Document and storage management specialist Metrofile, which has been working to grow its technology unit to reduce reliance on legacy physical operations, has plans in place to grow digital subscriptions while also looking to maintain its dominant position in paper or physical document solutions.
Metrofile’s physical and digital subscription business contributes 62% of the group’s overall revenue.
“Plans are in place to ensure growth in the subscription-based business to achieve an optimal mix that will support predictable growth. This mix will be achieved partially organically, but also through investments into digital assets such as the successful and value enhancing IronTree acquisition,” Metrofile CEO Pfungwa Serima said as the group reported interim results to December 2023.
He said this would ensure the move “of our primary offerings towards nonpaper-based subscriptions while retaining our dominant position in paper-based storage in SA”.
In 2021, Metrofile spent R48.9m to acquire a 70% stake in IronTree. The business provides data management services including cloud backup, disaster recovery and specialised hosting in a private cloud. IronTree also offers cybercrime and ransomware prevention.
“IronTree continues to grow ahead of expectations and we are currently planning the expansion of its services into the other geographies in which we operate,” said Serima.
Overall, group revenue rose 2% to R577m in the period following growth in secure storage offset by lower demand in products, services and digital.
The company said its revenue growth was negatively affected mainly in three areas. Trading was hit by the increase in interest rates, costing about R6.4m, while customer retention investment in the United Arab Emirates (UAE) and internal process challenges within its scanning centres in the SA business eroded margins.
“While we have limited control over interest rates, we have introduced measures to limit further impact of the other two areas” in the second half of the financial year, the group said.
Earnings before interest, tax, depreciation and amortisation (ebitda) fell 4% to R160m and operating profit 5% to R111m.
Valued at R1.15bn on the JSE, the group operates from 70 facilities and provides records and information management services in SA, Kenya, Botswana, Mozambique and the Middle East, with SA accounting for more than half of its revenue.
Secure storage helped to push up the group’s SA revenue by 1% to R311m, while operating profit was down by 10% to R87m.
Revenue in the rest of Africa — Kenya, Botswana, Mozambique — decreased by 7% to R49m, with operating profit increasing 40% to R18m, underpinned by a positive resolution to a long-standing legal dispute in Kenya.
The group’s operations in the Middle East — made up of the UAE and Oman — continued to grow and expand its digital project pipeline. Revenue for the period increased 28% to R61m, while operating profit was down 48% to R6m due to “a significant lower margin on an isolated project, as well as lower margins on a new take-on project”.
Metrofile cut its dividend 22% to 7c, about a R29.5m payment, down from the 9c it paid in previous matching period.
“While we expect a challenging economic environment given the current macroeconomic situation and upcoming elections, we believe we will see positive results from our operational interventions that stemmed from challenges experienced during the first half 2024,” said Serima.
Metrofile, a lightly traded stock, saw its share price fall the most since late November, down 9.86% to R2.65.
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