Logicom’s expansion drive to continue

Maintains spectacular growth in sales and profits

 

Logicom Public Co. Ltd. (LOG), Cyprus’ leading IT company with a presence in 14 countries, aims to maintain its spectacular growth by continuing with its expansion drive into new markets and high growth areas.

Logicom Managing Director Varnavas Irinarchos told the Financial Mirror in an exclusive interview that the annualized cumulative growth rate of Logicom during the last five years has averaged 42%. The high growth is expected to continue through the introduction of new products and services as well as new expansion into high growth countries.

The company is Cyprus’ biggest IT company and is associated with most of the major  international software and IT firms. It has distribution and approved partner deals with Intel, Microsoft, CISCO Systems, Seagate, IBM, HP, Kingston, Philips, Sony, Linksys, US Robotics, MaAfee, Symantec and others for Cyprus, Greece, Gulf countries, Lebanon, Jordan, Saudi Arabia and an increasing number of European countries. Logicom has a presence in 14 countries with nine warehouses and has recently expanded into Italy and Turkey. The Group has a total of 4,000 clients spread across 20 countries.

The group is heavily involved in Cyprus in the servers, storage, networking, data security and systems maintenance sectors and provides tailor-made IT solutions.

 

Spectacular growth

 

Logicom’s international expansion drive has helped boost turnover, forecast at just under EUR 250 mln for 2006 from EUR 200 mln in 2005 and below EUR 50 mln in 2001.

Cyprus now represents 16-17% of total group turnover with the Gulf countries accounting for 43% (based on Q306 results), Greece 27%, Lebanon/Jordan 8% and Italy 6%.

Net after tax profits and minority interests up to September 2006 stood at EUR 4.6 mln compared to EUR 2.6 for the full of 2005 and under EUR 1 mln in 2001. EPS stood at EUR 9.80 per share and return on equity (ROE) at 19%.

Total assets are seen at EUR 100 mln, own capital at EUR 33 mln while the ratio of loans to own capital at the end of September stood at 40%. Of the total amount of EUR 62 mln in current liabilities at the end of September 2006, 50% or EUR 31 mln was owed to banks and the remaining EUR 31 mln to creditors.

Debtors amounted to EUR 53 mln, cash balances EUR 21 mln and stocks of goods were at EUR 19 mln.

When asked if the spectacular growth rates are sustainable, Irinarchos pointed out that if the business plans for Italy and Turkey where the company expanded in 2006 are realized, then the desired growth in business will have been achieved.

“But we have plans to broaden the number of products and services offered in Italy, Turkey and Saudi Arabia and expand further into the East European markets,” he said.

By keeping a tab on costs while boosting sales and profits, Irinarchos wants to extend the diversification drive, reduce dependence on any one region and at the same time target 20% annual ROE.

 

Risks under control

 

Irinarchos says that it is imperative for the company to invest and expand into new markets, otherwise it will lose its momentum. The company nevertheless is taking steps to reduce its risk as much as possible.

For example, last year it took credit insurance on its debtors and is contemplating entering into factoring deals for its debtors. As regards stocks, which on average turn over every 30 days, it has invested in an advanced stock management system and has stock rotation and price protection agreements with its principal vendors, protecting the company from volatile price swings.

No wonder that the likes of CISCO Systems consider Logicom as a role model for their expansion into emerging countries, while most of its vendor partners join Logicom in subsidizing some of the costs when entering new markets.

 

Wider ownership

 

Logicom’s spectacular growth, its diverse presence in 14 countries, its expansion drive and its jealously guarded deals with the global IT multinationals are some of the reasons why institutional investors have recently warmed up to the stock.

The Varnavas Irinarchos family is the principle shareholder of Logicom with a 55.7% stake, followed by management and staff with a 6.5% stake, institutional investors with a 24.2% stake and the remaining 13.6% spread among the public.