Public sector IT projects drying up: Datatcentrix

Datacentrix, the listed IT solutions provider has on Tuesday (16 April) reported a decline in operating profit for the year ended February 2013, to R106.16 million, from R123.44 million before.

The group cited a decline in public sector projects and increasing pressure from the telecommunications industry for its profit fall.

Revenue increased by 9% to R1.919 billion, while the group’s net asset value per share increased by 4% to 251.1 cents.

Headline earnings per share, however, decreased by 16% to 39.6 cents.

Datacentrix declared a gross final dividend of 12.02 cents for the financial year ended February 2013.

Global IT landscape

The group said that the worldwide IT industry has been impacted by a combination of factors, ranging from macro-economic conditions through to industry volatility.

As a result of the global economic crisis, development of disruptive technologies and the continued commoditisation of infrastructure hardware, the industry is in a state of flux.

SA IT landscape

Datacentrix said that the South African IT industry is experiencing pressure from the telecommunications industry.

“Telecommunication companies are facing their own challenges in the form of slowing revenues in their traditional voice business and are attempting to supplement this by extending offerings in the traditional IT sector, such as cloud computing, a strategy that they hope will diversify their income base and, in the process, drive data revenues,” it said.

With regards to the local environment, market conditions continue to be constrained, with industry growth estimated to be in the single digit range.

Some competitors continue to seek growth through aggressive acquisition strategies, while others are facing sustainability challenges, Datacentrix said.

The group opined that further consolidation of the industry is inevitable, and where appropriate, Datacentrix will play a proactive role in these market changes.

It said that the past few years, though profitable, have been challenging.

“As a consequence of both market dynamics and the change in the technology landscape, Datacentrix has strategically repositioned itself in the market, moving from being a pure hardware supplier to a fully-fledged systems integrator and solutions provider.”

“This strategy has necessitated investment in infrastructure, as well as technical and managerial resources that were previously not required,” it said.

Moreover, it noted that traditional revenue streams, such as the public sector, have dwindled significantly.

“Government revenue contributed 40% to 45% to group revenue at its peak, and now accounts for less than 10% of total revenue,” Datacentrix said.

Prospects

For the year ahead, Datacentrix said it plans to continue the consolidation of its transition into an integrated solutions and services-based business, backed by top-level vendor accreditations and technical capability.

“Datacentrix will continue reinforcing its skills base, extend the cloud solution and has already created greater focus in the technology and outsourcing business units with the new senior management appointments.”

“Datacentrix maintains its view that benefits could be derived from targeted acquisitions and will continue exploring suitable opportunities,” it said.

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Public sector IT projects drying up: Datatcentrix