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Strong growth continues for Datacentrix

Paula Gilbert
By Paula Gilbert, ITWeb telecoms editor.
Johannesburg, 19 Apr 2016
CEO Ahmed Mahomed says Datacentrix's "unique positioning within the current marketplace" helped it battle tough economic conditions.
CEO Ahmed Mahomed says Datacentrix's "unique positioning within the current marketplace" helped it battle tough economic conditions.

Datacentrix saw full-year group revenue increase by 16% to R2.6 billion despite a less than favourable economic environment over the past year.

The integrated ICT systems provider saw headline earnings per share rise 18.5%, to 62.8c, for the financial year ended 29 February.

Datacentrix CEO Ahmed Mahomed says despite tough economic conditions, the double-digit growth could be attributed to the company's "unique positioning within the current marketplace".

"We have aligned our capability to optimise our response to changing market conditions, as well as to leverage opportunities in the market and drive efficiencies," he says.

This as the group's earnings increased by 19% to R123.2 million and earnings per share increased by 18.9% to 62.9c.

The company has cash on hand of R120.5 million but decided not to declare a final dividend, citing a need for more working capital going forward for investment and potential acquisitions. The group previously declared an interim dividend of 9.23c per share in the first half of the financial year.

Growth strategy

Mahomed says during the past financial year, the company continued to secure revenue in Africa, largely by following customers into the region.

"We are, however, cognisant of the challenges in trading in Africa and have centred our strategy on following existing customers into the continent," he says.

"The group will continue with its strategy to expand both organically and through acquisitions, and will seek out suitable acquisitions to broaden its reach and bring new solutions to market."

Datacentrix is now a Pinnacle Holdings Group company, after Pinnacle upped its stake to just over 55% in January. Datacentrix says this gives it further access to an extended solution set, positioning it uniquely among its peers by eliminating the need to source alternative vendors or solutions in non-core areas.

"This move to becoming a more holistic technology solutions provider makes Datacentrix more cohesive, more reliable and a stronger IT partner.

"In general, we believe Datacentrix's agility, single-minded, customer-centric approach has built credibility and positioned the group favourably within the market," according to Mahomed.

In July 2015, it received the appropriate approvals from the Competition Commission to acquire Infrasol from Pinnacle for R85 million. Infrasol designs, deploys, manages and supports ICT infrastructure for organisations across SA.

Datacentrix says the acquisition has strengthened the group's positioning in the managed services space and has also further bolstered its existing network, communications, data centre and outsourcing businesses.

"The effective integration of Infrasol into the group since July 2015 has resulted in synergies and the group securing a number of combined wins."

Wide-scale progress

Datacentrix says good growth was achieved across all its operating divisions, with the managed services division contributing 45% to group earnings, increasing 22% to R55.7 million and achieving an operating margin of 12.6%.

"The expertise of our solution consultants sets us apart as a strong contender for multi-faceted system integrations, resulting in meaningful-term customer engagements and good revenue growth," says Mahomed.

The technology solutions division grew revenue by 16% and now contributes over 42% to total group earnings, while business applications accounts for 9%.

"Our role is no longer one of merely upgrading technology, but of helping businesses to optimise the benefits of the always-on, connected world through the provision of competitively priced, scalable, fit-for-purpose solutions," adds Mahomed.

Legal issues

Last week, Datacentrix announced it would oppose a court application brought against it by rival Dimension Data, over a R500 million tender. The high court application regards a bid awarded by the Department of Justice and Constitutional Development to Datacentrix in January 2015 for a court recording technology solution.

Datacentrix, the department and 12 other ICT service providers were cited in the application, which seeks to review and set aside the bid award granted to Datacentrix "on the grounds of alleged irregularities in the adjudication process".

Datacentrix says in 2006, Dimension Data was granted a three-year contract by the department for the provision of the court recording technology solution. After expiry of the original contract in 2009, the tender was republished a number of times over the next five years but was never awarded, and accordingly Dimension Data continues to provide the services under extensions to its original contract.

In June 2014, another tender was published and adjudicated, and awarded to Datacentrix in January 2015. Datacentrix says it has now taken legal advice and has advised its shareholders it will oppose the court application.

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