BCX remains under pressure mainly impacted by the IT segment, which faced pressure in its supply chain while Converged Communications is at the tail end of migrating clients to next-generation technologies. This is due to the lingering impact of the lockdown and the global supply chain constraints and shortages of semiconductor chips. The second half of the year saw good growth due to investments in new capabilities, progress made with strategic programmes and renewed activity in the market. As a result, we saw an improved performance with some clawback in revenue though it remains negative. The improvements in performance seen in the last quarter across the business signal a more positive outlook for the next financial year as declines in revenue are expected to end.
Key strategic focus areas
Revenue declined by 2.6% to R15 329 million, mainly impacted by the IT segment, which faced supply chain pressure while the Converged Communications business is at the tail end of migrating clients to next-generation technologies. Renewed activity in the market has boosted our ability to stabilise our pipeline for the next financial year.
The revenue from the Converged Communications business declined marginally by 1.1% to R7 274 million, primarily owing to declines in data consumption as employees continue to work from home, and hardware delivery backlogs due to the global shortage of semiconductor chips. The performance impact expected by the decline in fixed voice was slightly tempered by improved usage across the voice portfolio, offsetting data declines and reducing the EBITDA impact expected with this trend.
The revenue of the IT business declined by 4% to R8 055 million due to projects being delayed because of a slower than expected economic recovery, backlogs resulting from the global supply chain constraints and chip shortages.
EBITDA declined by 7.1% to R2 288 million due to top-line pressures. Cost management initiatives were implemented resulting in a 1.9% decline in total expenses. The top line was affected by constraints in the supply chain, which are now reaching manageable levels.
The reduced rate of decline in fixed-voice revenue signals the transition of the Converged Communications business transitioned from legacy services to digital technology services, with investments made in automation, wireless research and development, and in the partner ecosystem for a generous product offering.
BCX’s Wireless business and Data Access Network business have been key drivers of Converged Communications’ performance. Wireless has seen a stellar performance with a 12% year-on-year growth, driven by the research and development capabilities and a focus on Wi-Fi 6 and 5G. The Data Access Network business has also shown rapid growth over two years. The business benefited from the increase in the availability of bandwidth, the consumption of connectivity, cloud-based applications, and the requirement for work-from-anywhere.
| 1 | CPE refers to Customer Premises Equipment |
The IT business consists of two key revenue pillars for BCX. Refocusing the business enabled the Cloud Platform Solutions and Digital Platform Solutions businesses to develop pockets of excellence that are expected to scale in the next financial year. The IT business was most impacted by environmental challenges. A sluggish economy and the Gauteng and KwaZulu-Natal riots which resulted in clients reducing their ICT spend or postponing large-scale planned projects.
Cloud Platform Solutions (CPS) is the ICT infrastructure and infrastructure services arm of BCX. Environmental constraints resulted in revenue declines. Due to the nature of the business, CPS requires scale to maintain profitability. In the first half of the year supply constraints had a significant impact on its ability to maintain scale. This turned around as supply began to show signs of stability in the second half of the year and while challenges will continue, predictability improved markedly. Although performance was slow within CPS, its Security business grew revenue significantly in the current year albeit from a lower base. Catalysts for the stellar performance can be attributed to early investments in novel skills and enhanced resources, while increased cyberattacks on clients throughout the year continued to generate revenue for the BCX Security business. BCX’s rapid response initiatives on incident reports and in managing security risks for clients were favourably received by the market.
Digital Platform Solutions (DPS) is the digital arm of BCX that brings together highly qualified internal consultants, subject matter experts, and sophisticated digital technologies across BCX and partner IP1, bringing digital transformation to life for our clients. In the current financial year, DPS noted declining revenue as it refocused its efforts on structuring its capabilities for efficiency and modernisation to meet market demands. Investments were made into artificial intelligence for IT operations (AIOps), resulting in revenue growth of 35%, with greater gains made in the second half of the year. Growth of 19% was experienced in the IoT business. This may be attributed to new markets, including the focused utilisation of resources to provide greater client value.
DPS will continue to invest in the AIOps and IoT spaces in the future. It will focus on growing its digital consultancy business, while working towards the diversification of its enterprise application offerings to clients, such as SAP, Payroll Solutions, Octane and SOLAR. Further efforts will be placed on the modernisation of its IP businesses and creating synergies through its centralisation efforts.
| 1 | Intellectual property |
The improved market conditions in the second half of the year have created opportunities for growth and for BCX to pursue its objectives in the medium to long term.
In the medium term, BCX will develop end-to-end digital solutions focused on the key verticals and entry into new markets. In addition, BCX is exploring the introduction of a strategic equity partner (SEP) to unlock shareholder value, drive sustainability and to increase our capabilities within key markets. We would require the SEP to contribute to the capital outlay of BCX, specifically focusing on our strategic investment portfolio. The new partnership should be able to provide access to new products, services, and IP such as industry applications, cloud services, cybersecurity, digital solutions, and transformational outsourcing.
BCX has been certified as Top Employer in 2022 as it sets out to be a leading employer of choice for top industry talent and expertise. This achievement allows BCX to focus on building capabilities at organisational, team and individual levels. The continuation of enhancing digital skills and technical capabilities becomes the foundation of future growth opportunities.
The Converged Communications business transitioned to legacy services due to the reduced rate of decline in fixed-voice revenue signals to digital technology services and using 5G as a key enabler of future growth. Part of this future growth strategy is becoming a cloud orchestrator across cloud consulting and infrastructure by leveraging existing assets and partnerships with hyperscalers. These initiatives are aligned and supported by our intent of growing our own intellectual property to meet the demands of our clients.