Datatec reports 19.32% drop in profits as strong dollar weighs

INTERNATIONAL information and communications technology (ICT) group Datatec reported yesterday a 19.32 percent decline in profits to $22.67 million (R317.83m) for the six months to end August as a strong US dollar and global trading conditions continued to impact margins.

The company said its earnings before interest, tax, depreciation and amortisation (Ebitda) decreased 14.48 percent to $68.90m, down from $80.57m, while underlying earnings per share decreased to 12.5 US cents from 16.6 cents as compared with the comparable reporting period.

But chief executive Jens Montanana said the company was optimistic that it would produce better results next year despite the decline.

“There are now, however, signs of improved confidence in emerging markets and we expect a continued slow recovery in these markets, with more stable currencies,” Montanana said.

Datatec operates three divisions: Westcon, which accounted for 75 percent of the group’s revenue; Logicalis, which accounted for 24 percent; and Consulting and Financial Services, which accounted for 1 percent.

The group’s operating profit fell 27.8 percent to $40.68m compared with $56.34m, while revenue came in at $3.04 billion, down 7.6 percent as compared with the $3.29bn during the corresponding period last year. per ordinary share, down from 114.32 cents per share declared in the comparative period, which would be paid from income reserves.

Montanana said the company had strengthened its position in key markets and anticipated better second half results.

Peter Takaendesa, a portfolio manager at Mergence Investment Managers, said the operating results were largely in line with the guidance provided by the company last month.

Takaendesa said the results were still affected by a stronger average dollar over the period, which affected revenue from their European and emerging markets operations as the company reports in dollars.

He said that with the currency headwind largely reversing at the moment and economies picking up, the company would recover to better growth rates into next year.

“We… expect strong earnings recovery from Datatec over the next few years driven by stronger revenue growth, as well as margin expansion.”

Datatec shares fell 0.86 percent yesterday to close at R47.50.