DiData's maiden dividend pays off for execs

Johannesburg, 25 Jan 2007

Dimension Data has rewarded directors on the back of financial results that saw it report its maiden dividend.

The company paid out a total of $5.184 million in various forms of directors' fees during the 2006 financial year, a $453 000 increase on the previous year. At an approximate average rand:dollar exchange rate of R6.57 to a dollar, this equates to R34 million.

CEO Brett Dawson earned a total of $1.444 million - or R9.49 million - in the same year Dimension Data rescued its profit line and reported a maiden dividend of one US cent.

The company's CFO, David Sherriffs, earned a total - including benefits and bonuses - of $585 000, an amount equivalent to almost R3.84 million. Chairman Jeremy Ord earned $1.334 million, or R8.76 million.

Work ahead

In November, the company said it had steered a course into more profitable waters, although there were still a few disappointing divisions to be sorted out.

However, margin improvement in the next few years will be slow. Dimension Data's bottom line margin for the 2007 financial year is 3.6%, a figure the company released some time ago.

In November, Dawson said he was not changing the firm's guidance on this, but added that, in the next three to five years, it hoped to hit a margin of 5%. 2006 saw a margin of 2.8%.

An analyst commented that if the company hit a margin of 5%, its local share price should go up to R8. Shortly after the presentation, London- and Johannesburg-listed DiData's shares were trading down 0.18%, at R5.54.

The company's 2006 results showed revenue of $3.067 billion, up 16% year-on-year from $2.646 billion. It also reported operating profit up 50%, from $56.7 million to $85 million. CFO Dave Sherrifs said cost containment had contributed to this.

The company said pre-tax profit was $69.7 million, up 66% from $41.9 million. Earnings per share moved up 150%, from 0.8 US cents to two US cents. The company also declared its inaugural dividend of one US cent.

Three years ago, it was running at a $15 million loss. Chairman Jeremy Ord said it had been a productive year with "very good growth" in Africa and good results from Australia, Asia and the US.

The only disappointment, he said, was Europe, which the company has taken steps to remedy.

Earning power

Mabili's recent report into directors' earnings found the average CEO earned R5.35 million in 2005, a 24% increase on the previous year. These figures exclude share options.

However, the company found CEOs in the IT sector are not raking it in as much as their counterparts. It said in November that the average CEO package in the IT sector amounts to R3.5 million. Two CEOs and one executive chairman received packages of more than R5 million.

The IT sector, states Mabili's report, is "still in its infancy and remains a volatile business environment", in addition to being the smallest sector covered in the report.

The report points to the fact that only three of the 13 companies surveyed posted an after-tax profit of more than R100 million, leading it to conclude that "executives in this sector are feeling most pressure financially".

The highest paid CEO in the IT sector in 2005 was Jens Montanana, who heads up Datatec and received a dollar-based package that converted to R10 million.

Solidarity's report, "Remuneration of Chief Executive Officers: An Overview of JSE-Listed Companies", released in July, found that, while CEOs on average earn between 35 and 53 times more than the total remuneration of the average worker, leaders in the telecommunications industry earn an average of 59 times more than an average worker.