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DIMENSION DATA HOLDINGS PLC ("THE GROUP")- UPDATE ON TRADING CONDITIONS
Dimension Data Holdings plc
ISIN: GB0008435405
Share code: DDT
Datacraft Asia, Dimension Data`s listed subsidiary announced today that, as a
result of continuing economic and geopolitical uncertainties, together with
intense competitive pressure in the infrastructure end of the market, operating
pre-tax results for the six months ended 31 March 2003 (before taking account of
restructuring costs of approximately $3.5m and asset impairment costs of
approximately $8m) will be around break-even. This contrasts with Datacraft
Asia`s contribution of $17m to the Group`s operating profit before goodwill
amortisation and exceptional items in the prior year and accordingly the effect
of the above on the results of the Group in the current period will be
significant.
Dimension Data`s USA region, which had been downsized in the previous year to a
month-on-month break-even position, is now expected to post a loss for the first
half. This region represents a less mature business model than the rest of the
Group, and the unanticipated sharp decline in infrastructure volumes and related
services, reflecting the performance of some of our key suppliers (notably Cisco
in that region), has led to this loss. The Group responded immediately by
implementing further rationalisations, the cost of which will amount to
approximately $4m for the current period. The Application Integration division,
which was restructured in the prior year, has traded profitably for the period.
Turnover for the rest of the Group remains broadly in line with management
expectations. Combined with the strength of most of the Group`s trading
currencies against the US Dollar, all of the above will result in the Group
reflecting overall reported turnover for the current period slightly lower than
the turnover of $1,085 billion for the second half of 2002.
At the time of the preliminary results announcement the Directors indicated that
the gross margin for the full 2003 financial year was expected to be in line
with the second half of 2002 at 20,7%. While there is continued evidence that
the pressures on technology margins have stabilised, the lower volumes in Asia
and the US will result in a reduction of the Group`s overall gross margin for
the first half to around 19%.
The majority of the Group`s cost base is non-US Dollar denominated, placing
upward pressure on reported overheads. Despite the fact that the Group will
have effected annualised savings during the first half of some $35m, the US
Dollar`s weakness means that the Group`s earlier guidance on overheads at $410
million for the full year remains in place.
The Group`s working capital position at 31 March 2003 will remain robust, with a
free cash balance (before taking into account the US$100m convertible bond which
matures in 2009) of not less than US$270m, reflecting the operating performance
for the half as well as anticipated seasonal working capital conditions. All
significant acquisition vendor liabilities outstanding at the end of the
previous financial year have been settled during the current period.
The conditions in which the Group operates remain difficult, and visibility
remains limited. In these circumstances, the Group will continue to closely
monitor trading conditions, and manage its cost base accordingly.
Dimension Data Contacts :
Bronwyn Goeller : 083 296 6910 / (011) 709 1484
David Sherriffs : +44 207 651 7017
Brunswick Contact : (011) 268 5750
Rob Pinker
Heidi Geldenhuys
Gareth Sharp
Date: 06/03/2003 07:51:00 AM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
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