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Datacraft swings profit in Q2

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CIOL Bureau
New Update

Jennifer Tan



SINGAPORE: Southeast Asia's biggest computer data network builder, Datacraft Asia Ltd, swung to a quarterly profit from a loss after cutting 160 jobs in the past year and said it was considering acquisitions.



Datacraft, which distributes equipment from partners such as Cisco Systems Inc forecast stronger earnings in the second half if economic conditions remained stable in the 13 Asian markets where it operates.



"The company looks like it is on track for a recovery in the second half," said G.K. Goh Securities analyst Jatin Doktor. "They've brought their cost down to a stable base and are waiting for demand to pick up in a more meaningful way."



But the appearance of Datacraft's former chief operating officer in a Singapore court, to face charges on share ownership disclosure requirements cast a shadow over the earnings, which were at the lower end of market expectations.



Singapore's white collar crime body, the Commercial Affairs Department (CAD), has charged Koh See Heong with failing to disclose shareholdings in the company following his appointment as director in July 2000.



Koh could face a maximum penalty of jail and at least S$15,000 ($8,907) in fines if found guilty on all charges. As he appeared in court, Datacraft publicly distanced itself from his case, which was adjourned until May 25.



Chairman Patrick Quarmby said the charges had nothing to do with the company or its procedures, noting that a two-year probe by the CAD into Datacraft itself ended last week with no charges brought against the company.



"The company is not involved in any way" in the investigation against Koh, the chairman told reporters.



But the investigation has rattled investors. Datacraft's stock is down 42 percent from a mid-January peak, though selling in recent months also reflects disappointment over the pace of its earnings recovery, analysts say.



COST SAVINGS



Datacraft, a unit of South African information technology group Dimension Data, reported net earnings of $158,000 for the three months to March 31, rebounding from a net loss of $12.9 million a year earlier.



The turnaround reflects mostly cost savings after Datacraft cut 160 jobs in non-core businesses in the past financial year, a company official said.



Revenue rose 10 percent to $89.0 million from a year earlier.



Chief Executive Bill Padfield said, he expected Datacraft's loss-making China unit to turn profitable in three to four quarters and its South Korean operation to move into the black in six months.



The company is considering using a $78.7 million pile of cash for possible acquisitions, a dividend payout or stock buyback. Padfield said a decision had not been made yet.



Datacraft has already flagged plans to merge its five call centres into one centre in India in the second half. While this would enhance profitability in the longer term, it would have to bear "short-term consolidation expenses", it said.



For fiscal 2003, the company was in the red for the second year running, losing $16.1 million. But analysts polled by Reuters Research expect Datacraft to post a full-year net profit of $8.7 million in 2004.



Datacraft's rivals include the services units of U.S. heavyweights Hewlett Packard Co Ltd. and International Business Machines Corp, as well as smaller player Frontline Technologies Corp.



© Reuters

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