| Tue 20 Aug 2002, 0:00 | | Dimension Data Holdings Plc |
|
Dimension Data Holdings plc
("Dimension Data" or "the Group")
20 August 2002
During the year Singapore listed, Dimension Data subsidiary, Datacraft Asia
changed its year-end to 30 September to align it with that of Dimension Data.
To keep the market fully informed, Datacraft Asia today gave a market update on
the company`s performance for the 12 months to June 2002 and the future outlook
(included below). As part of the update Datacraft Asia indicated that margin
pressure and a slow quarter to September 2002 would result in a small operating
loss for that quarter. This will impact Dimension Data`s gross margin as
referred to below.
Dimension Data had given guidance at the May 2002 interim results announcement
for a sequential increase in US$ revenues in the second half of the 2002
financial year, and for a gross margin of not less than 22,1% for the full year.
Whilst the Group is on track to achieve its sequential revenue guidance, lower
gross margins in the second half of the year driven largely by Datacraft Asia, a
number of strategic low margin technology transactions in New York and a higher
contribution from the Express Data distribution business in Australia, will
result in an overall gross margin for the 2002 financial year of approximately
21%.
The Group`s overheads are being well contained with a further 9% reduction in
headcount since the interim reporting period with the result that overheads for
the full year will be approximately US$420 million.
The Group`s unencumbered free cash, before taking into account cash generated
from operations, is expected to be in the region of US$193 million at 30
September 2002. This is made up as follows:
US$m
Cash balance at 31 March 2002 630
Payment of Chernikeeff loan notes 242
Liabilities:
- Convertible debentures 100
- Acquisition vendor liabilities 55
- Plessey put option 40
Free cash balance before operational
Cash flow 193
The text of the Datacraft Asia announcement is as follows:
Datacraft Asia
Overview of performance for 6 months to June 2002 and future outlook
In an announcement on 9 May 2002, the Company stated that its year-end would be
changed from June to September in order to align with the financial year of its
parent company, Dimension Data Holdings plc. Consequently the Company`s next
formal announcement of results will be for the 15 month period ending 30th
September 2002. On 16 May 2002, the Company advised the market that, after the
effects of accounting for the additional provisions for doubtful debts in China,
the Company would make a loss for the 12 month period ending 30th June 2002.
In line with the Company`s intention to give the market an update on its
performance, the Company wishes to announce that it was profitable at the
operating level (before tax, amortisation of goodwill, one-off charges and the
China debt provision announced on 16 May 2002) for the six months ended 30th
June 2002. Unaudited Revenues and operating profit (defined herein as profit
before tax, the one-off China debt provision, one-time restructuring charge and
amortisation of goodwill) achieved for the period were similar to those reported
for the six months ended 31st December 2001 of US$217 million and US$10 million
respectively.
Business conditions for the six months to June 2002 were very challenging.
Customers continued to focus on cost reductions and were generally less ready to
invest in new IT projects. The Group undertook a restructuring exercise
towards the end of calendar year 2001 and as a result, overhead expenses
declined by US$6.0 million for the second six months compared to the first six
months.
Performance differed widely across the operating entities. Whilst performances
from China, Korea and Singapore were below expectations, good performances were
recorded from India, Thailand, Vietnam, and Indonesia. Japan returned to
profitability following the change of management there. These countries were
awarded several major projects, including US$18 million for the State Bank of
India, US$9 million for TOT in Thailand, US$5.6 million for CP Orange in
Thailand, US$2.6 million ISP centre in Hanoi, US$2 million from Dresdner Bank
in Japan and a large Managed Services contract from an insurance company in
Japan. In terms of revenue breakdown by geographies, Greater China (China,
Hong Kong and Taiwan) contributed 21.8%, East Asia (Japan, Korea) 25.7% and
South Asia (Asean, India and NZ) 52.5%. As for revenue breakdown by business
mix, telecoms contributed 33%, enterprises 29% and services 38%. For the fifth
year running, Datacraft Asia was voted as the Best Systems Integrator in Asia by
the readers` survey in Telecom Asia magazine.
Outside of China, the Group`s Revenues increased by 5% over the preceding 6
month period, operational profits grew by 15% and recorded an operating ratio of
6.6% PBT. China Revenues, now representing 9% of Group turnover, have declined
by 28% sequentially, and China recorded a $2.6 million operational loss in the 6
month period.
