SA’s largest IT group, Dimension Data, has continued to show an improvement in its financial performance in the six months to 31 March 2010, with profit margins reaching their highest levels in almost a decade.
Investors have reacted well to the news, sending the group’s share price leaping higher on Wednesday morning.
The group, which is listed in London and Johannesburg, increased its operating profit by 21%, to $107,5m, on revenues that climbed 11,1% to $2,2bn, aided significantly by currency fluctuations. Operating margin expanded to 5%, from 4,6% in the first half of 2009.
The improvement in margins was due to a higher contribution from more profitable services sales and containment of overheads.
The group ended the period with $493m in cash.
All regions, including the US, showed “satisfactory” growth, the group says. However, a poor performance at Plessey, due to a sharp slowdown in business from African mobile operators, dragged on the group’s results. Plessey’s revenues, in constant currency terms, fell 51,4% year-on-year and it reported a “small operating loss”.
The group’s key Internet Solutions business grew revenue by 10% in constant currency and improved profits by 11,7%.
Didata CEO Brett Dawson, pictured above, says market conditions are continuing to improve. “The market has turned in terms of clients’ willingness to spend on IT and IT services,” he says.
Analyst firm Frost & Sullivan says services were the “saving grace” for Didata during the economic downturn.
“However, we expect the infrastructure spending cycle to start again in the middle of 2010 and product sales for Didata should do much better in the second half of the year,” says Frost & Sullivan ICT analyst Spiwe Chireka.
In the six-month period, the group saw continued growth in its managed services division. Services revenue now accounts for 44% of group revenues, up from 42% in the corresponding period in 2009.
Didata’s share price was trading up more than 5% on the JSE on Wednesday morning. — Duncan McLeod, TechCentral