Listed outsourcing company Datacentrix is still on the hunt for an empowerment partner to increase its credentials and maintain revenue growth.
Datacentrix is a level four contributor, but is being pressured by its clients to reach at least level three in the short-term. However, despite this, the company has withdrawn a cautionary announcement relating to talks with a potential partner.
It has black empowerment ownership of 10%, but this stake is not locked in and its empowerment partners can sell the share. In April, CEO Ahmed Mahomed said the company had been put on notice to improve its credentials, or risk losing business.
Yesterday, in its results announcement for the six months to August, it said it had withdrawn a cautionary announcement around a potential empowerment deal, because discussions with a particular party were discontinued.
Chairman Gary Morolo says Datacentrix is still being challenged by the market and the pending ICT charter to improve its empowerment credentials. The private sector wants the company to be at least a level three contributor, with level one being the highest possible qualification.
Datacentrix is continuing to urgently evaluate other opportunities to improve its BEE equity holding. Morolo says improving its credentials is a “challenge”.
Slowing government spend
Datacentrix grew revenue despite the previous period including a Fifa Soccer World Cup contract, which was a once-off and left a hole in the company's revenue stream, says Morolo.
Morolo says it was a “significant challenge” to replace the Fifa-related revenue, an amount that he cannot disclose due to the soccer body's rules. Datacentrix's growth came from the public sector as government spend has declined as a percentage of revenue, he adds.
A few years ago, Datacentrix earned about 40% of its revenue from the public sector, but this has dropped to low double digits, notes Morolo.
Morolo explains it is difficult to quantify the current percentage as the firm previously only offered the public sector infrastructure services, but has now added higher value offerings to the basket.
Datacentrix's infrastructure division, which accounted for 52% of revenue, is migrating from being mostly a commodity player to a solutions provider in the infrastructure segment of the market.
Although Datacentrix is not overly acquisitive, Morolo says the company is looking for entities that will kick-start its presence in niche areas. He comments that it has looked at a few possibilities, but most are over-priced.
Acquisitions will mostly be completed to enter into new market segments and create critical mass in existing competencies, Datacentrix explains.
The company declared a 13.4c a share dividend. Its stock closed unchanged at 422c yesterday.
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