Xantium maiden annual HEPS in line with forecast

AltX-listed Xantium Technology Holdings has posted positive maiden annual results with headline earnings per share of 7.1c in line with the pre-listing forecast.

Since its debut as the first direct listing on AltX in August 2004, Xantium has established a national group presence, grown its staff headcount from 55 to 241, built a sustainable private sector and government client base and successfully bedded down four new business acquisitions.

Turnover for the year of R94 million was lower than forecast. Xantium CEO James Murray attributes this to a change during the year in the mix of product sales and services.

He explains: "Higher forecast turnover was based on an assumption of a heavier weighting towards product sales, which actually declined during the year as a result of direct selling between our product partners and end-users."

He points out that notwithstanding the initial impact on turnover, "we are pleased to have made inroads into the services market where securing clients is generally challenging due to longer lead times and demanding delivery standards". He adds that the foothold in the services market bodes well for future growth in light of the higher profit margins of services over product.

Murray says Xantium's cash-flow suffered as a result of extended debtor collection periods, "which present an ongoing challenge for a growing business, particularly with government customers where debtors' days range from 60 to 120 days". He says the group will prioritise reducing debtors' days to acceptable timeframes as far as possible in the year ahead.

Xantium's intensive acquisition trail played a major part in the group's performance. "The acquisitions made during the year have enabled Xantium to offer a specialist range of services that distinguishes us in the market," says Murray.

The acquisitions of Oracle specialists Waymark Consulting and ITQ have proved a leading advantage by enhancing the group's Oracle capability and entrenching exclusive partnerships. PVC card and printing business Spec Systems was also bought by the group, followed later by niche systems and process training operator Foster-Melliar. Murray says successful pre-planning of integration has ensured Xantium has continued into the new financial year as a seamless IT solutions provider.

The total maximum purchase consideration for all the acquisitions, despite not yet falling due for payment as a result of future earn-out warranties, has been raised as a liability on Xantium's balance sheet in accordance with a new accounting practice (AC140).

Murray is positive in his outlook for the year ahead. "We are confident that our service offering and strong BEE credentials will sustain our organic growth." Some 45% of Xantium's employees are currently HDIs and Murray says the board will focus on raising BEE participation at all levels of operations, specifically in middle management and at board level. In the private sector Xantium will focus on mining, financial services and telecommunications customers in light of the sectors' transformation charters, while at the same time consolidating its healthy government client base.

He points out that the group will continue to pursue appropriate strategic acquisition opportunities. "Consolidation in the local ICT sector bodes well for acquisitive growth." He also says that in line with the group's listing strategy it will look to expand into Africa where increasing access to technology is driving ICT market growth.

Shares in Xantium closed yesterday at 60c a share.