Datacentrix profit down for half-year
CEO says group has seen improvement in trading in second quarter
TECHNOLOGY Group Datacentrix’s headline earnings per share took a hit in the six months to August, falling 28%, from 26.8c to 19.2c, because of difficult trading conditions and deflated margins.
Its share fell 4% to R4.51 after it announced it was cutting its interim dividend to 11.25c from 13.4c last year.
But trading conditions had improved since August, Datacentrix said in its interim results, released yesterday. “Our margins are still at about 6%. Our competitors’ margins are between 2% and 3%,” CEO Ahmed Mahomed said.
The group managed to grow its revenue from R912.7m to R976.7m during the reporting period. Mr Mahomed said the company had maintained sound financial and operational disciplines, with cash generated from operating activities amounting to R52.7m. The closing cash balance was R288m. At the end of the reporting period, the company had no interest-bearing debt.
“The group has seen a significant improvement in trading conditions during the second quarter of the fiscal year after a particularly constrained first quarter.
“Revenue was stronger in the commercial sector, whilst performance in the public sector deteriorated further.
“Furthermore, Datacentrix has made considerable investments in growing competencies and capabilities organically, bearing a significant portion of the investment costs during the reporting period,” Mr Mahomed said.
Some of the improvements were due to a stronger product mix. “The group’s business mix has changed over this reporting period with managed services now contributing 44% to the group’s earnings. The infrastructure division contributed 40%, while the business solutions division contributed 16%,” he said.
The managed services and business solutions divisions gen- erated margins of 11.1% and 12.3% respectively. The business solutions division, which comprised the enterprise resource planning, business intelligence and enterprise content management business units, achieved revenue growth of 40%.
Earnings in the enterprise content management segment were under margin pressure as new entrants joined this market.
The enterprise content management business was making inroads in providing specialised solutions to the government healthcare industry, Mr Mahomed said. However, he noted that the public sector was spending a large amount of money on maintenance and not necessarily new technology, which suggested it would not contribute to Datacentrix strongly in the near future.
The group believes its organic growth strategy and consequent investments have positioned it well to compete effectively in its selected areas of development.