Although this was a year of no revenue growth for Logicalis, the organisation is, however, in better shape with improved profitability, mostly due to increased sales of services, which we see continuing to grow. Services now account for a third of the revenue mix.
During the financial year, Logicalis completed two acquisitions. In January 2015, Logicalis acquired Inforsacom, a German IT services and solutions provider. Inforsacom is a provider of database, storage and infrastructure solutions and services with operations across the major economic centres of Germany. The acquisition has significantly enhanced Logicalis’ scale and capabilities in the German IT market.
In September 2014, Logicalis acquired a 51% shareholding in ituma, a specialist developer of spatial intelligence software and a disruptive enabler in vertical markets such as retail and education. ituma helps to build new mobile centric experiences, pushing rich and relevant content directly to the consumer, and enables organisations to gather unique analytic insights from an individual’s movement and behaviour.
The demand for IT infrastructure in the markets in which Logicalis operates was again mixed during the year. The market for networking technology products was generally positive, particularly in Latin America, UK, Germany and the US; whereas demand for servers and storage remained generally weak (as in FY2014). Demand from telecommunications operators and service providers in Latin America, an important customer segment for Logicalis in this region, held up, although it was not as robust as last year.
Under a new executive management team, Logicalis is focused on building a strong business through organic growth and acquisition, and has set out a clear strategy to realise this, with some new senior management in the European and US regions.
Revenues were US$1.54 billion (2014: US$1.55 billion), including US$21.9 million of revenue from acquisitions made during the year.
Revenue growth for the year was mixed across the regions with marginal increases in North and Latin America offset by Asia Pacific, which was adversely impacted by difficult trading conditions in Australia and a weakening in the macroeconomic environment. The Latin America region was the best performing region with revenues up 1% year-on-year although the reported results are held back by 10% by the further strengthening of the US dollar against the Brazilian real.
The gross margin was also up at 24.2% (2014: 23.3%). Overall service margins were down slightly but product margins were up with better transaction margins being achieved.
The increase in profitability for the year was driven primarily by a much improved performance in the Southern Cone region of Latin America. Despite the general market growth in demand for cloud solutions, this revenue segment is still a relatively small proportion of total revenues.
For IT infrastructure the outlook for growth is relatively subdued. Analysts are predicting stronger growth in IT investment across the Latin America market in 2015 compared to 2014, especially in the demand for networking equipment, driven by the ongoing investment by service providers. Elsewhere, the outlook for general IT spending remains mixed. Growth at the market level is expected to be low in the more developed economies.
Ongoing investment in communications networks, next-generation data centre virtualisation technologies, collaboration solutions, business mobility and cloud solutions are still expected to drive investment decisions, and Logicalis wants to build on some of the expertise it already has to move further into social, mobile, analytics and cloud (SMAC) related growth markets. Already in this new financial year (FY2016), Logicalis acquired Trovus, a business analytics solutions company to complement the existing business analytics and information management capabilities in their UK division.