Patrick Quarmby, newly appointed chairman of Dimension Data`s Asian subsidiary, Datacraft Asia, says the $15 million provision made for debts in the company`s Chinese operations is a once-off charge and investigations into impropriety over the debts continue.
Speaking at the DiData results presentation at the JSE yesterday, Quarmby explained that concerns over the debt resulted from Datacraft`s Chinese division`s dealings with local import and export companies as well as clearing houses.
DiData has a 51% stake in the Asian company, which accounted for 20% of DiData`s interim revenues, and 24% of operating profit.
Quarmby said DiData`s internal auditor PricewaterhouseCoopers is in the preliminary stages of an investigation into possible impropriety in the Chinese business, but stressed that the $15 million provision for bad debt is a once-off charge.
DiData management explained that its Asian division would be less reliant on the Chinese operations going forward. According to DiData chairman Jeremy Ord, the Asian operations are doing substantially more business with other Asian countries such as Taiwan, and business in these countries would make up for decreased revenue in China.
Quarmby also noted that the decline in business in China would probably result in further staff cuts in that operation.
Global branding
Ord announced that the DiData branding and marketing strategy, "The DD Way", would be rolled out into the South African market this weekend.
The strategy, aimed at giving DiData a stronger international image, will be rolled out over a two-year period.
The costs of the branding strategy were reflected in the group`s "start-up overheads" of $20 million.
Ord said the group`s stronger brand has already helped it to win new business with banking group HSBC.
Cash on-hand
DiData ended the six months to March with cash and cash equivalents of $630 million, a sequential drop of $221.4 million.
Ord explained the decrease is due to payments to vendors for acquisitions made in the previous reporting period, as well as rationalisation costs incurred in the second half of 2001.
Management also stressed the group has a backlog of $502 million, consisting partly of signed deals, which would be realised on the books in the coming months.
The DiData share recovered some of the ground it lost on the announcement of the Datacraft profit warning yesterday, gaining 24c or 2.6% on morning trade, swapping hands at 955c by 10.30am today.
Related stories:
DiData sees silver lining
Quarmby appointed as Datacraft chairman
Share