JSE Main Board-listed Morvest Business Group (Morvest) delivered satisfactory results to May 2012 given a trying economy, reflecting the viability of the group's diversified business strategy. Revenue and profitability increased on the previous year, driven mainly by organic growth. Morvest is a black-empowered diversified services group with a focus on business support services, ICT, and more recently, retail solutions.
Revenue grew 7.6% to R868.6 million (2011: R807 million), of which the lion's share - 95% - was generated locally. EBITDA was up year-on-year by 6% to R112.1 million and headline earnings up by 10% to R36 million. This translated into earnings per share of 2.33 cents and headline earnings per share of 6.81 cents, both higher than the previous year.
CEO Mohammed Varachia says the performance, as supported by a sound business strategy and strict cost control, proves the group's resilience in tough trading conditions. "To face down market challenges, including ongoing pricing pressure, and to maintain margins, we continued controlling costs and optimising systems, productivity, skills and capacity utilisation." In addition, the new centralised group campus, in Midrand, due to be completed by February 2013, is expected to reduce rental and administrative costs and introduce economies of scale.
Varachia says Morvest also continues to monitor Africa and further afield for higher-margin projects in sectors where the group has existing capabilities. He is confident that opportunities in emerging economies can offer the group a way to offset the difficult local conditions, which he expects to prevail over the next 18 months. "The most notable opportunities are in ICT, retail, resourcing, training and education," he says, all areas in which the group has a proven service offering.
Morvest's diversification strategy kicked off in 2012. New additions to the Morvest portfolio include consumer financial services and travel management, and from a retail perspective - cleaning and waste management and solutions for e-commerce. "Morvest has traditionally operated in the business-to-business market, which is heavily saturated at present," says Varachia. "Looking to long-term sustainability, the business-to-consumer market, including retail, offers the group new opportunity for revenue generation." The new companies are expected to start contributing to growth in the next year.
Looking ahead, Varachia cautions that the 12 to 18 months ahead hold in offer a still sluggish domestic economy and trading challenges that include ongoing pricing pressure from a cost-sensitive customer base. He realistically outlines the plan: "Further cutting of overheads while retaining quality will remain a priority, looking to new geographical markets is a focus, and integrating our new acquisitions and bedding down the Retail and Consumer Services division is key to generating new revenue streams and maintaining our growth curve." He concludes that Morvest's consistently steady financial platform positions the group to achieve these growth objectives.
Morvest transferred from the AltX to the JSE Main Board in June 2011. The share closed yesterday at 20 cents.
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