Dimension Data Holdings, the South African computer services group, yesterday described the current downturn in technology spending as like a "once in 100 years flood" as it unveiled a $1.7bn (£1.2bn) loss in its first full year as a listed company on the London Stock Exchange.
The company, known on the market as Didata, recorded the losses after asset write-downs of $1.8bn. These included $1.1bn to cover a write-down of the value of its European operations and a further $148m write-down of its American assets. These included the Proxicom internet consultancy business acquired for $448m in cash in May.
Didata was a late-comer to the UK technology boom when it floated at 520p per share in July last year. The shares initially soared to 693p but have been collapsing ever since. They closed a further 8.5p down at 92.5p yesterday.
Didata provides computer network installations, support and maintenance for clients such as Renault. But the business has seen a slowdown in revenue growth and increasing pressure on margins as large corporate customers spend less on computer-related services.
Jeremy Ord, the chief executive, said the company had already taken action to "rightsize" the business with more than 1,500 job cuts. He said the business was now correctly positioned for an upturn.
Margins are expected to fall from 7.4 per cent to 5 - 6 per cent this year as customers put pressure on prices. Revenue growth is considered unlikely to reach double digits. Mr Ord said: "We are not seeing any dramatic downturn in activity. Deals [contracts] are just taking longer to come to fruition." The company did not expect IT spending to improve significantly in the current financial year. It also said that visibility (of future orders) remained poor and that the trading environment continued to be characterised by "considerable uncertainty". Mr Ord dismissed suggestions that there could be more asset write-downs to come.
Didata had warned of lower figures in a statement in July, saying increased price competition would squeeze margins in the US, the UK and Germany. Full year figures for the year to 30 September showed that total turnover grew by 24 per cent to $2.4bn. Operating profits before goodwill write-offs and other exceptionals was $180m.
Didata's shares had already fallen 14 per cent on Tuesday after Morgan Stanley cut its recommendation on the shares to underperform from neutral saying the premium to the company's peer group was undeserved.
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