• Thursday, April 25, 2024
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Change in business strategy pushes CWG’s HI revenue down

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The Computer Warehouse Group (CWG Plc), indigenous technology company, has blamed recent revenue decline on the recent change in strategy, which is expected to take the business in a different direction, based on a robust subscription business model.

According to Remi Adeloye, CWG’s financial controller, the company’s 2014 first half of the year revenue of N8.3 billion is 16 percent below 2013 N9.9 billion, while Gross Profit N1.6b is 23 percent below 2013 N2.1b. The lower H1 revenues, acoording to him, is a reflection of the continued decline in margins on traditional Information Technology (IT) infrastructure business due to commoditisation and competitive pressures, as well as viable alternatives in the Cloud Computing Frontier.

Continuing, Adeloye further added “the financial position of the group remains strong with adequate liquidity, leverage and efficiency ratios”.

H1 2014 Current ratio improved to 1.5 as against H1 2013 which was 1.4 signifying strong liquidity and adequacy of working capital to meet transactional needs. Also CWG’s leverage debt to equity ratio remains low at 9 percent as against 10 percent in 2013.’ According to Austin Okere, group chief executive officer, “We crafted the plan code named CWG2.0 in 2010, realising back then the pervasiveness of cloud computing, and the major enablement for this in our region following the increase in broadband access from 0.65tb to a combined capacity of 9Tbits per second.” He explained that while the tremendous growth recorded by the company over the years had been propelled by its traditional businesses in hardware and software sales and support, and VSAT bandwidth vending, these areas, according to him, “represented mature and declining margin businesses, the import of which have been evident in our recent financial statements”, Okere further added.

Emphasising the imperative in the shift in strategy, Austin Okere, group chief executive officer, said, in a recent statement, “we consider the refocusing of our business into a subscription based model as a dual advantage play. In addition to being a more sustaining strategy, it maximises our social impact investing on the economy of Africa, and helps to create jobs by empowering entrepreneurs in the countries of our operation.”

The dip in the technology company’s H1 numbers while expected, according to Okere, will be more than compensated for when the full import of CWG2.0 comes fully on stream by H2 2015.’

With the rebasing of Nigeria’s GDP to $509.0b (N80.3trillion), capturing the recent growth effects in sectors such as telecoms and the movie industry (Nollywood), and with the fast growth of the ICT sector, contributing about 8.3 percent of current GDP, Okere’s optimism is not far-fetched.

The uptake of the company’s new cloud products not only in Nigeria but also in Ghana, Cameroon and Uganda proves that the emerging business model of providing IT services on a subscription basis is scalable, repeatable and transferable, albeit relatively more sustainable and profitable, according to him.

Following its listing on the Nigerian Stock Exchange in November last year, the company has vigorously pursued her CWG2.0 initiative with the commissioning of a tier 3 Data Centre and the release of many products, which have been solely locally developed, or in collaboration with other innovative Companies such as MTN Nigeria, Diamond bank and Ericsson among others. According to James Agada, chief technology officer of the group, “CWG2.0 is all about the freedom to dream and the passion to execute. CWG2.0 defines the future direction of our company.”

Ben Uzor