IT infrastructure and solutions provider, Datacentrix, has presented its interim results for the six months ended 31 August 2003. The company performed well in a challenging environment, with turnover down 4% compared to the corresponding period last year, resulting in EBITDA, earnings and headline earnings per share decreasing by 8%, 9% and 3% respectively.
Compared sequentially to the six month period ended February 2003, turnover was up by 11% and EBITDA, earnings and headline earnings per share up by 19%, 11% and 15% in that order. Net asset value increased 21% to 98c compared to the corresponding period and tangible net asset value increased 34% to 79c. Cash generated from operations was R43 million, resulting in R147 million cash on hand, with no interest-bearing debt.
According to Gary Morolo, executive chairman of Datacentrix, a significant factor affecting these figures has been the strengthening of the rand.
"It all stems from declining turnover in rand terms. All of Datacentrix`s products are dollar-denominated, meaning that although our business has developed at a solid rate, the growth that should have been reflected, diminished at the same rate as the gap between the US dollar and the rand. The group believes that the strengthening rand costs the company at least 25% growth it would otherwise have shown on turnover."
Morolo believes that the scrapping of import duties on equipment has been an additional factor, albeit less influential.
"While a strengthening rand will have a negative impact on revenues, it might also have the unanticipated benefit of accelerated infrastructure renewal cycles."
He is upbeat about Datacentrix, pointing out that nothing about the company`s business model, operations or even the prospects have changed other than the uncertainties of the currency movements. "Datacentrix makes no turn on the currency movements and clients carry the risk and enjoy the full benefit of forex fluctuations. "Despite the current circumstances, Datacentrix has prevailed, showing a comfortable profit and the same prospects as earlier this year. Morolo says the company does not anticipate any changes in strategy except a more determined sales drive to compensate for the challenge imposed by the strengthening rand.
Datacentrix continues to follow its successful strategy of focusing on specific growth areas. In terms of the company`s infrastructure division, the organisation has firmly established itself as a serious player within the enterprise solutions space, concentrating on consolidation within the areas of server and storage, as well as the Microsoft space and opportunities within the Johannesburg market.
The ERP focus of the Business Solutions division is primarily on the Windows/Intel platform as well as the Microsoft Business Solutions space - a major potential growth area. The organisation was recently named as Microsoft Business Solutions` Partner of the Year. Datacentrix`s Services division is actively pursuing partial outsourcing and application hosting opportunities, particularly within the mid-tier sector of the market.
Together with its focused strategic approach, Morolo attributes Datacentrix`s steady progress to the development of staff. "Datacentrix might sell product, but we are primarily service-driven, meaning that quality people really are our most important asset.
"We are continuing to attract the right people, while also investing seriously in the training of our staff. Over the past 12 months, we have increased our staff complement by approximately 30%, without any acquisitions, resulting in the current employee figure of 429."
He adds that the current stressful market and declining financial performance of companies means that local businesses are just not hiring. "For Datacentrix, this has meant that the best talents of the market have been proactively approaching us and we have been able to add top technical and high level management expertise to our skills pool." The company also recently appointed Elizabeth Naidoo, the group`s current CFO, as financial director of Datacentrix Holding Limited.
Datacentrix strategy continues to focus on black economic empowerment (BEE), with independent confirmation of its progress in this area provided by the "A" rating from Empowerdex, a leading rating agency on BEE.
Says Morolo: "Datacentrix`s BEE strategy has been well vindicated. We are staying ahead of the curve in terms of any regulatory or charter empowerment requirements. We are comfortable that whatever happens will not require an extraordinary effort on Datacentrix`s part and are not expecting any surprises on the empowerment front," he concludes.
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