Dimension Data has turned in a strong financial performance for the six months to 31 March, with good services leading to improved gross and operating margins.
Overall reported revenues declined for the quarter relative to the third quarter of 2008 (prior period) by approximately 12%. Adjusting for the impact of exchange rate movements, constant currency revenues declined on the prior period by approximately 4%, with services up by approximately 12% (supported in particular by managed services) and product declining by approximately 14%.
Gross margins for the quarter improved over the prior period, due mainly to the change in mix in favour of services. This, together with the group’s continued focus on managing its fixed cost base, resulted in improved operating margin and operating profit relative to the prior period.
From a geographic perspective, Europe, Australia and Middle East and Africa recorded revenue growth and operating profit expansion. In the Americas, revenues and profits were lower than the prior period, although recent improvements in the monthly order intake in that region have been encouraging.
In Asia, profitability improved on the back of services growth and cost management, despite product revenue declines.
While Middle East and Africa performed well in aggregate, Plessey’s revenues declined as mobile operators on the continent reduced infrastructure spend.
The group’s order intake for the quarter reflected a year-on-year decrease at the revenue level but an increase at the gross profit level. On a sequential basis, order intake for the quarter at the revenue and gross profit levels improved on the previous three months.
Working capital was well controlled throughout the period, and the group maintains a robust balance sheet and a strong net cash balance.
The company comments in a statement: "The continued solid performance of the group in the third quarter gives us confidence that, given prevailing economic conditions, Dimension Data will deliver a good financial performance for the second half of the year.
"The performance of our services business should ensure that gross margins are maintained at similar levels to those reported at the interim stage and this, combined with an emphasis on cost management, means that the group should deliver operating profit expansion in constant currency for the 2009 financial year.
"In the medium term, we continue to see opportunities throughout our solutions and services portfolio, and remain optimistic about the prospects for the group. We remain committed to investing in our execution capabilities and to enhancing our competitive position to capture opportunities in the markets within which the group operates.