4Sight Holdings grows revenue as digital transformation trend accelerates
4Sight Holdings (JSE AltX: 4SI) reported a 16.9% increase in revenue for the six-month period ended 30 June 2021; revenue rose from ZAR 249.1 million in the same period last year to ZAR 291.1 million.
“Despite the challenging trading conditions and impact on potential growth due to the COVID-19 pandemic, we are pleased to announce stable financial results for the six-month period under review.”
“These past six months have been challenging for all businesses across our group. Results were mixed. The performance of our IT cluster was particularly affected by the impact of the pandemic. Fortunately, the exceptional performance of our Business Environment (BE) cluster, as well as the strong growth in our Channel Partner (CP) cluster, somewhat offset the disappointing IT cluster performance and improved overall group results for the half year,” states Tertius Zitzke, Chief Executive Officer at 4Sight Holdings.
“Our strategic digital modernisation projects stem from our decision to transform the enterprise. This strategy has favourably positioned 4Sight to pursue our preferred blue ocean strategy to capture new markets by meeting pandemic-fuelled trends around digital transformation and cloud technology adoption with existing solutions.”
According to Zitzke, 4Sight's decision to create a modern digital workplace in January 2020, before the pandemic struck, helped to support continued revenue growth through the crisis.
“This foresight of workplace modernisation gave us an edge and made it easier for us to help our customers after the pandemic fast-tracked cloud migration and accelerated the need for digital transformation."
With more companies transitioning their IT from a capital expenditure to operational expenditure model, 4Sight Holdings experienced a surge in demand for managed services and software as a service (SaaS) solution provisioning.
“Customers required an easier and more cost-effective way to manage their IT spend to improve cashflow. As such, the cloud deployment model gained traction during the pandemic, which supported a rise in annuity-based selling,” explains Willie Ackerman Chief Sales and Marketing Officer at 4Sight Holdings.
Rising demand for access to task automation solutions and application modernisation to empower employees, has also driven the cloud migration trend.
4Sight Holdings' BE cluster, formed in January 2020, accounts for a significant proportion of the company's revenue growth over the period.
“By bringing information technology and operational technology systems together through convergence, the BE cluster is helping customers gain greater visibility across their end-to-end environment. When coupled with access to real-time information, customers are empowered to make better business decisions, faster,” continues Zitzke.
Strategic partnerships with key original equipment manufacturers (OEMs) and vendors have also supported the cluster’s double-digit growth.
By leveraging Microsoft Teams, we have created a digital cloud-based collaborative platform that effectively connects staff and customers, and integrates finance, operations and services in the workplace.
“As a consequence of this OEM-aligned platform-based innovation, which offers scalability and rapid deployment benefits, the 4Sight Holdings BE cluster grew its Microsoft-based business by 40%, far exceeding the 12% industry average,” continues Ackerman.
According to Ackerman, additional focus on partnerships and collaborative market penetration initiatives served as additional strategic drivers for revenue growth. 4Sight Holdings increased its channel network from 540 to over 600 partners to support the company's blended go-to-market strategy.
According to Eric van der Merwe, Chief Financial Officer at 4Sight Holdings: “Normalised earnings for continued operations increased for the six-month period ended 30 June 2021, from a loss of R725 360 reported for profit after tax for H1 2020 to a profit of R 3 705 065 in H1 2021, more than a 100% improvement."
4Sight increased its working capital by R14.2 million for H1 2021 and this directly contributed to the decrease in cash balances during tough trading conditions by 19.1%.
While profit after tax was down 81.1% from the same period last year, Zitzke attributes this decline to once-off entries accounted for in the prior period in 2020 relating to foreign exchange gains of ZAR11.1 million on deferred vendor liabilities and the net gain of ZAR6.7 million on the ETI programme.
Additional initiatives that also contributed to once-off costs include a company-wide project to consolidate ERP solutions and streamline back-office operations, creating efficiencies by rooting out duplication of effort and reducing costs.
During the period under review, 4Sight Holdings granted all existing non-executive staff an annual increase to retain key skills, and, in addition, increased headcount by 16.7% to acquire new skills.
“These payroll costs came at a time when billable hours declined due to multiple project delays or halted implementations related to lockdown restrictions and cost-reduction drives from various customers,” continues Zitzke.
Furthermore, 4Sight Holdings incurred cost overruns on a major project, but these were deemed necessary to retain a customer to support future growth.
Additional strategic business initiatives that contributed to higher costs during the period included programmes in support of broad-based black economic empowerment goals and securing an ISO 27001 certification by Q4 2021 to underline the robustness of our information security.
When coupled with the company's ongoing innovation around existing solutions and products, Zitzke believes these investments should positively impact company performance over the remainder of 2021, while unlocking additional medium- and long-term growth opportunities.
These plans include expansion into sub-Saharan Africa by establishing a presence in Namibia and broadening the company's global reach into the Asia-Pacific region.
“Following our strategic initiatives and operational realignment, 4Sight Holdings is ready to meet rising demand for cloud-based digital services when local and global economies fully reopen and business spending ramps up. We expect that revenue from consulting services will pick up to support continued revenue growth from software licensing and solution sales,” concludes Zitzke.