BCX reports wilting profits

Johannesburg, 03 Feb 2009

High taxes and an aggressive restructuring process have taken their toll on Business Connexion's (BCX's) profits.

The JSE-listed company released a trading statement saying its profits will be down by between 30% and 40%, compared to the same period last year. This is something of a disappointment for the company, which was showing dramatic turnaround last year, after a troubled past.

BCX has endured a bumpy ride over the last few years; however, last year the company implemented a revitalisation programme that seemed to work wonders on its profit margins. However, the company's trading statement yesterday says the same revitalisation strategy is to blame for its current slump.

According to the statement, BCX paid once-off costs of R24 million (R13.8 million after tax and minority interest) relating to the group's revitalisation programme, which affected the bottom line. It also indicates that R15.7 million, paid on the special dividend announced last year, is another contributing factor to lower profits.

The trading statement follows similar disappointing results from rival business Faritec.

Financial yo-yo

BCX produced a number of shining results last year, after a bleak 2007.

Actual operating profit in November 2007 had shareholders concerned about their investment in the company. It reported operating profit of just R41.9 million, down from R108.5 million, in May the same year. In the results ending 31 May 2006, the company was sitting on an operating profit of R143.8 million.

However, in May last year, the company seemed to start its bounce back, reporting a 51.3% increase in operating profit, to R164.2 million. The company seemed to show strong results for the rest of the year.

The revitalisation programme covers five areas of BCX business and is aimed at improving operating margin and returns to shareholders. BCX CE Benjamin Mophatlane last year made a commitment to achieve an increased operating margin of 8% by 2011, under the new strategy.

While this week's trading statement has indicated lower profits, the company did report higher basic earnings per share by up to 10% more than the same period in the last financial year.