Datatec opts to withhold dividends
DURBAN – Datatec, the international information and communications technology (ICT) group, has opted to withhold a dividend payment despite reporting an 83 percent surge in earnings for the year to end February.
The group said on Wednesday that its policy is to maintain a fixed three times cover relative to underlying earnings when declaring dividends.
“However, as a result of the current Covid-19 pandemic and stated focus on preserving cash, the board has decided not to declare a dividend for financial year 2020,” Datatec said.
However, the group managed to return $60 million (R1.05 billion) to shareholders through a special dividend and share repurchases during the period.
Datatec generated $215.6m of cash from operations during the year, up from $69m generated last year.
Chief executive Jens Montanana said the group generated significantly improved cash flows while they returned $60m to shareholders through a special dividend and on-going share repurchases during the year.
“Since the start of the new financial year, the Covid-19 pandemic has taken its toll on economies, communities and business everywhere. We were able to adjust and move rapidly to a remote working environment across the group and all divisions. “We have seen increased demand for technologies and services required to enhance remote working in areas such as security and network access solutions, cloud migration and infrastructure virtualisation, as well as unified communications,” Montanana said.
Datatec reported an 83 percent increase in earnings before interest, tax, depreciation and amortisation (Ebitda) to $158.7m, and underlying earnings per share (Ueps) increased by 50 percent to 9.9 US cents a share while revenue was flat at $4.3bn.
Montanana said the group delivered strong results in the past year, supported by good operational execution in all divisions in the face of growing global economic uncertainty.
“Westcon International returned to profitability and Logicalis Latin America produced an exceptional performance, as did Analysys Mason, our management consulting division, which continued to benefit from demand for 5G expertise.”
Peter Takaendesa, the head of equities at Mergence Investment Managers, said Datatec reported a strong recovery in earnings driven by the Westcon International restructuring process and the continuing strong growth in its IT services division Logicalis.
“The best part of the results was much stronger cash generation from operations which has significantly strengthened their balance sheet.
“Covid-19 will surely have an impact on their operations through emerging markets currency volatility and potentially weaker demand, but some of their segments are experiencing increased demand for their technology and IT services as companies adopt remote working.”
Takaendesa said the company had returned significant cash to shareholders in the past financial year and they expected the board to continue to drive the value unlock process promised to shareholders.
“The potential listing of Logicalis Latin America and potential disposal of Westcon International in the next few years are likely to be key value unlock targets for the company.”
The share price closed at R22.01.