In this difficult economic period, the Company continued to focus on
streamlining its operations, strengthening its financial controls and its
balance sheet. A number of operations have been merged for greater
efficiencies:- Datacraft New Zealand and NCS, Datacraft Korea and Dasan,
Datacraft Singapore and Multisoft, Datacraft China and DNI. Considerable
improvement was made in the balance sheet and cashflow. For the past 12 months,
the operations generated approximately US$22 million of cash. Net Account
receivables have improved by 6% since the end of Dec 2001, from US$160 million
to US$150 million as at 30 June 2002. Excluding China, the DSO (days sales
outstanding) remained relatively flat. Inventory levels improved by 4% from
US$20.2 million as at 31 December 2001 to US$19.4 million as at 30 June 2002 and
are expected to improve further in the forthcoming quarter.
As part of the focus on strengthening the balance sheet, the Company re-
negotiated the acquisition earnout payments for several of its acquired
companies (namely Netwave, Multisoft, NCS and Dasan) and future acquisition
liabilities have been reduced by approximately US$15 million as a result of
adjustments and renegotiations.
In China, the operations of DC China and DNI have been merged and 2 WOFEs
(wholly-owned foreign enterprises) are being set up to cater for the networking
and training businesses respectively. Following the announcement on 16 May
2002, financial controls in China have been further strengthened with the
recruitment of 2 regional finance managers. The Company has also commissioned
legal, accounting and investigative agencies to pursue recovery of the account
receivables and to take the necessary recourse where there is evidence of wrong-
doing.
As an evolution from Datacraft`s Millennium Strategy, the Group is further
strengthening its focus on Services by appointing separate Group heads for
Professional and Managed Services and intends, together with parent company,
Dimension Data, to capture more global MNC accounts and to introduce new
business streams in areas such as Network Storage and Customer Interactive Call
Centre solutions.
As stated in the announcement on 16 May 2002, trading conditions continue to be
challenging and the outlook remains uncertain. The forthcoming quarter ending
30 September 2002 is traditionally a weak seasonal quarter and the Group is
expecting to make a small operating Loss for that quarter. For FY03 the Group
is focusing primarily on balance sheet, particularly cash flows and improving
PBT ratios and will be taking actions to return China to profitability.
The Group is expecting to take certain non-operational charges against the P&L
for the 15 month ending 30th September 2002 - these comprise, as previously
announced, the additional US$23 million China AR provision, the US$7 million
restructuring costs (the bulk of which have been taken in the first 6 months)
and amortisation of goodwill of US$5 million. In addition, the following non-
operational charges will also be taken - an AR provision for approximately
US$2.9 million owed by a Worldcom company, and a potential asset impairment loss
as a result of rationalisation of the Group`s i-Commerce companies.
The powerpoint slides of that presentation will be available on the Company`s
website at www.datacraft-asia.com.
About Dimension Data Holdings plc
Dimension Data Holdings plc (LSE: DDT) is a leading global technology services
company. The Group specialises in providing IT solutions that enable businesses
to operate seamlessly across Application Networks (the result of the convergence
of two previous separate areas of IT: application integration and network
infrastructure.)
The Group`s ability to offer expertise in networking, application integration
and global managed services makes it uniquely positioned to deliver the IT
solutions required by businesses to connect devices, information, applications,
business processes, people and organisations.
Dimension Data, founded in 1983, had revenues of $2.5 billion in 2001 and
operates in 30+ countries with over 9,000 employees. More information about
Dimension Data can be found on the Web at www.didata.com.
About Datacraft Asia
Datacraft Asia is the region`s leading independent e-business and network
systems integrator. Listed on the main board of the Singapore Exchange,
Datacraft specialises in the business of building and managing Internet
infrastructure, implementing online business solutions and delivering value-add
networking services for service providers and corporate customers across Asia
Pacific.
The company offers unparalleled regional coverage and specialist support with
its extensive network of 63 offices throughout Singapore, Malaysia, Hong Kong,
China, India, Taiwan, Indonesia, Thailand, New Zealand, Vietnam, Philippines,
Japan and Korea. Datacraft is a member of the Dimension Data Group. More
information about Datacraft can be found on the Web at www.datacraft-asia.com.
For further information, please contact:
Karen Cramer, Head of Investor
Relations +44 20 7651 7000
Bronwyn Goeller, Investor Relations RSA +27 11 709 1484
Yuen-May Lum, Investor Relations Asia +65 6 323 7988
Giles Sanderson / James Melville-Ross
Financial Dynamics +44 20 7831 3113
Date: 20/08/2002 08:00:00 AM Produced by the JSE SENS Department
