File photo: INLSA

JOHANNESBURG - Datatec is eyeing cost-cutting measures and right-sizing after the JSE-listed information communication technology company made two major disposals in the six months to September.

The group disclosed this information during the results presentation yesterday. Datatec said it has sold Westcon-Comstor’s businesses in North America and Latin America (Westcon Americas), as of September 1, and a 10percent interest in the remaining part of Westcon-Comstor (Westcon International) to Synnex Corporation for $630million (R9.05billion) in cash, with the potential for an earn-out of up to $200m in cash.

“This business, which has faced difficult trading for the last few years, will be reshaped through a combination of cost-reduction measures and business efficiency initiatives,” the group said. The Westcon International currently retains $63m annual central costs of Westcon-Comstor.

It has an existing transitional services agreement with Synnex, which will run until August 2018. The group said going forward Westcon International would be able to implement fully its plans to reduce the central costs and right-size the business. Peter Takaendesa, a portfolio manager at Mergence Investment Managers, has also noted that the business was starting to right-size after selling Westcon Americas and management was working on reducing the legacy central overheads in the remaining Westcon operations outside the Americas.

“Selling of Westcon Americas at an attractive price has brought forward the value unlock for shareholders as R5bn has been set aside for a special dividend and we believe the remainder of Westcon operations will also be sold as soon as they have been stabilised from the SAP implementation problems and head office costs right-sized,” he said.

In the results the group reported total revenue including revenue of the disposed operations of $2.99bn compared to $3.04bn while combined earnings before interest, tax, depreciation and amortisation was $39.3m as compared to $68.9m.

Exceptional value

Underlying earnings per share was US1.4cents compared to 12.5c for last year.

Chief executive Jens Montanana said although the first half headline results were disappointing, the group has generated exceptional value through the successful sale of its Westcon Americas business and recently the smaller disposal of the non-core Logicalis SMC business.

“In the near term, we plan to return $350m of cash to shareholders in a structured way to give them maximum flexibility and in due course return to shareholders any deferred cash consideration from the sale of Westcon Americas,” Montanana said.

Commenting on the results, Takaendesa added that the underlying earnings per share of 1.4c were in line with the trading update guidance provided a few weeks ago and show that the business has at least stabilised when compared to an underlying loss per share of 1.5c for the last six months to end February.

Datatec has three businesses: Weston-Comstor contributes 76percent to the group’s revenue, while Logicalis contributes 23percent and Corporate, Consulting and Financial Services is contributing 1percent.

Datatec shares yesterday closed 5.44percent lower on the JSE at R59.76.