Asha Speckman
DATACENTRIX, which has historically focused on growth through increasing output and sales, is changing its strategy to aggressively pursue acquisitions, according to chief executive Ahmed Mahomed.
The information technology (IT) solutions provider, which reported yesterday a 9 percent increase in revenue for the year to February, is reviewing several opportunities to gain capability in systems integration and competency in enterprise resource planning (ERP) solutions offered by vendors such as SAP and Oracle.
Mahomed said Datacentrix, whose corporate clients include mining firm Exxaro, investment group Remgro and petroleum company Engen, was considering takeover targets that had “reasonable critical mass”.
“We don’t want to do 10 small acquisitions and put them together,” he said, but he declined to reveal how many targets were being considered.
Mahomed said there were new business opportunities in providing core ERP systems, which was a highly contested area. The company also intended to look for opportunities in business intelligence and analytics and was considering acquisitions in the business process outsourcing market.
Datacentrix shares jumped 8.06 percent, the most since February 27, to close at R3.35.
Acquisitions would help reposition Datacentrix from the commoditised hardware supplier segment towards being a managed services, systems integrator and business solutions provider.
According to Datacentrix data, five years ago 81 percent of the business was focused on providing infrastructure. Today, infrastructure contributes 37 percent and has been overtaken by managed services, which has grown from 8 percent in 2008 to 40 percent today.
Datacentrix chairman Gary Morolo said the planned further growth would be funded from the balance sheet.
The company dipped its toe in the acquisition market by acquiring Nokusa Engineering Informatics for R45.8 million in December last year to strengthen its position in enterprise information management, which analysts predict will be a high growth area.
Dirk Noeth, an analyst at Avior Research, said: “That is where IT is going to be in the future. Over the next couple of years you will get handsets that provide more data, devices will communicate on the internet. There will be a growth in data.”
In its results for the year to February, Datacentrix, which derives its revenue largely from the private sector, reported a 15 percent drop in headline earnings a share to 39.6c and a 15 percent decline in earnings a share to 39.5c.
The company said it had been necessary to invest in new infrastructure, technical and management resources that were previously not required to drive the firm’s new focus on services and solutions.
Cash generated from operations was R57m compared with R79m a year earlier.
The local IT industry, according to the group, was under pressure from the telecoms sector, which had begun to provide traditional IT services to augment revenues as growth in voice services slowed down.
Cash on hand was R274m by the end of the period with no interest-bearing debt.
The company declared a final dividend of 12.02c a share.