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Fundamental shifts in technology in 2009 sifted the industry to reveal companies best geared for the new realities of providing IT solutions.
In South Africa, Dimension Data, Datatec and others showed their resilience in the down market and a return to growth during the year, while others – such as Faritec and Mustek – continued to experience declines and were forced to focus on restructuring.
A move to services underpinned the year and defined the market leaders.
IT customers are increasingly turning away from owned infrastructure and focusing on solutions offered as a service that allows them to unlock operating efficiencies and deal with technology as an operational rather than capital expense.
Flavour of the year
The cut back in spending that resulted from the downturn continued last year and limited the prospects of companies focused on the likes of computer hardware for network infrastructure while favouring those with technology solutions that reduced costs.
Dimension Data ended off the year on a high, reporting a 6% increase in turnover for the last three months of 2009, compared with the same period in 2008.
While it did report less than stellar results for its Plessey subsidiary (which provides telecommunications infrastructure in Africa) that was offset by a strong performance by its Systems Integration unit in the United States.
Last year Dimension Data again showed it has solid inherent defensiveness gained from its international operations.
When the financial sector downturn dragged down business in the US, DiData was propped up by South America, Africa and Asia.
And current improvements in the US are making up for poorer conditions in Africa.
DiData company Internet Solutions also continued to show strong growth and is an example of units within the group that are geared well for the future.
Datatec is another player that’s featured internationally, not only reporting solid results in 2009 but also taking advantage of the down market to make new acquisitions in Asia, where it’s bought the NetStar Group.
It funded the acquisition by issuing additional shares and also announced the group had returned to growth in 2009.
Datatec promised strong cash generation and said its margins were staying consistent.
It made no changes to its guidance for the year and predicted revenue of between $3.7bn to $4bn, with headline earnings per share of 23c.
Recovery was also reported by the Business Connexion group, which continued to restructure itself and focus on efficiency.
BCX revealed diluted headline EPS of 36.9c for the 15 months to end-August 2009, prompting it to declare a cash dividend of 18c/share.
It also reported healthy operating profits but incurred “revitalisation” costs of R98m during the period.
BCX said it would be shifting its attention to optimising its capital structure and looking at new areas of business that could be used to boost revenue and operating profits.
At the time of writing it was expected to release its results for the rest of 2009 within weeks, which will quantify the success of its revitalisation plan and other efforts to promote growth.
Faritec wasn’t so lucky, as its bad times intensified in 2009.
FariFail
It posted its results for first half 2009 very late and was warned by the JSE it could have its listing suspended if it didn’t meet its end-January deadline.
When Faritec did finally announce its results further losses were reported, with revenues diluted and profits in the toilet.
Its results – reported almost seven months after the period under review – revealed revenues had declined by 30% to R731m from just more than R1bn in 2008.
Faritec said the losses were due to trading difficulties exacerbated by the initiation of its turnaround programme and customers cutting back on capital expenditure.
However, it maintains it has a turnaround plan that will make all well in the future and is seeking funding to that end.
It claims to be in negotiations to raise that additional funding and attributed its late results announcements to those ongoing negotiations.
Another company that had a rough ride last year is computer manufacturer Mustek, which was ambushed by volatile currencies that led to losses in 2008.
Greeting 2009 on a low, it predicted the year would be flat and began restructuring.
Looking good
Towards year-end 2009 there were signs of improvement and in early this year Mustek announced it expected HEPS for the six months to end-December 2009 to be between 40% and 50% higher than the corresponding period in 2008.
With exchange rates now stable, Mustek knows what to expect and can focus on getting things back on track, benefiting from the changes it’s made to its operations.
Things are also looking up for Mustek’s chief competitor – Pinnacle Technology Holdings.
It’s seen a spike in its share price early this year, thanks to its forecast of a 1.8% rise in first-half fully diluted HEPS, beating expectations.
With the bad times behind it, the technology sector has turned its attention to new opportunities and lines of business.
The downturn separated the men from the boys and revealed those companies with sound gearings for efficiency that not only helped them to weather the storm in 2009 but also to rapidly return to growth once the bad times had passed.
This year analysts’ predict services will continue to be a key driver for the industry and that technology must have clear value in order to be successful, as the market for the most part isn’t willing to bet on new toys with questionable returns anymore.
It remains questionable as to whether Faritec will manage to turn itself around, while for companies such as Dimension Data and Datatec it’s business as usual, with good prospects for growth.
