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Trading update hurts Datatec share price

Currencies
Durban - Datatec  shed more than 6 percent on the JSE following the release of an unfavourable trading update.

The group said on Thursday that it expected to report a huge drop in earnings for the year to end February. “Underlying earnings per share are expected to be US11 cents for the financial year 2017, this will be 66 percent lower than financial year 2016 earnings of US32c,” the group said.

The news negatively impacted the share price and it dropped 7.24 percent to R56.50 a share at the close on the JSE yesterday, down from Wednesday’s closing price of R60.91 a share.

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The group said year-on-year decline in earnings was as a result of a worse than expected performance in the company’s Westcon subsidiary [Westcon-Comstor)] particularly in the fourth quarter.

Read also: JSE cancels Oakbay trades, starts probe 

Disruption

“Westcon-Comstor experienced disruption to the business as a result of the final Systems, Applications & Products implementation in Europe, Middle East and Africa [Emea],” the group said.

Westcon-Comstor revenues have declined by 7 percent year-on-year.

Datatec announced last month that it is looking at selling a major stake in technology distributor Westcon-Comstor for $800million [R10.83billion]. The group is yet to report any interest for this stake.

It added that earnings for the period were further impacted by higher finance charges, depreciation, amortisation expense and effective tax rate than in the prior year.

Datatec also expects a further decline in headline earnings per share and earnings per share for the period.

“Headline earnings per share are expected to be US2c for financial year 2017, 90 percent lower than financial year 2016 of US19.4c. Earnings per share are expected to be US1.4c for financial year 2017, that is 93 percent lower than the financial year 2016 of US19.3c,” said the group.

Datatec is an international ICT solutions and services group operating in more than 70 countries across North America, Latin America, Europe, Africa, Middle East and Asia-Pacific.

The group’s service offering spans technology, integration and consulting sectors of the ICT market.

The group also reported a decline in the financial performance in the Emea region. It said transformation challenges in Emea led to a drop in revenues of $263m, which was down by 12 percent.

North America revenues were down $111m or 6 percent year-on-year. This was mainly due to softer Cisco and Avaya sales. Latin America performed well, with revenues up 5 percent to $518m while in the Asia-Pacific region revenues were up 2 percent.

Datatec said Logicalis performed in line with expectation and produced revenues of $1.51bn, slightly down from $1.53bn reported in 2016.

Logicalis results continued to be impacted by the weak performance of its UK operations, which were undergoing restructuring, the group said.

The group expects to release its results on May 22.

BUSINESS REPORT ONLINE 

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