South African network integrator Dimension Data posted an 82% drop in annual earnings on Thursday as margins were squeezed in what it called an extremely challenging and fiercely competitive market.
”Constrained IT budgets, declining volumes, smaller deal sizes, lengthening lead times and postponement of significant spending decisions were all features,” Didata said of its results for the year to end-September, which were broadly in line with market expectations.
It said the outlook remained cloudy and it would focus on improving its sales mix and profitability in the year ahead, rather than aggressively growing turnover.
”We have seen some stability in the pricing environment and expect gross margins in 2003 to be broadly the same as the second half 2002 levels.”
For the full year, the gross margin was 21,5%, down from 23,4%. And in the second half of the year the margin was 22,6%.
Didata’s volatile share swung widely at the start of trade in Johannesburg, initially losing 6,6% before rebounding to trade up 5,3% at R4.00 at 0754 GMT.
The share, the darling of the bourse two years ago, has lost three-quarters of its value this year, despite having moved off September’s troughs. It has underperformed the computer services sector by around a quarter this year.
Didata is South Africa’s biggest tech stock and is a key reseller of Cisco equipment.
It said basic earnings per share before goodwill amortisation and exceptional items fell to 2,3 US cents a share in the year from 13 cents a year earlier. A Reuters poll of eight analysts had forecast an average 2,42 cents a share.
Didata said cash on hand dropped to $372,6-million from $894-million.
”Following the restructurings we expect operating costs of approximately $410-million in 2003,” Didata said, after reporting fixed overheads of $416-million for the 2002 year, compared to a budgeted $465-million. This was partly thanks to a 19% cut in staff numbers.
In August, Didata forecast a full-year gross margin of around 21%, impacted by lower second-half gross margins at its Datacraft Asia unit, strategic low-margin US technology deals and a higher contribution from a low-margin Australian distribution business. – Reuters