Datatec’s earnings slip on weaker Westcon

Listed ICT group Datatec has on Wednesday (15 May) reported a decline in earnings for the financial year ended February 2013, impacted by a weaker second half at its subsidiary, Westcon.

While the group improved revenue for the period by 4% to $5.25 billion, operating profit declined to $141.373 million, from $150.644 million, while earnings before interest, taxes, depreciation and amortization slipped to $185.5 million (2012: $190.2 million).

Datatec reported diluted headline earnings per share of 40.4 US cents, from 42.5 US cents in 2012.

Cash generated from operations increased to $316.8 million (2012: $102.8 million), and the group delivered a total capital distribution to shareholders of ZA153 cents (approximately 17 US cents 2012: 16 US cents) per share.

Datatec 2013 Operating profit EBITDA
Datatec 2013 Operating profit EBITDA
Datatec 2013 Revenue
Datatec 2013 Revenue

Jens Montanana, chief executive of Datatec, said: “Last year presented contrasting trading periods and differing divisional achievement.  In the first half we performed well in most operations around the world and met our financial expectations.

“However, in the second half, Westcon experienced a slowdown in revenues, particularly in Europe and North America. Logicalis, by contrast, continued to perform strongly throughout the year especially in the UK and USA.

“Our increase in capital distribution, despite the weaker second half and challenging trading environment, is a clear demonstration of our confidence in the sustainability of our long term growth strategy.

“In the current financial year, we anticipate another robust performance for Logicalis while Westcon will continue to consolidate and focus on improving operational leverage,” he said.

Datatec is a global ICT solutions and services group with more than 6,000 employees worldwide and with operations in over 50 countries.

Westcon is a distributor of converged communications solutions, focusing on tailored voice, security, mobility, storage and power solutions. It accounted for 73% of Datatec’s revenues (2012: 74%) and 59% of its ebitda (2012: 65%).

34% of Westcon’s revenue was generated in Europe (2012: 35%), 33% in North America (2012: 35%), 13% in Asia Pacific (2012: 13%), 10% in AIME (2012: 11%) and 10% in Latin America (2012: 6%).

Operating profit declined to $98.2 million, from $120.4 million in 2012.

In terms of revenue by business stream, 73% (2012: 74%) came from technology distribution, 19% (2012: 18%) from ICT Solutions (Logicalis product sales) and 8% (2012: 8%) from services (Logicalis and Consulting services).

Looking ahead, Datatec said that weak economic conditions continue to prevail in most of its markets.  Companies remain cautious about investment, generally have strong balance sheets and are mainly focused on IT projects with compelling return on investment.

“The cloud computing model is driving growth in many of the sectors in which the group operates, such as data centre and networking managed services, the integration of unified communications systems and security solutions. Conditions in Europe remain weak with modest growth in the US,” it said.

However, the group said that it expects to return to revenue growth with operating leverage returning in the 2014 financial year.

It said that based on current trading conditions and prevailing exchange rates, the group expects revenues for the 2014 financial year of between $5.6 billion and $5.9 billion, with underlying earnings per share to be approximately 50 US cents and both earnings per share and headline earnings per share to be approximately 46 US cents.  Profit after tax is expected to be approximately $102 million.

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Datatec’s earnings slip on weaker Westcon