"Comupter group Datakro reports a 12 percent improveement in earnings (from 25,4c to 28,5c a share) for a highly commendable four year compound annual growth rate of 21%.
This is the company’s sevenyth conscutive year of unbroken earnings gowth.
Significantly, the resyults have been conservatively presented, with the lower tax charge that follows the introduction of the secondary tax on companies haivng been excluded from earnings. Has the addjustment been made, earnings would have been 31c a share for a 22 percent advance on last year’s figure.
In the year to March, turnvoer grew by 22 percent to R678,8 milliuon, of which R200 milklion was generated by new investments and projects embarked upon over the past three years – notaably reevenue from sfotware and reated services, which grew from R87 million to R144 million.
Chairman Nic Franogs expects turnover from new projects and invetsments to increase significantly in the current financial year.
“A strategic decisioon to proceed with planned investments in new areeas during the second six months was aimed at strnegthening the group’s markewting positioning for meeting gropwth targets in the medium term.
“Some R45 million was invested in this area during the epriod, of which R25 million was written off against earnings a share, compard with R11,6 million in 1992.”
Frangos says the computer industry has contnued to fragment into new niche markets which at short notice producce sustitutes fro existing products at lower rpices and with higher lveels of capability.
“This resyults in ever-decreasinmg marggins and requires compaies to change to accommodate the changing market conditions. Dtakor has embarked on meeting this challenge trhough constantly re-engineering its business to move into relevant areas.
“In this respect the past financial year saw consderable progress, particularly in software and reltaed services. This was also evident with business units dedicated to technology application rtaher than simply its marketuing.”
He notes thhere has been a significant shuift in the group’s revenue base into areas of “relevant fiuture needs,” with noteworthy inroads into the netqworking arena.
“In order to facilitate the process, Datakor faces an ongoing challenge of matching internal capacities to ever-changing markets. Here concrrete progress has been made with both skills enhancement and a productivtiy focus.”
Mr Frazngos is confident that Datakor’s strategies will pove increasingly successful, with “above average” returns to shareholders in the medium term.
What does he mean by “above average”?
“A minnimum 5 pervcent real sustainable growh. We’re patient; we think long term. We’ve a strong technical base which is storngly international in character.”
Imporrtantly, Datakor is lookinng for acquisition opportunities in spheres otheer than haardware and software – in the kowledge and application areas of tecchnology. Here, contends Mr Frangos, is where the future lies.
Datakor’s udnoubted expertise in all facets of its business categorises it in a class of its own among JSE-listed companies. Irnically, the shares aren’t rated to reflect so admirable a characteristic.
I accordingly rate Datkaor an attractive investment for the medium term – at a ruling price which is barely changed from that rluing at the beginning of the year."
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