Grow­ing stronger

Doesn’t ex­pect to es­cape cri­sis un­scathed, but so far so good...

Finweek English Edition - - Companies & Markets - BELINDA AN­DER­SON

AL­THOUGH DI­MEN­SION DATA doesn’t ex­pect to es­cape the cur­rent global fi­nan­cial credit cri­sis un­scathed, there’s no ev­i­dence of any im­pact on the group just yet, de­spite a 23% rev­enue ex­po­sure to the fi­nan­cial ser­vices sec­tor. In fact, its lat­est re­sults point to a busi­ness grow­ing in­creas­ingly health­ier.

CEO Brett Daw­son says Di­data aims to emerge even stronger at the end of the cur­rent cri­sis. Key to manag­ing the busi­ness over that pe­riod will be to fo­cus on ar­eas of strength clients are still happy to spend on – such as its net­work in­fra­struc­ture and IP tele­phony – and watch­ing costs like a hawk.

Daw­son says Di­data has no spe­cific plans for gen­eral cost-cut­ting. How­ever, if any re­gion or line of busi­ness in the 47 coun­tries it op­er­ates in shows signs of weak­en­ing or un­der­per­form­ing, it could take spe­cific re­me­dial action.

Man­age­ment’s ap­proach to run­ning the busi­ness has shown in­creas­ing ev­i­dence of ma­tu­rity not vis­i­ble in the heady pre-bub­ble days. It’s such level-head­ed­ness that at­tracted value in­vestor Al­lan Gray to be­come one of its big­gest share­hold­ers on be­half of its clients.

Writ­ing in a re­cent note on Di­data – Fallen Stars – A con­trar­ian’s hunt­ing ground – Al­lan Gray fund man­ager Del­phine Goven­der says while it had held the view back in 2000 that Di­data’s earn­ings were un­sus­tain­ably high it now feels its cur­rent earn­ings are “be­low nor­mal”. Di­data’s cur­rent share price “con­sid­er­ably un­der­val­ues what we be­lieve the busi­ness is worth”.

Goven­der high­lighted a num­ber of rea­sons why Di­data rep­re­sents a mean­ing­ful hold­ing in its clients’ port­fo­lios, among them its sig­nif­i­cant scale, man­age­ment team, pay­ment of div­i­dends since Septem­ber 2006 and the be­hav­iour of users with re­gard to IT. “The IT net­work has be­come deep-rooted in our lives over the past decade, thanks to mo­bile tele­phony and our need to be con­nected con­stantly to the In­ter­net.”

She says those ma­te­rial changes com­bined with other op­er­a­tional and strate­gic re­fine­ments had im­proved the sus­tain­abil­ity of Di­data’s busi­ness model. How­ever, Al­lan Gray doesn’t ex­pect Di­data’s lev­els of prof­itabil­ity to re­turn to pre­vi­ous lev­els. “But in re­la­tion to cur­rent prof­itabil­ity our base case ex­pec­ta­tions are for earn­ings to in­crease.”

Re­port­ing its full-year re­sults to Septem­ber 2008, Di­data says it achieved op­er­at­ing mar­gins of 4% – up from 3,3% in the pre­vi­ous year. And Daw­son says it will main­tain its 5% op­er­at­ing mar­gin tar­get to 2011. It hasn’t made any fore­casts be­yond that.

Di­data grew its rev­enue by 19,5% to US$4,5bn (roughly R46,4bn at US$1/ R10,31) and op­er­at­ing profit by 39,1% to $182,2m (roughly R1,88bn). Earn­ings per share were 7,7c (around 79,4c) to put the share on a his­toric mul­ti­ple of 6,3 times.

Daw­son con­curs with Al­lan Gray’s prog­no­sis for the com­pany. “Our busi­ness has never been stronger,” he says.

Aims to emerge even stronger. Brett Daw­son Rep­re­sents a mean­ing­ful hold­ing. Del­phine Goven­der

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