.
He adds that the fact that the group acted quickly to stem the losses demonstrates the quality of management. "We have no sacred cows," he says.
Watt says the plan for now is to revert back to BCX`s former approach to Africa. "Where there is an opportunity that is easy to deal with, we`ll take it. If it doesn`t look easy to do, we don`t do it. But we are keeping our ears to the ground."
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