Bytes Technology Group will remain firmly rooted in SA. This was the message from group CEO David Redshaw, when the company's interim financial results for the six months ended 31 August were released yesterday afternoon.
The results showed a shift in the geographical split of the group's revenue, with foreign business nearly tripling compared to the six months ended 31 August 2006.
Redshaw says: "SA will always be our business." He adds there is no reason to fear Bytes will move its core focus towards overseas revenue.
The board's strategy has consistently been to grow its international component to around 30% of total revenue and 25% of its profit, he notes.
"It is a bit higher than that at the moment, but I am confident this will be rectified in the second half [of the financial year]."
International operations provided for 46% of group revenue and 30% of profit in the six-month period at hand.
Redshaw notes the R580 million National Health System (NHS) Microsoft contract for the British government would have distorted the foreign business reporting to some extent.
"Adjusting for the NHS contract, revenue increased by around 16%, a satisfactory performance," says Redshaw.
Cash flush
Bytes registered 44% growth in revenue, compared to the same period last year, albeit at a slower rate than achieved in the six months ended 31 August 2006.
Redshaw says part of why the South African growth rate seems low, at about 6%, is because the company had a good first half in 2006.
"We expect good growth in the second half (domestically) and we had anticipated slower growth in this half so we weren't disappointed."
The group's operating margin went down to 6%, from 8% in the comparable period in 2006, which Redshaw attributes to a weakened sterling exchange rate, as well as some production issues. He says the situation should be rectified in the second half of the financial year.
In the meantime, the company remains cash flush, with the net cash position moving from a negative R83 million in August 2006, to a positive R137 million over the 12 months. Of the R220 million improvement, R100 million was, however, of an extraordinary nature, relating to the NHS contract.
Redshaw says the company remains aggressive in its acquisition drive and is looking to expand in Europe.
"We've been expanding rapidly with Xerox in the UK and they have asked us to look at expanding into the Netherlands with them," says Redshaw.
Risk issues
Frost and Sullivan research analyst Letticia Nkumbula says Bytes' international presence and vigorous campaign in building a strong portfolio of companies is helping it to achieve compelling results in many areas of its business operations.
"This is an excellent strategy, as BTG can take advantage of its market positioning by grabbing opportunities presented from its diversified business operations."
Nkumbula says the company's strong cash flow enables it to make strategic acquisitions that not only increase its skills base, but also modify risk in the competitive ICT market.
"Acquisitions and investments are important in diversifying risk. Bytes' portfolio of companies resulted in some high-performing areas of the business offsetting those that underperformed."
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