Dimension Data has posted strong first half results to the end of March 2009 with revenue in constant currency up 8,1% to $1,95-billion and operating profit up 0,7% to $88,8-million compared to $85-million for the comparative period.
The company says the year on year appreciation in the US dollar against most of its trading currencies has impacted statutory reported results in US dollars with revenues falling by 10.2%. Encouragingly, it adds, operating profit increased by 4,4%.
It says that excellent execution in the Group’s Services business drove overall revenue and profitability growth in the period.
Total Services revenues increased 21,1% and were driven by strong growth of 25,2% in Managed Services. Product revenue growth was muted reflecting economic realities and decreased client capital expenditure. In addition to period on period growth, the Group achieved sequential growth in operating profit on the second half of FY2008, demonstrating an encouraging level of robustness in its business model.
The progress that the Group has made over the last five reporting periods in widening its operating margin continued in this reporting period. Operating margin improvements came as a result of an increase in the gross profit margin from 21% to 21,8% which reflected excellent growth and execution in its Services business and good cost containment. Gross profit increased 11,4% while the Group contained growth in its overhead base to 6,1%.
The Group’s effective tax rate on profit before tax, excluding exceptional items, increased to 28,9% (H1 2008: 26,6%) as a result of the change in mix in profits across the Group.
Earnings per share before exceptional items was 3,5 cents – up marginally from H1 2008, and the Group closed the period with a strong balance sheet and $345-million in cash.
“The Group’s first half performance has been particularly pleasing in light of the challenging trading conditions we’re experiencing in some of our key markets," says Dimension Data CEO Brett Dawson. "Excellent execution in our Services business led our overall revenue and profitability growth in the period. Total Services revenues increased 21,1% and were driven by strong growth of 25,2% in Managed Services.
“The market opportunity for IT services within our Systems Integration (SI) business has remained healthy," Dawson says. "The Group has taken advantage of the current economic environment to drive market share gains in maintenance, support and multisourcing-related Services. Uptime, our value-added maintenance and support offering, achieved the largest growth within our Services business.
"In the midst of the economic headwind, we continued to improve our operating margin,” Dawson adds.
The Group’s regional performances were strong, with the exception of the Americas. Australia, Europe, and Middle East and Africa delivered excellent performances. Europe was an outstanding performer in the period, delivering strong growth in revenues and a doubling of operating profit. Asia experienced revenue challenges due to its exposure to global financial services and multinational clients, however, Asia’s Services revenue base and a focus on cost management helped to deliver a strong increase in operating profit.
Addressing the America’s performance, Dawson says the effects of the financial services industry downturn in the Northeast of the US severely impacted the Americas region. “However, Services and selected lines of business performed well," he says. "The Group has addressed the cost base in the US and continued to focus on developing the maturity of its Services business.”
Commenting on the Group’s future outlook, Dawson says: “We believe market conditions will remain challenging and business visibility will be uncertain. There are some signs of stabilisation and our interim results demonstrate a solid platform as we enter the second half of the financial year. We continue to see opportunities throughout our Solutions and Services portfolio, and believe the medium term opportunities are robust.
"At present it is too early to call an upturn in the market, however we are optimistic about our future prospects and believe Dimension Data is well positioned for the long term.”