South African headquartered ICT services provider Business Connexion (BCX) has realised the benefits of the revitalisation program it implemented over the past two years. Through their Black Economic Empowerment (BEE) transaction and new strategic business initiatives focusing on containing operating expenses and driving margins, the group has kept a steady course through challenging economic conditions.

BCX released results for their year end results today, revealing a 26% drop in revenues in comparison to last years financial year end results, but a 48.7% jump in operating profit. Diluted headline earnings per share increased from 36.9 cents to 40.3 cents. The Group’s gross profit margin improved slightly from 26.6% to 28.6% compared to the previous 15-month reporting period as a result of greater efficiencies from the Services Division’s focus on its service catalogue and costing strategies.

“BCX’s outsourcing services including amongst others data centre, storage and security services, remain the company’s competitive advantage, and continue to be the largest contributor to the company’s total revenue at 45.3%,” says Frost & Sullivan’s ICT Research Analyst for Africa, Jiaqi Sun. “BCX is able to provide competitive pricing due to the economies of scale present within its data centre facilities through the purchase of large numbers of servers and storage. In addition, the company is able to leverage off its long presence in the market, credible reputation and proven delivery track record,” Sun continued.

The growth in group operating profit was driven primarily by the performances of the Services and Technology Division whose operating profit grew 9.8% and a significant 144% respectively, while operating profit declined for BCX’s Innovation Division from US$ 16.7 million to US$ 9.6 million. The International Division continues to suffer losses but less so in this financial period.

The revenue and margin growth resulted from BCX’s outsourcing services, which Frost & Sullivan applauded in 2010 by awarding BCX with the South Africa Market Share Leadership Award which recognises BCX as the leader in the data centre market. Frost & Sullivan believes that BCX’s development of the first Tier IV design certified data centres in South Africa and across the African Continent was a significant achievement for the company as there are only eleven Tier IV certified data centre companies world-wide. “By providing end-to-end solutions, BCX's data centre services were the leading service provider representing 23% market share of the South African data centre service market in 2009,” points out Sun.

BCX implemented satellite services this year directed to the data centre which enabled its service network to cover the whole of Africa and parts of Europe. However, the International Division?s results continue to be disappointing.

“BCX’s expansion into the Nigerian outsourced contact centre services market last year has seen substantial growth on the back of the Cisco gold certification, which together with the other international operations in Mozambique, Namibia and the UK are showing healthy growth despite the tough economic environment,” says Sun. Recently BCX also signed a Joint Venture agreement with Canon Smart Office Services (SOS) to expand its print service offerings and establish the largest managed print services organisation in Africa with over 600 certified support engineers.

Sun believes that on-demand cloud computing services and unified communications solutions targeting small and medium-sized enterprises are expected to be the new revenue streams for BCX in the future. He says, “Financial services and the public sector are the focus areas of BCX going forward.” In April this year, BCX together with with Cisco, EMC and VMware, launched the Virtual Computing Environment (VCE), enabling South African companies to deploy virtualisation and cloud computing solutions quickly and cost-effectively.

With the market consolidation of system integration services in South Africa, Frost and Sullivan expects BCX to strengthen its market power through horizontal integrations to compliment its existing product and service portfolios.

“With declining corporate spending and rising market competition, BCX has successfully faced the challenge of reducing operational costs in order to maintain its operating profit margins through is revitalisation programme implemented in 2008,” says Sun. “As a result, BCX has outperformed most of its competitors in the South African system integration market.”