Dimension Data, the information technology high-flyer that moved offshore at the height of the tech bubble in the late 1990s, continues to struggle against what executive Jeremy Ord describes as “very tough market conditions”.
In March DiData was bumped off the JSE Securities Exchange’s top 40 index by newly listed Telkom.
The company’s six-monthly results ending March this year reflected a continuing downward trend in the global technology market.
Dimension Data’s earnings a share dwindled from a profit of US0,5c, to a loss of US0,3c in the second half ended September. The United States, Asian and Australian operations fared poorly. In the US, revenue declined 25% on the back of contractions in both the group’s network integration and its application divisions.
The group says the effects of a shrinking market have been exacerbated by the constrained budgets of its major clients, banks and other financial institutions. Turnover ebbed to $1,012-billion in the first half of the year from $1,085-billion in the previous half.
DiData’s star performer was Africa, which recorded an 8% increase in constant currency revenues for the period. Africa’s turnover came in at $171-million, compared to $137-million in the previous half.
The company’s headline loss before goodwill, amortisation and exceptional items was US0,4c a share.
Last year was the worst in information technology history, with spending — according to the International Data Corporation — contracting by 4%. The year before spending shrank by 0,5%.
Particularly vulnerable in the current climate are information technology companies, like DiData, that mostly provide services rather than products.
A harbinger of its dismal performance was the company’s March trading update. This saw its shares falling to a low of 170c, the lowest since 1995. The share has since inched upwards, closing at 206c on Monday this week.
To effect a turnaround, especially in Asia and the US, DiData says it plans to bolster its relations with clients, extend its global footprint, grow sales and margins “and enhance the value of our proprietary technology and brands”.
Chief financial officer Malcom Rutherford cites the group’s alliance with Cisco, the world’s biggest pro-ducer of high-end networking pro-ducts, such as routers.
“Cisco has realised how important Dimension Data is as a channel and it has reinvested something in us after its gross margins widened recently,” Rutherford said.
DiData said its African performance once more highlighted the group’s position as a leader in the South African information tech- nology services market.
This justified the company’s decision to devote $10-million of its total $20-million capital expenditure for the period to bringing all its operations under one roof in a new complex in Bryanston, Johannesburg.
HSBC telecoms analyst Franca di Silvestro said DiData’s results could be stronger in the next half. However, the group was unlikely to effect a turnaround for the full year.