JSE-listed IT solutions provider Datacentrix experienced a challenging first half of the year, which saw total comprehensive income drop 28.17%, despite revenue growing 7%.
The group yesterday released its interim results for the period to August, and reported revenue of R976.7 million, a gain on the first half of 2011, when it recorded R912.7 million. However, total comprehensive income declined to R37.5 million, from R52 million.
CEO Ahmed Mahomed says he is happy the top line is keeping pace with industry market growth of 7%, especially considering the current tough trading environment. Datatcentrix's operating margin was around 6%, which is off historical levels, but around double that of its peers, he adds.
Mahomed explains the group's bottom line was impacted by Datacentrix's continuing investments to grow organically and the constrained economic environment. He says revenue growth lags behind the spending.
"Datacentrix has made considerable investments in growing competencies and capabilities organically, bearing a significant portion of the investment costs during the reporting period."
Government, which at one stage accounted for between 40% and 75% of revenue, added nothing to the bottom line during the period, because of the resources required to service state deals, says Mahomed. He says there was a small gain in revenue from government contracts.
Datacentrix is experiencing continued decline in public sector revenue and sees little prospect for an upturn in the fiscal year. Sizeable tenders have been submitted in this field, but it is no longer a significant contributor to Datacentrix's revenue or profitability.
Tough times
Mahomed says Datacentrix saw a significant improvement in trading conditions during the second quarter of the fiscal year, after a particularly constrained first quarter. In the second half of the year, he expects to extract more value out of investments, although the half will be difficult for the market.
During the first six months of the year, Datacentrix also improved its empowerment credentials, moving to the second-highest notch, level two, from being the weakest company in the industry from an empowerment perspective.
Mahomed explains the company grew empowerment equity from 10.6% to 17.47%, after taking advantage of the rules that allows it to benefit from its shareholding. However, the stake is not encumbered and shareholders can sell at any time, he notes.
Mahomed says the company will look at acquisitions if they make sense, but so far this has not been the case. The group generated R52.7 million from operating activities, and closed the year with a cash balance of R288 million and no interest-bearing debt.
Datacentrix also announced the appointment of Antony Ball and Peter Backwell as independent, non-executive directors.
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