Asha Speckman
Datatec expected revenue to increase modestly to between $5.6 billion (R51.4bn) and $5.9bn during the current financial year, as weak economic conditions prevailed in most markets the technology firm operated in, chief executive Jens Montanana forecast yesterday.
“Companies remain cautious about investment, generally have strong balance sheets and are mainly focused on information technology [IT] projects with compelling return on investment,” he said.
Reporting a 4 percent hike in revenue to $5.25bn for the year to February, Datatec said trading had slowed in Europe and North America during the second half of the year.
Underlying earnings a share declined to 43.1 US cents compared with 47.9c for the same period a year earlier, but cash generated from operations increased to $316.8 million from $102.8m previously.
Datatec subsidiary Westcon, which contributed 73 percent to group revenue during the year, suffered the biggest decline in profit as it was the most exposed to these markets.
Westcon’s revenue inched up to $3.8bn during the 12 month period from $3.7bn previously. Its earnings before interest, tax, depreciation and amortisation dipped to $117m compared with $133m the year before.
In January, Montanana said Westcon’s Canadian and US operations would be restructured into a single business unit as the adverse economic conditions placed a strain on the subsidiary is a value-added distributor of network, security and unified communications products. Westcon is still in discussions to exit a business partnership in India.
Datatec’s board said yesterday that it expected Westcon to return to real revenue growth with operating leverage returning during this financial year.
Dirk Noeth, an analyst at Avior Research, said: “I’m positive on the US, where economic recovery appears to be gathering pace. Europe will remain muted. Asia Pacific is likely to continue to grow at a steady, albeit more muted pace. Latin America is a concern, with Brazil showing some jitters.”
The board said Datatec’s second-largest unit Logicalis, which offers integration of technology infrastructure solutions and managed services, would deliver robust performance.
Logicalis reported a 9 percent rise in revenue to $1.35bn, which included $8.5m revenue from acquisitions made during the year. In June last year, the unit bought Corpnet, an Australian provider of IT solutions including data centre, cloud and managed services. In November, it acquired voice, data and video call solutions provider Cibercall’s operations in Colombia and Ecuador.
Revenue from product sales grew by 8 percent for the year, but was 2 percent lower in the second half on lower product revenues after a strong first half that included two very large transactions, Datatec said.
The group said it would maintain its final capital distribution due to its strong financial position and prospects. The dividend for the year was R1.53 a share.
Datatec shares gained 5 percent to close at R56.50 yesterday.