Revenue declined 12% in the three months to June, but gross and operating margins improved due to growth in the services division, says London- and Johannesburg-listed Dimension Data Holdings.
The company yesterday issued a trading update, indicating gross margins for the quarter were an improvement on the second quarter, thanks to a change in mix, with a bias towards services. In addition, a focus on managing the fixed-cost base aided an improvement in operating margin and operating profit compared with the previous period.
CEO Brett Dawson says the performance of the South African and African units is holding up, despite the economic crisis. He says the group is growing its business in Africa, which performed well off a low base as it is an area of expansion. On a percentage basis, revenue in Africa grew faster than in SA.
Europe, Australia, Middle East and Africa recorded revenue growth and operating profit expansion. In the Americas, revenue and profit were lower than the previous period, although recent improvements in the monthly order intake in that region have been “encouraging”, the company says.
Paying dividends
Dawson says the company's strategy to target the public sector is paying off, and is partially making up for a slowdown in spending from other sectors, such as financial services. The public service strategy was introduced a few years ago.
In SA, Dimension Data is benefiting from government's spending on infrastructure, particularly around construction of World Cup stadiums. Lawson says the group is providing services and infrastructure for the Port Elizabeth and Cape Town venues.
Cape Town, he says, “will be the most advanced IT stadium in the world”. The company is putting in the IP network that connects aspects such as communication, entrance control, turnstiles and lighting.
The Middle East and Africa (MEA) region accounts for almost a quarter of the group's global revenue. Lawson says the area is a “critical part of our growth strategy”. While Middle East and Africa performed well in aggregate, subsidiary Plessey's revenue declined as mobile operators on the continent reduced infrastructure spend.
In Australia, the group performed well as it continues to gain share in a tough environment. The company also held up in the MEA region, Dawson says. The business in Asia also performed well, as profitability improved due to services growth and cost management, despite product revenue declines.
Dawson says he is pleased with the performance in Europe given the current market conditions. “The macro-economic situation is not that positive, so to hold our own and get some growth is good.”
The company is expected to release its annual results for the year to September on 18 November. It expects a “good performance” during the rest of the second half of the year.
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