Datatec has turned in results for the last 10 months that are slightly lower than its expectations, but still good considering market conditions.
The board reports that revenues and gross profit margins have held up relatively well despite the sharp deterioration in economic activity in most markets, and it remains confident that the group will deliver year-end revenues of about $4,3-billion.
Group profits have been impacted by the cost base which had been sized for higher revenues than achieved and have also been adversely impacted by the rapid appreciation of the US dollar during recent months particularly against Sterling, the Australian dollar, the Brazilian Real, the Turkish lira and South African rand.
The group remains focused on reducing operating expenses in all areas and on continuing to improve its cash generation. More than $20-million of annualised cost reductions have been completed or initiated during the second half year across all operations.
The board expects, based on current exchange rates, that operating profit before finance costs, depreciation and amortisation (EBITDA) will amount to approximately $120-million for the year ended 28 February 2009. It also expects, based on current exchange rates, that earnings per share and headline earnings per share for the year ended 28 February 2009 will be between 25 and 29 US cents and that underlying earnings per share will be between 31 and 35 US cents.
The gourp has remained profitable in each of its divisions, with gross margins held broadly steady. Operating cash flows have continued to improve as the group deleverages on the back of lower than expected revenues and improvements in working capital.
Westcon's performance for the 10 months ended 31 December 2008 has tracked the trends seen in many of the world`s major economies. Continued weakness
in demand in the US and European revenues has been partially offset by a strong sales result in South America and Asia Pacific.
Revenues for the second half are expected to be somewhat lower than those achieved in the first half of current financial year. This will reduce operating profits and margins which have also been impacted by currency and translation losses that have been incurred, due to the rapid strengthening of the US dollar.
Westcon has continued to align its cost base to the slower market conditions, and will enter the new financial year starting 1 March 2009 with a much lower operating cost base than that of the prior year.
The Westcon Emerging Markets division, consisting of Datatec`s distribution businesses in Africa, the Middle East and India, has continued to grow revenues. The acquisition of a 50,01% stake in Inflow Technologies in India, completed during the second half, has contributed positively in this period.
The strong performance from Logicalis in the first half of the financial year remained robust up to the period ended 31 December 2008. This second half performance has been impacted by the weakening of the Brazilian real against the US Dollar which is expected to result in a reduced contribution from South America in the second half. Operating expenses across Logicalis are being reduced further in line with market conditions and a solid performance is expected for the full year.