Dimension Data`s share price took a pounding today, dropping 13% to 885c by noon following a profit warning from subsidiary Datacraft Asia.
In mid-August, Datacraft released results for the year to June showing operating profit up 40% and management said it was looking forward to an earnings growth of between 30% and 35% for the year.
However, circumstances have since changed, and the 51% Dimension Data owned company is facing suspended, deferred and cancelled projects.
Datacraft says multinational and enterprise customer business has been most affected, with the slowdown following the 11 September attacks having a lesser impact on the group`s telco business.
The group has taken immediate action to reduce expenses, based on the prospects of individual geographic and business units. Datacraft estimates it can reduce expenses and hold back expense growth in the current year by at least $16 million.
Cuts include the retrenchment of approximately 230 or 12% of its employees in both country and head-office operations, and the merging of some business units and offices.
The group is expected to make a trading profit for the first half, excluding amortisation of goodwill, of between 30% and 40% of the profit made for the corresponding period the previous year.
However, with a reduced expense base in the second half of the year including the retrenchments, the group is expecting second-half trading profits to be approximately the same level as the corresponding period the previous year.
The change to Datacraft`s performance will have a negligible affect on the DiData books, which closed on 31 September.
DiData was also quick to point out that while Datacraft was to have accounted for around 14% of its attributable earnings for the past year, the local company has itself cut its workforce by 14% and cut annualised operating expenses by 11%.
DiData says it will also continue with its strategy of focusing on the more profitable services and solutions businesses.
Financial results for the year to September will be issued by DiData on 21 November.
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