Local IT sales have been little affected by the international financial blow-out, says Gary Morolo, Datacentrix Holdings chairman.
The longer sales cycle is because of the increase in deal size and complexity, he adds.
For the six months ended 31 August, Datacentix reported a 21% increase in headline earnings per share, to 26.8c, and earnings per share rose 20%, to 26.7c. Operating performance (EBITDA) increased by 11%, to R73.7 million. Cash generated from operations was R32.1 million.
The results are particularly pleasing for Morolo, who has been with the group since its listing in 1998 and is celebrating that 10th anniversary this month. Over the past decade, it has seen its annual turnover increase from around R100 million to the current R1.3 billion.
Deals have increased in size and complexity as the group increasingly bundles services with its hardware offerings and is heavily involved in providing turnkey solutions for clients who want one firm to project manage an installation.
“No one calls us for a quote on 10 PCs anymore. But the slower sales cycle, due to the complexity increase, has affected our top line growth,” he says.
Investors in world markets have been shaken by the turmoil brought about by the US sub-prime collapse. IT shares, which have been closely linked to those of financial firms, have also been affected.
However, Morolo says the local market has not yet experienced any direct link and investors should feel comfortable in the IT sector.
“The IT sector has followed the overall trend of the Johannesburg Stock Exchange, unlike resources shares, which were the flavour of one month and then fell from grace the next,” he says.
Datacentrix has made accreditation a particular focus over the past year, having recently updated its HP certifications and remaining the US hardware vendor's largest local partner. It is a Microsoft gold partner and IBM premier partner, and has recently been accredited as a Cisco premier partner.
“These accreditations are important because clients have to sense that the vendor is behind us. We have also managed to maintain good margins by moving more into the services and consulting side,” Morolo notes.
He says the group is also reviewing its black economic empowerment (BEE) strategy, although it has level four rating according to the Department of Trade and Industry codes, which means it has 100% BEE recognition.
“We have to review and find a way to increase our BEE rating (the DTI allows for a total rise to 135% rating), because often state-owned enterprises do not follow the official guidelines and become a law unto themselves. They will insist on their own higher criteria and we have to protect ourselves from that.”
However, Morolo says the group could do more on the skills development side and ensuring there is a larger broad-based BEE stake in the company that would include women's groups.
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