After a disappointing full-year, which saw revenue drop 20%, ConvergeNet has bounced back, growing revenue 20% in the first half of the year.
The company on Friday published its interim results for the period to February, and said revenue grew to R497 million, although its gross profit margin dropped from 29% to 25%, due to changes in its product mix.
Six months ago, the company said delayed orders weighed on revenue, causing it to drop 20%, to R784 million, in the year to August. However, the company has now signed a “long-awaited” contract, which has not been reflected in the first half of the year, but should be seen in the second six months.
ConvergeNet says: “There continues to be substantial demand for the group's products, solutions and services.” The company is “cautiously optimistic” about the second half of the year, and expects to improve earnings and strengthen the annuity income as a result of newly-awarded managed services contracts.
The company adds it will continue to “cautiously invest in previously identified strategic growth areas”. It ended the period with R28.9 million in cash.
Operating profit from continuing operations increased by 63%, to R19 million, due to improved revenue and a better cost-to-income ratio. In September, ConvergeNet said it was focusing on controlling costs and the benefit would flow through in the 2011 financial year.
Earnings per share from continuing operations increased 30%, to 1.34c, and headline earnings per share also gained 30%, to 1.35c.
ConvergeNet bought an additional 20% stake in Structured Connectivity Solutions for R300 000, as well as an extra 15% in Xdsl Networking, for R667 771, from 1 September, which it paid for in cash. The company now has a 90% interest in SCS and a 66% interest in Xdsl.
Shares in the company closed flat on Friday at 23c. Its 52-week high was 36c on 31 May last year, while its 52-week low was 19c on 29 December.
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