Datatec has reported improved operational execution in all divisions for the six months ended 31 August 2018.
Group revenue came in at $2-billion, with EBITDA at $42,6-million and underlying earnings per share of 3.6 US cents.
Jens Montanana, chief executive of Datatec, comments: “The group’s first half results came in ahead of our expectations, backed by improved operational execution across all divisions.
“Logicalis performed well in the first half and produced good results despite emerging market currency headwinds, especially in its key Latin America region.
“Westcon International’s recovery is underway and we are delivering on our commitments for this division with the ERP system now stable, the BPO reversal almost complete and central cost reductions on track.
“Looking ahead, we expect the improved operational and financial performance to continue for the remainder of the year. We are addressing the valuation gap through improved execution at Westcon International and the ongoing share buy-back programme. We continue to pursue small acquisitions that enhance Logicalis’ positioning in the long term.”
Datatec is an international ICT solutions and services group operating in more than 50 countries across North America, Latin America, Europe, Africa, Middle East and Asia-Pacific. The group’s service offering spans the technology, distribution, integration and consulting sectors of the ICT market.
Datatec operates two main divisions:
* Integration and managed services – Logicalis: ICT infrastructure solutions and digital enablement services; and
* Technology distribution – Westcon International: distribution of security, collaboration, networking and data centre products and solutions.
Datatec’s strategy remains to deliver long-term, sustainable and above average returns to shareholders through portfolio management and the development of its principal subsidiaries providing technology solutions and services to targeted customers in identified markets around the world.
Logicalis is the largest contributor to the Group in terms of profitability. The division also continues to provide the widest geographical exposure and Datatec intends to continue to develop and grow Logicalis globally.
In H1 FY19, Logicalis delivered a good performance while executing on its strategy. Revenue grew by 14,4% and EBITDA by 37,2% in relation to H1 FY18, supported by a significant multi-year project in Latin America.
Westcon International is 90% owned by Datatec following the sale of Westcon Americas to SYNNEX together with 10% of Westcon International in FY18. As highlighted in the prior year, the Group’s strategy to reshape the Westcon International business in order to restore profitability and reduce the central cost base which was retained after the SYNNEX transaction, is well underway.
In H1 FY19, Westcon International continued to deliver on its commitments to organisational renewal and restructuring. The ERP system is now stabilised after a long and disruptive multi-year implementation process. The BPO reversal is complete in Asia-Pacific and nearing finalisation in EMEA with in-house shared service centres in the Philippines and South Africa now in place to drive operational efficiency
The quantum of the earn-out payment relating to the disposal of Westcon Americas to SYNNEX has not yet been agreed and the parties are currently engaged in an arbitration process through an independent accountant as provided for in the sale and purchase agreement. Datatec will update shareholders once this process is finalised.
The board expects the improved financial performance of H1 FY19 across all divisions to continue in H2 FY19. Logicalis’ financial performance is expected to be maintained throughout the rest of FY19 although its results may continue to be impacted by currency weakness especially in Latin America.
Westcon International is expected to benefit further from the reorganisation, targeting monthly operating profitability by early next year.
The company will continue with its general share repurchase programme, subject to market conditions.