South Africa’s integrated information and communications technology (ICT) systems provider, Datacentrix is in a robust position, with an extensive offering, strong execution capabilities and a sound balance sheet.
So says CEO, Ahmed Mahomed, at the announcement of the organisation’s annual financial results for the year ended 28 February 2014.
Group revenue grew by 19% to ZAR2.3 billion for the reporting period, supported by strong growth in the Managed Services and Technology (previously Infrastructure) areas of the business.
Earnings before interest, taxes, depreciation and amortisation (EBITDA) grew by 21% to ZAR152.4 million, with an EBITDA margin of 6.7%. Earnings after tax increased from ZAR77.3 million to ZAR88.9 million and headline earnings per share (HEPS) grew by 15% from 39.6 cents to 45.6 cents. Working capital was effectively utilised through acquisitions and internal investments necessitated by the organisation’s ongoing business model transformation.
The Company maintained sound financial and operational disciplines, with cash generated from operating activities amounting to ZAR142.6 million, reflecting a closing cash balance of ZAR203 million. Cash was utilised in the reporting period for settling the consideration of acquisitions (ZAR57.8 million), returned to shareholders (ZAR47.7 million) and tax obligations (ZAR60.4 million). Capital expenditure has resulted in a 38% higher depreciation and amortisation charge.
With the investment in new capabilities largely completed, the growth of employee-related costs was normalised.
Other operational expenditure was reviewed to drive cost efficiencies, resulting in total costs being well managed.
Mahomed states, “The Group achieved positive bottom line growth, underlining our execution capacity and the fact that the business is competing effectively in its new areas of competence.”
Mahomed affirms that a continued focus on intelligent, higher value solutions is contributing positively to Group performance, with areas such as managed services, security, datacentres and storage solutions in particular gaining momentum in the market. This includes Datacentrix’ recently announced Infrastructure as a Service (IaaS) cloud offering, adding a new dimension to its existing cloud services.
The Managed Services division contributed 49%, Business Solutions 11% and the Technology division 37% of group profit before tax (PBT).
Revenue in the Managed Services division grew by 25%, with positive contributions from the outsourcing, managed print and document solutions businesses, and eNetworks. Aided by the acquisition of eNetworks, EBITDA grew by 46% in the division, with a healthy operating margin of 12.7%.
Renamed to more accurately reflect its transformation to a solutions business, competencies housed within the now Technology division include unified communications, networking, datacentre capabilities, end user computing and security solutions. The Technology division contributed 37% to group PBT. Operating margin increased from 2.8% to 2.9% with year-on-year revenue growth of 16%.
“A significant investment in skills over the last few years and continued focus on a solution offering has resulted in slightly higher operating margins,” Mahomed explains.
“At the same time, working capital requirements are increasing, with the growing uptake of our systems integration offerings, and we have seen a positive contribution from organic growth investment areas such as security, datacentre solutions and networking.”
From the perspective of the Business Solutions division, revenue increased by 27%, while EBITDA decreased by 34% due to the challenges experienced with a specific client, as highlighted in the organisation’s August 2013 interim results announcement.
The issues experienced in the first half of the financial year within the Enterprise Information Management (EIM) Gauteng operations were successfully addressed, resulting in 81% of the division’s ZAR15.3 million annual EBITDA being generated in the second half.
The Business Solutions division enables organisations to take better advantage of the information that is constantly being created and stored in their ICT infrastructures. There are three key solution focus areas, namely: EIM; business intelligence (BI) and analytics; and enterprise resource planning (ERP).
“One of Datacentrix’ key strategic enablers is its solid partnerships with longstanding technology partners. With the aim of achieving top-level vendor accreditations with best of breed vendors, we have managed to develop or bring on board some of the most scarce and capable skills in the market,” he adds.
Testament to these efforts has been the accolades received from partners over the past year. The Datacentrix HP team made history at the end of 2013 by being the first African partner to gain entry into the top 10 HP partner ranking for the EMEA region. The Group garnered no less than 10 of the 12 top awards at the HP partner event held in November 2013.
The organisation was also named Africa’s first ‘Diamond’ level partner by application performance company, Riverbed Technology, in recognition of its outstanding track record of sales success and it’s technical and support capabilities. Furthermore, it is the only Platinum Partner for EIM solution provider, OpenText in South Africa, as well as being an OpenText Global Alliance partner.
Moving forward, says Mahomed, the company is focused on adding tangible value that drives our customers’ business strategy in the most efficient way. This value-driven, customer-centric approach will fortify Datacentrix’s reputation as one of the leading ICT players within the local market. The launch of its cloud services offering, while impacting profitability negatively in the short-term, will serve the Group well in terms of capitalising on future cloud opportunities. In addition, Datacentrix will continue to pursue suitable acquisition opportunities to create critical mass in selected areas and to further expand its portfolio.