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Dimension Data Reports Strong Performance, Strong Execution
Published May 16, 2010
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IT solutions and services company, Dimension Data, announced its results for the six months ended 31 March 2010.
The Group, which is listed in London and Johannesburg, reported sales of $2.2 billion - up 11.1% in reported currency over the prior period. Operating profit increased by 21.0% to $107.5 million, and the operating margin expanded to 5.0% (H1 2009: 4.6%, before exceptional items), in reported currency. The widening in the operating margin was driven by an improved gross margin following a higher contribution from Services and good containment of overheads. Earnings per share grew 20.0% to 4.2 cents and the Group ended the period with cash of $493 million.
The H1 2010 results need to be analysed in light of major fluctuations across many of the Group’s trading currencies, as well as the very strong comparative H1 2009 performance. Revenues in constant currency declined by 3.7% with Q1 2010 revenues down, while Q2 2010 revenues showed a return to growth. The decline was primarily driven by a sharp deterioration in Plessey revenues as well as by lower revenues in Express Data off a high comparative. Excluding Plessey and Express Data, a 0.4% increase in constant currency revenues was achieved.
Services growth of 7.4%, and specifically strong growth in Managed Services, was the big driver of growth and improved profitability in the SI business. We continued to see solid demand for our industry leading maintenance service Uptime, as well as for our IT Outsourcing offerings. Professional Services revenues increased by 3.1%, with growth achieved in most regions. The proportion of Services in the SI business increased to 42.1% from 38.6% in the prior period.
The highlight of the period was the performance of our Systems Integration (SI) business, which grew operating profit by 15.8% in constant currency to $80.6 million and reported an improved operating margin of 4.5% (H1 FY2009: 3.8%). The SI performance was underpinned by continued strong growth in Managed Services, which increased by 10.1% in constant currency.
By geography, SI operating margins showed a very pleasing improvement in four of the five regions. The Americas performed extremely well with increased revenues and a strong improvement in profitability. We saw a recovery in product spend and a continued improvement in revenue mix in favour of Services. In Europe, increased margins and efficiency improvements drove a significant increase in profitability. Both the Americas and Europe reported operating margins in excess of a 3.0%, a significant milestone. Trading in Asia improved throughout the period, as the region continued to invest in a strategic growth program. In Australia and in Middle East and Africa, our robust expansion in profitability and in operating margins was driven by Services revenue growth and cost control.
Internet Solutions performed well, with growth driven by the Communications, Data Centre and Carrier business units. Wins in the public sector, in cloud solutions and voice services were a feature of the period. IS delivered good constant currency revenue growth of 10.0%, an improved operating margin and a 11.7% increase in profitability. IS continues to see solid demand for its solutions, particularly its data centre and hosting offerings.
The robust performances from IS and the SI business were offset by the weak trading conditions in Plessey, which reported a 51.4% constant currency revenue decline and a small operating loss. Express Data's revenue declined by 13.8% due to price reductions of approximately 20% across most product lines associated with strong currency appreciation of the Australian and New Zealand currencies. In addition, volumes were impacted by some supply constraints experienced by some of our key vendors.
Dimension Data CEO, Brett Dawson says, “We are optimistic about our market positioning and relevance and believe that the market has turned in terms of clients’ willingness to spend on IT and IT Services.
In response, we continue to invest in resources to meet market demand and accelerate our Services strategy. We anticipate that the second half of 2010 will see further recovery in client spend and are confident that our revenue targets of single digit constant currency growth in revenue for the full year are achievable.”
“Growth and operating leverage remain key objectives. Looking towards the next 3-5 years, we have set an objective of growing constant currency revenues by at least 10% on a compound basis, with Services growing ahead of Product revenues, and are targeting a 7% operating margin by 2015. This margin improvement will be driven by a greater contribution from Services and a focus on efficiencies of scale. We are investing to reach these growth targets and to ensure our transition to a ‘services-led’ company continues to track to plan.”
“We are optimistic about the Group’s short and medium term prospects and continue to see evidence that our value proposition provides competitive differentiation in the marketplace. Successful progression of our services strategy will only serve to differentiate us further”, Dawson concludes.
For more information:
Mechelle Buys du Plessis
Dimension Data, UAE
T: +971 44 33 1749
F: +971 44 35 5612
M: +971 50 881 4832
E: mechelle.duplessis@mea.dimensiondata.com
Posted by
VMD - [Virtual Marketing Department]
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