Computer Configurations Holdings (CCH) has restructured its 17 operating companies to form five focused strategic business units aimed at clarifying the group`s focus and allowing it to maximise its position as an e-business systems integrator.
The group has also released its financial figures for the six months to 31 December 1999, during which it lifted attributable earnings 121% to R40.9 million (1998: R18.5 million).
However, the market appears to be reacting negatively to the company, with the CCH share plummeting to R26.10 by early Monday afternoon - 17.7% or 560c from Friday`s close of R31.70.
The group has created five business units:
CCH Enterprise Solutions, housing Computer Configurations` hardware and data storage businesses and the software and professional services part of Software Futures;
CCH Software Development, housing the software development business of Software Futures, the outsourcing team, and GSM company Global;
CCH Hosted Services, hosting all businesses based on annuity income, including business recovery, data and call centres and Finsource;
CCH Consulting, housing the electronic business, customer relationship management and others; and
CCH Infrastructure services, primarily involving the business of Infracom.
The sales function has been consolidated at group level.
The key drivers for the new structure included better communication with clients and the market, says group CEO Aletha Ling.
"We needed a simpler organisation for clients and investors to understand. Creating the five units also gives more credibility to our claim of being a focused group."
She adds that the restructuring allows for more efficient management of the group, and ensures more logical "clustering" of operations and delivery.
The new structure also ensures maximum leverage within each cluster and the size and potential of each is maximised.
"Each one is a large business in its own right," Ling says.
CCH increased operating profit 211% to R57.1 million (R18.4 million) on a 230% rise in turnover to R341.2 million (R103.5 million), reflecting an operating margin of 17% (18%). Executive chairman Mario Pinheiro says the targeted margin percentage in the lower 20s for the full year is still attainable.
Fully diluted earnings per share rose 66% to 40.2c (24.2c).
"These results represent almost 100% organic growth as only one small acquisition was completed during the period, namely Eikon Software, which we classify as 'tuck-in` acquisition - strategic but earnings enhancing."
He says an effective tax rate of 32% resulted from losses from strategic investments, particularly ORCA, which incurred a development loss of R3 million, for which no tax relief could be provided. "The R4 million loss resulting from the restructuring of the CCH Middle East business was offset by a highly successful software export drive."
Pinheiro says the current ratio of 1.4, compared with a previous 3.1, is distorted by current liabilities inflated by the amounts due to vendors in terms of the acquisition of Infracom. "Approximately R115 million of these were due and settled in January 2000."
This left the group with a zero cash balance in January, but he adds that the cash situation will "normalise in our second six-month period and will reflect a healthy position by year-end".
Account receivable totalled R252.5 million at the end of the six months.
Pinheiro says plans to list ORCA on the stock market before June are on track.
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