Business Connexion (BCX) today announced that it is expecting the growth in cloud computing to help drive the company’s recovery from poor performance over the past six months. In a presentation of its interim financial results for 2011, Benjamin Mophatlane, CEO of BCX, acknowledged the companies shortfall, but urged investors to be upbeat about the steps they are taking to rectify the matter.
Group revenue for the first half of 2011 has declined by 10% to R1.8 billion (from R2 billion in 2010), a sharp decrease which Mophatlane attributes to the global economic downturn, slower turnaround times for public sector projects, and a decline in discretionary ICT spending in the private sector. “We are not satisfied,” Mophatlane said. “These results have not met our expectations.”
BCX is investing heavily in infrastructure in an attempt to place themselves ahead of the curve of adoption of cloud computing services. With R142 million CAPEX in the past twelve months, BCX is taking a big risk now in the hopes that they will see huge returns when cloud services start to gain traction in the marketplace.
“Our traditional outsourcing business will move more to the cloud,” explains Mophatlane. “We will have short term losses, but expect long term gains. Traditionally our clients we have a 1-on-1 relationship with BCX. When those contracts come to an end we will move them to the cloud. Also we will use it to attract new business.” Mophatlane expects to see the cloud services investment start to show positive uptake by the second half of 2011.
A second facet of BCX’s recovery is their recent acquisition of UCS for which BCX paid R614.2 million. As a result of the acquisition, BCX has taken on five divisions of UCS (UCS Solutions, UCS Technology Services, CEB Maintenance, ACCSYS and Destiny E-Commerce) and 1,567 UCS staff members. BCX expects the deal, which was approved by the shareholders on 31 March 2011, to deliver R1 billion in turnover in the next year.
One positive facet of the BCX results is the performance of their International division. BCX has extended it’s footprint into Namibia, Nigeria, Mozambique, Tanzania, Kenya and the UK. These operations have become self-sustaining and contribute 9% of the group revenue.
A statement by the company reads, “While these results are below the group’s expectations, the underlying businesses remain profitable and cash generative. Annuity revenue from key clients is stable. The Services division has an industry leading position in outsourcing IT services with a stable 25% market share (BMI TechKnowledge Group, 2010). The Innovation and International divisions had a good first half and look forward to public sector opportunities materialising in the second half. Margins in the Technology division remain under pressure.”
By Angela Meadon