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May 18, 2012

IT group focusing on managed services growth

Datacentrix|Training|Information Technology|Services|Solutions|Ahmed Mahomed|Gary Morolo|Infrastructure|Bearing|Information Technology
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JSE-listed information technology company Datacentrix is seeking to grow annuity revenue by investing in skills to support its services and business solutions development, while reducing its dependence on government-related business, chairperson Gary Morolo reports.

In the past, more than 50% of the group’s revenue was derived from the public sector.

“Managed services and business solutions now account for more than half of the group’s earnings,” said Datacentrix CEO Ahmed Mahomed at the company’s financial results presentation, held at the Inanda Club, in Sandton, in April.

The company grew its revenue by 11.6% to R1.76-billion, but experienced sustained margin squeeze, with operating profit falling to R123-million from R124-million during its financial year ended February 29, 2012.

Its earnings before interest, taxes, deprecia- tion and amortisation (Ebitda) dropped to R145-million from R150-million, which means its Ebitda margin decreased to 8.3% from 9.5%.

The decreasing margins have prompted the company to increase investment in its skills base, which is aimed at future growth. The company will also continue to focus on its organic growth and is not actively seeking acquisitions except to jump-start targeted new growth areas, says Mahomed.

“The three- to five-year strategic thrust (towards a services-based revenue model) remains unchanged and implementation has progressed satisfactorily,” says Morolo.

The scarcity of skills in the information and communication technology sector led to Datacentrix focusing on skills development, learnerships and vocational training programmes, which have been successful, he adds.

“We also deploy graduate-level skills in specific areas, which will be a long-term boon, and we focus strongly on internal skills devel- opment, opting to develop managers from internal staff.

Datacentrix increased its headline earnings per share by 1.2% to 46.9c a share and has R313-million cash on hand with no interest-bearing debt, which is partly a requirement as a vendor for blue-chip companies, and is disbursed and recharged during the course of a financial year, explains Morolo.

Datacentrix’ improved mixture of business reduces its reliance on depressed commodity infrastructure spending in the private and public sectors, while the managed services and business solutions units in the company are showing good margins. Coupled with its strong market position and strong vendor exposure, the company is placed in a favour- able position, concludes Mahomed.

Edited by: Martin Zhuwakinyu
Creamer Media Senior Deputy Editor
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