Johannesburg - Datatec was in talks over two merger and acquisition opportunities in south-east Asia, chief executive Jens Montanana said yesterday as shares in the technology provider fell after it posted weak interim results.
Improvements in the European economy might also make the region an attractive investment destination next year for the first time in six years as the recessionary atmosphere appeared to be abating, Montanana said.
“An area where we are clearly underweight is Asia.”
Datatec is seeking bolt-on acquisitions of companies specialising in management devices and systems integration, businesses that typically deliver between $100 million (R988m) and $200m in annual revenue.
In May Datatec said it was seeking acquisitions of at least $50m in Asia. The Asia Pacific region’s contribution to Datatec group revenues in the six months to August declined to 11 percent from 13 percent in the same period last year, the JSE-listed firm said.
South-east Asia is increasingly attractive to industries such as motor manufacturing due to its growing middle class and natural resources.
Montanana said the group hoped to grow its business in Africa beyond the nine countries in which it operated and into a $400m to $500m business over the next three years.
Acquisitions were not in the pipeline for Datatec’s operations in North America where its Westcon subsidiary reported lower transaction volumes and revenue growth following temporary challenges with a new information technology (IT) system it had implemented.
“It means changing the way we have to behave, the connections between the field sales force and the back end,” which was difficult. Westcon, a speciality distributor in branded networking, security, mobility and convergence products, achieved a 3 percent increase in revenue to $1.96 billion.
Challenging market conditions in mature markets in Europe and North America also slowed Westcon’s growth and were expected to continue through year-end.
Westcon is Datatec’s largest subsidiary and contributed 71 percent to the 6 percent jump in group revenue to $2.77bn for the half year to August.
Logicalis, a subsidiary providing IT solutions and managed services including data centre and cloud computing, reported revenue growth of 12 percent to $767.3m, largely from better sales in Latin America. The Consulting Services division reported a 3 percent decline in revenue to $37.1m.
Adrian Zetler, an equity analyst at Coronation Fund Managers, noted that Datatec’s costs had not declined as management promised previously while he questioned the further weakened outlook for full-year financial performance.
The shares fell 4.02 percent to R57.59 yesterday. - Business Report