The Dimension Data share price ended yesterday nearly 20% down on Monday`s close after a roller-coaster two weeks.
Although the global systems integrator`s full-year results were very much within market expectations, analysts have expressed concern that vague forecasts by the group indicate that things may not get better soon.
An analyst says the already nervous market is unlikely to be comforted by comments by the group that conditions are not expected to improve.
DiData financial director Malcolm Rutherford, asked at a press briefing broadcast from London whether the percentage turnover growth for the current financial year would be in double figures, would not commit to a forecast.
He said only that the group was expecting "modest" turnover growth, a comment which has also caused concern among some analysts.
DiData has indicated that it is hesitant to make specific forecasts for fear of having its share hammered again if the results are not in line with the forecasts.
The share price halved in July after the group issued a warning that full-year margins were expected to be one to two percentage points lower than at the interim stage. A series of downratings by various brokerages also helped push the share down.
An analyst says the recent share price rise, which saw the share close at R15.55 on Monday, was initially driven by better than expected quarterly results from US IT giant Cisco and was kept afloat by a Nasdaq recovery.
However, the share fell with the release of the results on Wednesday, falling to R12.70 from the previous day`s close of R14.05. It closed at R12.60 yesterday but was trading at R12.85 this morning.
Locally and in the UK, where DiData has its primary listing, analyst reaction to the results has generally been negative.
The Financial Times quotes SG Cowen analyst Hugo Mills as saying the total goodwill write-off of $1.92 billion, which pushed losses from $50.6 million to $1.66 billion, is the largest in the European IT services industry.
Local brokerage BOE Securities has changed its recommendation on the DiData share from "hold" to "reduce". The brokerage`s comments, distributed in its Morning Notes, are damning.
"Would you hold a company whose heps (headline earnings per share) were forecast to decline for its full year to September 2002 by 45% and was trading on an FPE (forward price-to-earnings ratio) of 17.9 times, even if this was in line with its peers?" it notes.
It says this is how it feels about DiData, whose earnings per share for the 2001 financial year were down to seven US cents, from 12.8c previously.
"There are some redeeming features in the results, such as improved cash flow and reduced headcount, but since eps for the first half to March 2001 are even more likely to be well down there is no compelling need to hold the stock in the meantime."
However, another analyst says the group reacted quickly and took steps early on when it saw its revenue was coming under pressure, which confirms that strong management is in place.
Yet he cautions that there is still some downside in the share, and the group has a way to go to restore investor confidence.
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