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Friendlier markets lift Didata

May 12 2010 10:17 Simon Dingle

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Johannesburg - Technology group Dimension Data [JSE:DDT] said on Wednesday the economic recovery in global markets has enabled it to deliver strong interim earnings growth.

Dimension Data, which is listed in London and Johannesburg, reported sales of $2.2bn for the period to end-March - up 11.1% in reported currency over the previous reporting period. Operating profit increased by 21% to $107.5m, and the group's operating margin expanded to 5%, compared to 4.6% before.

Earnings per share grew 20% to 4.2c and the group ended the period with cash reserves of $493m.

Said CEO Brett Dawson: "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.

"We anticipate that the second half of 2010 will see further recovery in client spend, and are confident that our targets of single-digit constant currency growth in revenue for the full year are achievable."

Didata attributed its better operating margins to an increased contribution of services rendered and "good containment of overheads".

However, Dawson said the results would have to be analysed against the backdrop of major currency fluctuations across the regions where the group trades.

Revenues in constant currency declined by 3.7%, with first-quarter 2010 revenues down, while second-quarter 2010 revenues showed a return to growth. The decline was primarily driven by a sharp deterioration in revenues at subsidiaries Plessey and Express Data.

Plessey reported a 51.4% constant currency revenue decline, while Express Data's revenue fell by 13.8%.

Dawson said the highlight of the period was the performance of Didata's Systems Integration (SI) business, which grew operating profit by 15.8% in constant currency to $80.6m and reported an improved operating margin of 4.5%, up 3.8% on the comparative period.

Subsidiary Internet Solutions delivered constant currency revenue growth of 10%. The performance was driven by an improved operating margin and an 11.7% increase in profitability on the back of new contracts in the public sector and a strong uptake in its other offerings, including cloud computing.

"Growth and operating leverage remain key objectives. Looking towards the next three to five 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," said Dawson.

"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," he said.

 - Fin24.com 

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