Pleasing results from Datacentrix

By Nicola Mawson, Contributing journalist

Johannesburg, 04 Oct 2006

IT infrastructure, services and solutions provider Datacentrix beat expectations in its six-month results to end-August.

The company yesterday reported an increase of 47% in revenue in the half-year to R604 million. Earnings before interest, taxation, depreciation and amortisation increased 98% to R50 million and headline earnings per share went up 91% to 14.5c. Earnings per share also increased, going up 166% to 14.1c.

Both headline earnings and earnings per share increased above the company`s anticipated increase, as stated in its trading update. On 22 September, it said headline earnings per share should be between 50% and 70% higher than the previous interim results. Earnings per share were expected to be between 110% and 130% higher.

Profit for the first half was R27.7 million (after accounting for an additional secondary company tax charge of R7.7 million) compared to R49.9 million in profit for the full financial year. Datacentrix also declared its first interim dividend, of 7c.

Cash generated from operations was R56 million, leaving it with R145 million in hand at the end of the period.

Investec analyst Sibusiso Zitha is pleased with the results, saying the company has a healthy balance sheet and its free cash flow - cash generated from operations - has seen a good increase.

He adds the company is well geared and could handle an additional R100 million in debt.

Chairman Gary Morolo says the company is "set on a good course".

Upbeat second half

Another analyst - who asked not to be named - says the results are "not bad", but could not be compared to the first half of last year as that was an especially tough period.

He adds Datacentrix would "do well to beat the second half of last year, but it looks upbeat".

CEO Gerhard Uys notes the company is now positioned to take "advantage of opportunities going forward".

The company has retained its focus on providing solutions, services and infrastructure - its biggest earner - in the local market and has no immediate plans to step outside of SA.

Executive director Klaas Lammers adds the local environment had a multitude of opportunities for growth and would see further IT spend in the near-term.

He says that as Microsoft launches new offerings, infrastructure upgrades would be seen as faster computing power became essential. In addition, government`s planned spend of R370 billion over the next few years would open a wealth of spend.

Government is expected to spend between R20 billion and R30 billion on IT while it rolls out massive infrastructure projects up to 2010, and Datacentrix aims to garner a larger percentage of this spend. In addition, says Lammers, the company seeks to benefit from expected IT spend by companies that are awarded these tenders.

Government is a key focus area for the company, and it is expending resources on trying to understand the state`s IT needs.

A move to more automation - especially in document handling - has resulted in security concerns and Lammers says the company hopes to benefit from this. In addition, as people become more mobile, more security concerns will arise.

He adds that - because of the company`s focus on infrastructure - any IT trends would benefit it. "Whatever the trend, it will have a positive effect on our company."

The company`s shares were unchanged at R3.40 yesterday. Its 12-month high is R3.65, while its 12-month low is R2.18.