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Johannesburg - ICT company Business Connexion [JSE:BCX] has reported a sharp decline in diluted headline earnings per share to 17.2 cents for the year ended August 2011 from 40.3c a year ago, reflecting the challenging local economic environment.
The group's revenue rose to R4.314bn from R4.060bn, mainly as a result of the acquisition of the UCS assets and the Canoa Group which together contributed R458.7m in revenue. However, operating profit was lower at R157.7m from R197.3m.
In the challenging environment, and after including certain once-off costs and unusual items, the group recorded a fall in headline earnings from R124.2m to R57.5m.
A final cash dividend of 14c/share was declared from 23c a year ago, and a special dividend of 40c/share was also declared, returning to shareholders the proceeds of the sale of Destiny Electronic Commerce. This brought the total dividend for the year to 54c
In May the group sold its 70% stake in Destiny Electronic Commerce to Verifone Singapore - a subsidiary of the NYSE-listed Verifone Systems.
The company said the SA economy remained challenging throughout the period and corporates were cautious with limited spend on capital projects, including information technology.
It added that while the results remained below expectations, the underlying businesses remain profitable and cash generative, while annuity revenue from key clients remains stable.
The group invested R873.2m in certain underlying subsidiaries of UCS Group and 50% plus one share in the Canoa Group.
These assets contributed revenues of R322.6m for the four months and R136.1m for the three months respectively, in the current reporting period.
"To date management is pleased with the performance of these assets which contributed R37.8m and R18.0m to operating profit. The integration into the greater group has been seamless and trading synergies are being realised," it said.
With revenue at R1.807bn, the services division remained the largest contributor to group revenue. Annuity revenue increased by 4% to R1.609bn, notwithstanding more clients now opting to move to the cloud environment.
The technology division was hardest hit with clients delaying spend on technology and achieved revenue of R1.231bn. The division has increased its focus to concentrate on leveraging strategic vendor relationships to enhance profits and improve sustainability. The senior management team has also been changed.
The innovation division achieved revenue of R417.1m. Q Data DynamiQue, the payroll and timekeeper business, underperformed and underwent a substantial restructuring to make it more competitive in the market. Nanoteq suffered from delays in several orders from the public sector.
Looking ahead, the group said that in order to address the underperformance in parts of the group and given the significant growth arising from the acquisition of the UCS assets and the investment in the Canoa Group, it has become even more important to ensure that the group optimises its structure to unlock the collective strengths of the new enlarged entity.
Vanessa Olver has assumed the role of deputy CEO with responsibility for the services division, and Lawrence Weitzman replaces Olver as chief financial officer.
"Business Connexion has benefited from new talent as a consequence of its acquisitions. In particular the group has gained new skills which will be put to use to address the issues in the technology division," it said.
The group executive committee has been bolstered to address new business development with specific appointments to focus on both private and public sector opportunities. John Jenkins has been appointed to the group board with ultimate responsibility for business development. Decisive action has been taken in divisions that performed poorly.
Shareholders were reminded that the group continues to trade under cautionary.
The group's revenue rose to R4.314bn from R4.060bn, mainly as a result of the acquisition of the UCS assets and the Canoa Group which together contributed R458.7m in revenue. However, operating profit was lower at R157.7m from R197.3m.
In the challenging environment, and after including certain once-off costs and unusual items, the group recorded a fall in headline earnings from R124.2m to R57.5m.
A final cash dividend of 14c/share was declared from 23c a year ago, and a special dividend of 40c/share was also declared, returning to shareholders the proceeds of the sale of Destiny Electronic Commerce. This brought the total dividend for the year to 54c
In May the group sold its 70% stake in Destiny Electronic Commerce to Verifone Singapore - a subsidiary of the NYSE-listed Verifone Systems.
The company said the SA economy remained challenging throughout the period and corporates were cautious with limited spend on capital projects, including information technology.
It added that while the results remained below expectations, the underlying businesses remain profitable and cash generative, while annuity revenue from key clients remains stable.
The group invested R873.2m in certain underlying subsidiaries of UCS Group and 50% plus one share in the Canoa Group.
These assets contributed revenues of R322.6m for the four months and R136.1m for the three months respectively, in the current reporting period.
"To date management is pleased with the performance of these assets which contributed R37.8m and R18.0m to operating profit. The integration into the greater group has been seamless and trading synergies are being realised," it said.
With revenue at R1.807bn, the services division remained the largest contributor to group revenue. Annuity revenue increased by 4% to R1.609bn, notwithstanding more clients now opting to move to the cloud environment.
The technology division was hardest hit with clients delaying spend on technology and achieved revenue of R1.231bn. The division has increased its focus to concentrate on leveraging strategic vendor relationships to enhance profits and improve sustainability. The senior management team has also been changed.
The innovation division achieved revenue of R417.1m. Q Data DynamiQue, the payroll and timekeeper business, underperformed and underwent a substantial restructuring to make it more competitive in the market. Nanoteq suffered from delays in several orders from the public sector.
Looking ahead, the group said that in order to address the underperformance in parts of the group and given the significant growth arising from the acquisition of the UCS assets and the investment in the Canoa Group, it has become even more important to ensure that the group optimises its structure to unlock the collective strengths of the new enlarged entity.
Vanessa Olver has assumed the role of deputy CEO with responsibility for the services division, and Lawrence Weitzman replaces Olver as chief financial officer.
"Business Connexion has benefited from new talent as a consequence of its acquisitions. In particular the group has gained new skills which will be put to use to address the issues in the technology division," it said.
The group executive committee has been bolstered to address new business development with specific appointments to focus on both private and public sector opportunities. John Jenkins has been appointed to the group board with ultimate responsibility for business development. Decisive action has been taken in divisions that performed poorly.
Shareholders were reminded that the group continues to trade under cautionary.
