ASX-listed IT vendor and distributor Legend Corporation has bought out its South African joint venture partner, flagging a plan to move manufacturing to Singapore but keep on with its African distribution arrangements.
Bradley Dowe, chief executive officer of Adelaide-based Legend, said in a letter to the ASX that Legend was taking over the operation of its five-year-old manufacturing and distribution joint venture in South Africa, Memory Performance.
Legend would pay 4.6 million South African rand ($944,931) to its former joint venture partner and decommission Memory Performance's manufacturing facilities in South Africa, he said.
The manufacturing part of the operation would move to Legend's new Singapore site, but Legend would keep supplying its memory module products to Memory Performance, Dowe said.
"Memory Performance will benefit from the synergies with the broader Legend global procurement and distribution network, letting the South African operations deliver considerably better sales revenue and margins than under the joint venture," he said.
Dowe said the joint venture had earned 36 million rand ($7.2 million) and net profit after tax of 581,546 rand ($117,000) in the year to February 2005.
"The South African business is expected to add $10 million in additional revenue for the financial year 2006," he said.
Total revenue for Legend in the 2006 financial year has been tipped to hit $205 million, up 20 percent from the 2005 financial year, Dowe said.
"We believe our low-cost distribution model, enhanced product linecard and global competitive pricing can add considerably greater sales than previously achieved," said Legend sales director Rob Kester.
Memory Performance would still distribute memory and related components across sub-Saharan Africa. However, its South African staff numbers would be cut under the watchful eye of founding team member and former joint venture chief Robert Carlton, Dowe added.
The African operation would be supported from Australia and from Legend's soon-to-be-launched Singapore operation, he said.
"Legend in South Africa will now share the same systems, processes and manufactured productst as [Legend in] Australia and New Zealand," Dowe said.