Datacentrix shares rise 8% as it declares dividend

SHARES in Datacentrix rose more than 8% to close at R3.35 yesterday as the company declared a 12c dividend for the year to February, down from 16.6c last year.

The company reported a 16% drop in headline earnings per share for the year to February, to 39.6c. Revenue grew 9% to R1.9bn.

CEO Ahmed Mahomed said the company was “quite comfortable” with the revenue growth but margin declines were disappointing due to competitive market pressure.

“From a strategic point of view, we have achieved our objectives. We were a purely hardware vendor, but have moved to a fully fledged systems integrator and solutions provider,” Mr Mahomed said.

While group revenue remained resilient, investments in both resources and capital projects and sustained gross margin pressures had weakened operating margins from 8% to 6%, he said.

Conditions in the local market continued to be constrained, with industry growth estimated to be in the single-digit range, he said.

“The business is yet to reach optimal functionality in some areas, as certain of these investments have not yielded returns at this stage and, in some cases, have negatively

From a strategic point of view, we achieved our objectives

impacted profitability,” he said.

Mr Mahomed said that, “as is the case with business, sales will initially lag investment cycles”.

The group’s traditional revenue streams, such as the public sector, had “dwindled significantly”.

Revenue from the government was 40% to 45% of group revenue at its peak, but now accounted for less than 10% of total revenue.

Kaplan Equity Analysts MD Irnest Kaplan said the company’s financial results were down, as was expected. However, he said: “The question is, can they turn it around? The company is not making a loss but they need to reverse the declines into gains.”

Mr Kaplan said that while the company was “trying” to grow, it was not clear what the plans were. “They are not giving us enough (information) … on their turnaround plans.”

Basic earnings per share declined 15% to 39.5c.

Revenue from the infrastructure business rose marginally to R1.3bn.

Managed solutions business, which includes cloud computing services, made R414.6m in revenue, up from R329.9m.

Mr Mahomed said that the

The market can expect a number of … developments

investment phase associated with turning the company into a fully fledged information and communications technologies provider “is by and large drawing to an end, with our capability significantly boosted, placing us in an enviable position as an end-to-end, integrated infrastructure IT (information technology) partner”.

“The market can expect a number of noteworthy developments from the group over 2013 and beyond,” he said.

Datacentrix was pursuing acquisitions to strength its business, especially in the SAP software application space.

“We maintain our view that benefits could be derived from targeted acquisitions and will continue exploring suitable opportunities,” said Mr Mahomed.