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South Africa: Strong Showing By Didata Gives Share 3,6 Percent Lift
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Business Day (Johannesburg)
15 May 2008
Posted to the web 15 May 2008
Lesley Stones
Johannesburg
A STRONG half-year performance by Dimension Data has beaten the expectations of market analysts, triggering a 5,4% rise in its share price to 795c as buyers reacted with enthusiasm.
The technology group clocked up a 23% rise in revenue from $1,7bn to $2,1bn for the six months to March and its profit of $66,9m was up from $42,3m. Efforts to cut overheads and improve efficiencies nudged its operating margin up from 3,1% to 3,9%, boosting basic earnings per share from $0,021 to $0,037.
Investec analysts had already upgraded its shares from hold to buy, despite predicting smaller revenue of $1,96bn and lower earnings per share of $0,027. Cazenove analysts were also pleasantly surprised after expecting revenue of $1,9bn and operating profit of $72,3m, compared with the $85m achieved.
"We are very proud of the results, which demonstrate the superb position of Dimension Data today," said chairman Jeremy Ord yesterday.
The figures were achieved by focusing on its core capabilities, the dedication of its 10500 staff, a clear understanding of market trends and deregulation of the telecommunications sector in emerging markets.
Tough economic conditions were causing some customers to tighten their budgets or delay their spending, but Didata's (DDT) order books looked good and the goal of a 5% operating margin was well within sight, Ord said.
Didata was continuing to invest in its future and had spent $40m on projects to upgrade its internal networks, boost the networks of its Internet Solutions subsidiary in SA and to buy more land in Johannesburg to expand its premises.
CEO Brett Dawson said all regions had performed well and double-digit growth was achieved by all its operations, with substantial gains in market share for its network integration and security services.
A key focus was to grow its service offerings, which include installing and managing technology infrastructure for clients. Its professional services had seen "terrific" growth, Dawson said, as clients embraced the idea of appointing a systems integrator such as Didata to run part of their businesses for them.
One new service was to help companies assess and reduce their carbon footprint by using more efficient technologies. A second growing niche was assessing the performance and security of corporate networks so data flowed more efficiently. Supplying data security products was another lucrative area, as companies had to protect their information no matter how tough the economy became.
One area highlighted as disappointing was the slow pace of deregulation in SA's telecoms sector, curbing growth that divisions such as Internet Solutions and Plessey could otherwise enjoy.
Dawson expected second-half performance to be equally strong, despite turmoil in the financial markets and the economy in general.
"We think the services we are taking to market are relevant to clients, the footprint we have across geographies is strong and our balance sheet provides additional strengths," he said.
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The group also sought more ways to improve supply chains to become more efficient and build up profit margins.
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