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Business Connexion operating profit up 16%

February 12, 2009 • Top Stories

Benjamin_Mophatlane_of_BCX.gifBusiness Connexion Group increased revenue by 10,3% to R2,2 billion in a challenging economic environment in the six months ended 30 November 2008 as the group’s revitalisation programme continued to gain momentum.

Growth in comparable operating expenditure was contained to 1,5%, with operating profit increasing 16% to R48,7 million.

The group’s operating margin increased from 2,1% for the first half of the previous year to 2,2% this year. Operating margin was negatively affected by one-off revitalisation programme costs of R24,0 million. When these costs are excluded, the operating margin increases to 3,3%.

Headline earnings were impacted by a payment of R15,8 million secondary tax on companies (STC) on the special dividend of 60 cents per share declared for the financial year ended 31 May 2008, as well as the one-off revitalisation programme costs. This contributed to a 34,4% decrease in headline earnings to R24,6 million. Comparable headline earnings increased by 47% to R54,2 million, reflecting the strong underlying operating performance.

Basic earnings increased from R36,7 million in 2007 to R39,3 million, benefiting from the R14,4 million profit on sale of the group’s property in Faerie Glen.

Chief executive officer, Benjamin Mophatlane, said all businesses showed pleasing revenue growth during the period. The Services Group increased revenue by 10,4% and the Technology Group by 10,1%, with revenue growing by 10,1% in the foreign (Africa and United Kingdom) businesses.

The group has secured new contracts of over R130 million in South Africa and more than $5 million in the rest of Africa in the current financial year, he said.

Mophatlane said Business Connexion continues to grow its African business and expanded into Nigeria during the year. “The investment in this business will position Business Connexion to become a meaningful participant in the rapidly expanding ICT sector in that country.”

The group’s revitalisation programme, which is aimed at improving operating margin and returns to shareholders, has focused on the implementation of the group’s new business model. This included consolidating support functions conducted in individual business units into a central support services business. The new business model also introduced a segmentation of the client base which has enabled greater focus on clients.

“These processes were largely completed during the first six months of the 2009 financial year and the cost savings and benefits are expected to be realised in the next 12 to 18 months,” said Mophatlane. “The group expects to incur further costs of between R15 million and R25 million in the current financial year in streamlining these processes.”

Business Connexion has committed to achieving an operating margin of 8% for the 2011 financial year.

On the outlook for the group, Mophatlane said Business Connexion has a strong and experienced leadership team, healthy annuity revenue flows from its loyal customer base and also expects to generate further benefits from the revitalisation programme. Public sector spending will continue to underpin growth in the ICT sector.

“We believe that these factors should lead to an improved performance in the second half of the year,” he added.

Lillian Mpofu (BCX)

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