Embattled IT company Business Connexion (BCX) has won a deal to provide Sanlam with an outsourced data centre.
However, as the company has not disclosed the value of the deal, it is unclear how much it will aid BCX's precarious financial position. BCX will report its annual results for the 15 months to August next Thursday.
In its last set of numbers, the company said that while revenue had grown despite declining spend in the sector, headline earnings slid in the 12 months to May.
In a bid to trim costs and optimise the company, BCX will spend R100 million on a revitalisation programme, which includes cutting jobs. CEO Benjamin Mophatlane has said the company is becoming more agile to face shifting demands in the market.
However, the fruits of these efforts will not be felt for a while, as savings so far have been small and have not yet reached its projected R100 million a year target.
BCX has been under pressure for some time, and headline earnings per share, a key measure of performance, fell 40%, to 26.9c, at the end of May. Net profits dropped 40%, to R69.1 million, and its operating profit margin was 2.59%.
The group, which has moved its year-end from May to August, has been clawing its way back from the brink of ruin for a few years. Its revitalisation programme, which started last year, is aimed at putting it back on track, and achieving an operating margin to 8% by 2011.
However, in 2005, the company achieved a net profit of R174 million against revenue of R2.8 billion - and an operating profit margin of 6.57%.
New win
The three-year Sanlam deal covers mainframe, open systems Unix and Windows servers, storage and data centre management.
However, analysts are unsure what the contract would mean for the company's bottom line, as the value has not been quantified.
Warwick Lucas, Imara SP Reid analyst, says three years is not a very long contract. “Companies like this have to continue winning contracts and building the pipeline.”
Lucas points out that BCX's turnaround programme has not yet improved the bottom line.
John Jenkins, group executive of BCX's services group says “this contract is very significant for Business Connexion Western Cape. We have always considered our corporate match with Sanlam as being very strong and this deal reflects that reality.”
Handover of the outsourcing contract is in progress and Business Connexion will be in charge of service delivery for Sanlam from January.
Sanlam's goal is to consolidate infrastructure services, including the data centres of both Santam and Sanlam, under the control of Sanlam's Information Technology Infrastructure Shared Services division.
BCX has been running the Santam data centre since 2000 and has now been awarded the contract for the Sanlam infrastructure as well. The Santam services will be relocated from Midrand to Cape Town in April.
Share
