Datatec does not learn from its costly mistakes

Datatec is learning a hard lesson, again. The technology group’s subsidiary Westcon is implementing new software systems that it intends to result in a seamless ordering and monitoring of its product and services at its warehouses. Westcon distributes technology hardware used in areas such as data centres.

It is a huge project, which it had done twice before in Australia and North America, and during which its operations were also disrupted.

Which is what makes it peculiar that Datatec seems not to have fully grasped what the effect of a project of this magnitude can have on the business if it is not executed properly. As a consequence, its profit for the year to February took a huge knock.

CEO Jens Montanana admitted the group probably underestimated the effect the project would have on operations.

Unlike during the Australian and North American projects when the company was dealing with one currency for payment, in Europe, it had to process orders in different currencies and connect the systems to multiple warehouses.

While the process is almost completed, Datatec may incur further costs upon the completion of the process.

At the same time, it is in the process of selling Westcon, its biggest subsidiary that accounts for about 74% of the group’s revenue. Selling the business is likely to substantially lessen investor interest in Datatec.

The group will be left with smaller subsidiaries, such as Logicalis, which makes up 25% of the group, although it is doing fairly well. But investors should really be concerned that earnings tumbled as a result of the same project that the group had implemented twice before.

Vukile Property Fund has become the first of what should be many South African listed-property companies that invest in Spain. The group, which focuses on buying and managing retail centres in SA, has bought 86.89% of the shares in Castellana, an unlisted Spanish real estate investment trust, for R193m. It made the announcement while reporting its financial statement for the year to March.

Castellana owns two callcentre properties that are both let to Konecta, a large call-centre company on a 15-year triple net basis. Spain’s economy is growing healthily after it struggled to recover from the 200809 global recession. The country’s tourism sector has been a big driver of its recovery. Spain’s economy grew 3.2% in 2016 and 3.2% in 2015. Spain is the sixthlargest economy in Europe by nominal GDP.

Given that Vukile has an R1.5bn war chest for its offshore expansion, it is reasonable to expect the group to build a presence in Spain quickly before other competing South African companies can begin to play on its turf.

Many South African funds have ventured into eastern Europe during the past yearand-a-half and, given how competitive the likes of Poland, the Czech Republic and Romania have become, they may do better in as large an economy as that of Spain.

Vukile already invests in the UK through its stake in Atlantic Leaf Properties. Vukile’s CEO Laurence Rapp said Spain was his fund’s focus in terms of where it would make new investments during the next financial year.