South Africa’s Didata Profit Beats Market Estimates

Mergers, Acquisitions and Financial Results

Strategies to survive the continuing economic turmoil have been spelled out by Dimension Data (Didata) as the technology company admits it is bound to suffer as its customers reel from the financial crisis.

Didata has survived tough times of its own creation in the past, when its over-exuberant growth backfired. Now its managers had the experience to cope with the crisis, CEO Brett Dawson said last week:"Our intention is to emerge stronger and more competitive once the world clears this economic downturn," he said.

Dawson presented positive results for the year to September last week, showing revenue up 19.5% from $3,7bn to $4,5bn, and operating profit up 39% from $123m to $182m. The operating margin inched up from 3.5% to 4%, on track for a goal of 5% by 2011. Earnings per share touched $0,077 and it declared a dividend of $0.017.

The figures beat market expectations as analysts had forecast 18% revenue growth to $4,46bn and operating profits of $178m. Didata's results have strengthened steadily every period since a comprehensive turnaround strategy was implemented a few years ago. Dawson said he was "absolutely delighted" with the results, but that there was always room for improvement.

The company operates in a variety of IT areas, and IT services rather than simply selling equipment now accounts for almost 80% of its business. Dawson refused to give any clear guidance for the months ahead, saying he was being deliberately evasive. "We are not immune to the current conditions. Of course we will be affected to some degree," he said. "Our business has become more robust over the last few years. We are stronger and better positioned to fight and to win."

The company was watching its order pipeline and running costs very carefully, but was still investing heavily to grow its services in some very attractive markets such as video conferencing and network security. If a division was not doing well it would adopt more conservative spending, followed by a performance improvement plan to help match the dollars it was generating to the dollars it should be achieving. "We will be adjusting our cost base wherever its required," Dawson said.

Overall, Didata would continue its geographic expansion, improve operating efficiencies, invest in staff to keep attrition rates low, and chase the most appropriate opportunities.

Business Day