ConvergeNet says revenue dropped in the half year to February as some contracts failed to materialise.
The listed company says revenue declined 22%, to R432 million, “primarily as a result of the delay in the award of some major contracts and the prevailing challenging economic environment”.
ConvergeNet first raised concerns over delayed orders from government last November, after reporting its full-year results.
CEO Pieter Bouwer said the company earns half its profit from government work. However, there had been delays in the publication and awarding of State IT Agency (SITA) tenders.
Hopeful
Despite the decline in orders, ConvergeNet says there is still “substantial demand” for its products, solutions and services. The company expects market conditions to improve next year, and to continue doing so.
“The directors of ConvergeNet are satisfied that the fundamentals of the businesses remain sound and the group will continue to cautiously invest in previous identified strategic growth areas,” it says.
ConvergeNet was founded in 2005 and its strategic plan includes exporting solutions to Africa and the Middle East as part of a phased approach. The company has seven operating subsidiaries.
During the half year, operating profit dropped 55%, to R21 million, and ConvergeNet has now put measures into place to trim operating expenses. It has started restructuring one of its major subsidiaries.
As a result of the decrease in revenue and operating profits, earnings and headline earnings per share declined 46%, to 153c. However, ConvergeNet improved its gross profit margin to 31%, compared to 24% in the first half of last year.
Related story:
Tender delays worry ConvergeNet
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