- Finweek
In South Africa, Dimension Data, Datatec and others showed their resilience in the down market and a return to growth during the year, while others – such as Faritec and Mustek – continued to experience declines and were forced to focus on restructuring.
A move to services underpinned the year and defined the market leaders.
IT customers are increasingly turning away from owned infrastructure and focusing on solutions offered as a service that allows them to unlock operating efficiencies and deal with technology as an operational rather than capital expense.
Flavour of the year
The cut back in spending that resulted from the downturn continued last year and limited the prospects of companies focused on the likes of computer hardware for network infrastructure while favouring those with technology solutions that reduced costs.
Dimension Data ended off the year on a high, reporting a 6% increase in turnover for the last three months of 2009, compared with the same period in 2008.
While it did report less than stellar results for its Plessey subsidiary (which provides telecommunications infrastructure in Africa) that was offset by a strong performance by its Systems Integration unit in the United States.
Last year Dimension Data again showed it has solid inherent defensiveness gained from its international operations.
When the financial sector downturn dragged down business in the US, DiData was propped up by South America, Africa and Asia.
And current improvements in the US are making up for poorer conditions in Africa.
DiData company Internet Solutions also continued to show strong growth and is an example of units within the group that are geared well for the future.
Datatec is another player that’s featured internationally, not only reporting solid results in 2009 but also taking advantage of the down market to make new acquisitions in Asia, where it’s bought the NetStar Group.
It funded the acquisition by issuing additional shares and also announced the group had returned to growth in 2009.
Datatec promised strong cash generation and said its margins were staying consistent.
It made no changes to its guidance for the year and predicted revenue of between $3.7bn to $4bn, with headline earnings per share of 23c.
Recovery was also reported by the Business Connexion group, which continued to restructure itself and focus on efficiency.
BCX revealed diluted headline EPS of 36.9c for the 15 months to end-August 2009, prompting it to declare a cash dividend of 18c/share.
It also reported healthy operating profits but incurred “revitalisation” costs of R98m during the period.
BCX said it would be shifting its attention to optimising its capital structure and looking at new areas of business that could be used to boost revenue and operating profits.
At the time of writing it was expected to release its results for the rest of 2009 within weeks, which will quantify the success of its revitalisation plan and other efforts to promote growth.
Faritec wasn’t so lucky, as its bad times intensified in 2009.
FariFail
It posted its results for first half 2009 very late and was warned by the JSE it could have its listing suspended if it didn’t meet its end-January deadline.
When Faritec did finally announce its results further losses were reported, with revenues diluted and profits in the toilet.
Its results – reported almost seven months after the period under review – revealed revenues had declined by 30% to R731m from just more than R1bn in 2008.
Faritec said the losses were due to trading difficulties exacerbated by the initiation of its turnaround programme and customers cutting back on capital expenditure.
However, it maintains it has a turnaround plan that will make all well in the future and is seeking funding to that end.
It claims to be in negotiations to raise that additional funding and attributed its late results announcements to those ongoing negotiations.
Another company that had a rough ride last year is computer manufacturer Mustek, which was ambushed by volatile currencies that led to losses in 2008.
Greeting 2009 on a low, it predicted the year would be flat and began restructuring.
Looking good
Towards year-end 2009 there were signs of improvement and in early this year Mustek announced it expected HEPS for the six months to end-December 2009 to be between 40% and 50% higher than the corresponding period in 2008.
With exchange rates now stable, Mustek knows what to expect and can focus on getting things back on track, benefiting from the changes it’s made to its operations.
Things are also looking up for Mustek’s chief competitor – Pinnacle Technology Holdings.
It’s seen a spike in its share price early this year, thanks to its forecast of a 1.8% rise in first-half fully diluted HEPS, beating expectations.
With the bad times behind it, the technology sector has turned its attention to new opportunities and lines of business.
The downturn separated the men from the boys and revealed those companies with sound gearings for efficiency that not only helped them to weather the storm in 2009 but also to rapidly return to growth once the bad times had passed.
This year analysts’ predict services will continue to be a key driver for the industry and that technology must have clear value in order to be successful, as the market for the most part isn’t willing to bet on new toys with questionable returns anymore.
It remains questionable as to whether Faritec will manage to turn itself around, while for companies such as Dimension Data and Datatec it’s business as usual, with good prospects for growth.
- Finweek
