Datacentrix delivers another year of strong organic growth
Integrated ICT systems provider, Datacentrix, has once again posted a solid set of financial results for the year ended 28 February 2015.
Earnings grew by 16.4% from R89 million to R103 million, headline earnings per share ("HEPS") increased by 16.2% to 53 cents, and operating margins increased from 5.5% to 6.4%. The tangible net asset value of the group increased by 17.6% to 262.4 cents.
The group generated cash of R199 million from operations, converting almost 200% of its profit to cash. This improved the cash balance of the group to a healthy R291 million.
Contributions to earnings by the three divisions reflected: Managed Services at 45%; Technology at 44%; and Business Solutions at 11%.
Earnings for the Managed Services division increased from R43.9 million to R45.6 million for the reporting period. Operating margins are at a healthy 12.7%, with a reduction in total operating expenses of 6.1%.
Datacentrix's Technology division grew earnings significantly by 38%, from R33 million to R45.5 million, with operating margins increasing to 4.1%.
Earnings in the Business Solutions division increased from R9.8 million to R10.8 million, with an improvement in operating margins from 8.5% to 9.5%. Good growth was achieved in the Enterprise Information Management (EIM) business, while the Enterprise Resource Planning (ERP) business unit clinched several important contracts.
"Datacentrix has developed a compelling cloud offering that offers long-term growth opportunities. Investment in cloud will continue as it achieves greater acceptance in the market," explains Ahmed Mahomed, Datacentrix CEO. "Our communications business, eNetworks, and the Managed Talent Services unit performed well. In addition, the Outsourcing business secured new contracts and extended a key outsource contract for an additional five years.
"One of the contributing factors for our success is the skills investment, which has provided us with the capability to design, implement and manage complex technology solutions, resulting in better strategic business partnerships with our customers. Skilled staff is crucial to business success, and as such, Datacentrix will continue to recruit, develop and retain the right skills to deliver on the group strategy," he says.
"We are pleased to see an improvement in public sector performance," continues Mahomed. "The group secured new three- to five-year contracts worth approximately R500 million." He believes the group is well positioned for the year ahead, as revenue from these transactions starts to materialise in the new year. In addition, the Managed Services division extended expiring contracts, valued in excess of R300 million. These contracts will benefit both the Managed Services and Technology divisions owing to the integrated nature of the solutions.
Mahomed adds the group's contract wins and extensions bear testimony to the recognised value that Datacentrix creates for its customers. Ian Brown, CIO at Exxaro, reiterates: "Datacentrix's intrinsic understanding of Exxaro's business, its strategic alignment to the organisation's business objectives, and significant continued improvement year-on-year were key factors contributing to the project extension."
The group's execution capability is supported by the "2015 Southern African IT Systems Integration Competitive Strategy Innovation and Leadership Award" that Datacentrix received from Frost & Sullivan. Says David Frigstad, Chairman of Frost & Sullivan: "To achieve excellence in competitive strategy is never an easy task, but it is one made even more difficult due to today's competitive intensity, customer volatility, and economic uncertainty - not to mention the difficulty of innovating in an environment of escalating challenges to intellectual property. Within this context, Datacentrix's receipt of this award signifies an even greater accomplishment."
Mahomed comments: "In addition, Canalys and several of our key technology partners presented Datacentrix with top industry awards. This continued credibility is, and will prove to be, invaluable in building a long-term, sustainable business."
The group plans to accelerate its acquisition strategy and will focus on seeking out suitable acquisition opportunities to complement current offerings, creating economies of scale in existing business areas and bringing new solutions to the market in areas such as managed services and business solutions. In line with this strategy, as reported on SENS on 17 April 2015, the group has entered into an agreement with the Pinnacle Group for the acquisition of Infrasol, an outsourcing and data centre facilities business. The acquisition will complement the group's existing capabilities and contribute to the Managed Services division, improving efficiencies and achieving economies of scale, Mahomed explains.
The group has declared a final gross cash dividend of 9.46 cents per share for the year, bringing the total dividend to 17.55 cents per share.