Cost Cutting Pays Off for Business Connexion in South Africa

Mergers, Acquisitions and Financial Results

Technology group Business Connexion (BCX) is on track to reach its operating margin target of 8% as its restructuring programme is starting to bear fruit. The company's operating margin for the six months to February doubled to 6.1%. In 2008, BCX implemented a wide range of projects and cost-cutting measures to restore its fortunes. CEO Benjamin Mophatlane is positive the target will be met, saying: "We are committed and are aware that it's not going to be easy. But we have to work hard." Operating profit jumped 74.5% to R122m from R69.9m in the six months to November 2008. BCX changed its financial year- end from May to end-August, hence the most comparable half-year period is November 2008. Headline earnings per share rose from 9.6c to 28.1c for the half-year to February. Mophatlane attributed the growth to the restructuring programme and the four outsourcing deals that the company won in the past six months. The company expects to save about R100m a year as a result of the restructuring programme. The benefits of the restructuring are already evident, with operating expenses falling from R499.3m in the six months to November 2008 to R469.3m for the six months to February. Revenue for the six months to February fell 9% to R2.01bn because of a delay in public sector spending and reduced private sector budgets as clients set new priorities for their IT projects. The technology division, which contributed 35.9% to group revenue, was the main victim. The services division performed well as it focused on more profitable businesses. The division's contribution to group revenue is 47.2% and it recorded a 154.9% jump in operating profit to R107.8m. Mophatlane said BCX would continue to develop its intellectual property products with the intention of selling them in more countries outside SA.