JSE-listed CS Holdings, which has reported a 46% increase in headline earnings for the six months to December, says it is strongly positioned to gain market share in a consolidating IT market.
<B>Salient figures</B>
CS Holdings results for the six months to 31 December 2002.
Year-earlier figures in parentheses, move in square brackets:
Revenue: R240.4m (R149.27m) [+61%]
Operating profit before depreciation: R30.36m (R19.96m) [+53%]
Profit before tax: R14.71m (R7.76m) [+89%]
Net profit: R12.13m (R5.87m) [+107%]
Headline earnings: R18.9m (R12.9m) [+46%]
HEPS: 8.37c (7.92c) [+6%]
Cash inflow from operating activities: -R10.06m (R14.45m)
Current assets: R182.63m (R173.09m)
Cash and equivalents: R13.37m (R16.7m)
Current liabilities: R102.13m (R125.02m)
NTAV per share: 47.15c (37.61c)
NAV per share: 79.41c (79.36c)
CEO Annette van der Laan says the group manages to maintain solid business fundamentals, which she lists as a healthy pipeline, strong client retention and tight fiscal controls.
The acquisitions of the past few years have been integrated into a single outsourcing service provider. "This has also resulted in a strong platform for sustainable growth, which will be mainly organic in the long-term," says Van der Laan.
She says significant progress has been made in terms of centralising the business development team as a core function of the CS Holdings group. All six vertical sector leaders have been appointed and the sales force has been realigned.
CS Holdings` areas of vertical specialisation are mining and metals, manufacturing, public sector and parastatals, financial and insurance, telecommunications and IT, and retail.
Geared to perform
Operating margins were almost unchanged from the same period the previous year. Van der Laan says margins are traditionally lower in the first half of the year. A slight improvement is expected for the second half.
An improvement in the current ratio from 1.4 to 1.79 is a result of higher levels of working capital due to strong revenue growth and cash received as a result of the issue of shares to Worldwide African Investment Holdings. The current ratio is the ratio of current assets to current liabilities as an indicator of a company`s ability to meet short-term obligations.
Working capital increased in line with the 61% revenue growth, which was both organic and acquisitive.
"The additional investment in working capital was funded from cash resources generated from operations. It is expected that, as increased growth and profitability convert into cash flow, cash generated from operations will return to normal levels.
"In addition, a concerted effort is being made to reduce inventory levels, minimise debtor collection days and accelerate work in progress turnaround."
Van der Laan says the board is confident that the group`s strategy is focused and managed in terms of an appropriately integrated business model.
"This model is geared to perform consistently well in a market where no significant upswing in IT spending is expected over the short-term.
"As an emerging black economic empowerment company, CS Holdings is confident that it is strongly positioned to gain market share in a consolidating IT market."
She says the group`s results are traditionally lower in the first half and that second-half results will exceed those of the interim period.
By midmorning today the CS Holdings share was trading 4c or 5.41% up at 78c.
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