Benjamin-Mophatlane — Benjamin Mophatlane

JSE-listed IT services company Business Connexion (BCX) has turned in a poor set of financial results in its 2011 financial year to end-August. CEO Benjamin Mophatlane says the company has had a “tough year” and the results “haven’t met expectations”.

Its technology and innovation divisions posted the most disappointing results.

Mophatlane says the company’s recent acquisitions — of selected assets from IT company UCS and of the Canoa Group — have turned in “pleasing results”. UCS and Canoa Group contributed 11,4% of BCX’s revenue in the financial year.

BCX’s “problem child”, according to Mophatlane, is its technology division. He says the main reason for the disappointing results are the global economic downturn and the fact that some vendors have begun “going straight to clients, particularly because of belt tightening” rather than through partners like BCX.

He promises the company is taking “aggressive and corrective action to turn the [technology] division around”. BCX has replaced the division’s management and reassessed its business model. It is also exploring the option of reducing product brands to avoid “unnecessary and conflicting technologies”.

For the year, BCX’s headline earnings per share collapsed from 47,6c in 2010 to 17,3c. The dividend also fell, from 23c/share to 14c, though the company did pay a special dividend of 40c during the period.

Group revenue grew by 6,3% during the period. Normalised margins were up to 6,1% from 5,7%.

Mophatlane says the group is prone to economic cycles and in the current economic environment both public and private sector clients are “holding back”. He says this also goes some way to explaining the margin decline in BCX’s services division as a result of a smaller number of projects.

Nevertheless, annuity revenue in the services division increased.

Meanwhile, Mophatlane declines to comment on speculation that BCX is in talks about a deal with Orange that could result in the French telecommunications operator buying a stake. However, he says he expects an announcement about the talks it is involved in before the end of the calendar year. — Craig Wilson, TechCentral