Multinational ICT company Datatec boosted its capital distribution payout by 6% in the full-year to February, despite missing its revenue target and reporting lower earnings per share than in the 2012 year.
Datatec generated modest top line "growth, despite the overall sluggishness of the world economy and a challenging trading environment for Westcon in the second half". In January, it said revenue should come in at $5.4 billion, but the group missed this target and reported turnover of $5.25 billion, a gain on 2012's $5 billion.
"Last year presented contrasting trading periods and differing divisional achievement. In the first half, we performed well in most operations around the world and met our financial expectations," says CEO Jens Montanana.
"However, in the second half, Westcon experienced a slowdown in revenues, particularly in Europe and North America. Logicalis, by contrast, continued to perform strongly throughout the year, especially in the UK and US."
The group, which has operations in Africa, the Middle East, Latin America, Asia Pacific, Europe and the US, says the "overall resilience" of the business allowed it to boost its full year capital distribution, the effective dividend, by 6%.
Montanana says its increase in capital distribution, despite the weaker second half and challenging trading environment, "is a clear demonstration of our confidence in the sustainability of our long-term growth strategy".
Its shares gained 5%, or R2.69, yesterday, to close at R56.50 on a day the broader market gained 0.75%.
Global spread
Datatec benefited from its business diversification with Logicalis, its integration and services division, which delivered its strongest performance to date. Overall, Latin America, Asia Pacific and the Middle East and Africa remain Datatec's strongest performing markets, generating 36% (2012: 33%) of Datatec's revenues and 43% (2012: 40%) of its gross profits.
However, its technology distribution division, Westcon, suffered from a slowdown in the second half of the year in Europe and North America as conditions in those markets deteriorated. Datatec says the broad geographic diversification of this division partly mitigated the impact.
Datatec's revenue mix was mostly unchanged, while gross margin contribution per unit was the same as last year.
Some 73% of revenue came from technology distribution, 19% from ICT solutions (Logicalis product sales), and 8% from services (Logicalis and consulting services). In terms of gross margin, technology distribution contributed 57%, ICT solutions 24%, and services 19%.
Reflecting the market conditions in the second half, earnings before interest, tax, depreciation and amortisation dropped to $185.5 million, from $190.2 million. Underlying earnings per share were 43.1 US cents per share, down from 47.9 US cents.
For the 2014 financial year, the company expects revenue of between $5.6 billion and $5.9 billion, and underlying earnings per share of about 50 US cents.
"In the current financial year, we anticipate another robust performance for Logicalis, while Westcon will continue to consolidate and focus on improving operational leverage," says Montanana.
Acquisition boost
Datatec continues to focus on a combination of organic growth in the faster-growing sectors of the ICT market, geographic expansion and complementary acquisitions. Its mid-term priority is focused on building scale and critical mass in the developing markets that it has moved into in the past few years.
Westcon's investment in new markets has now achieved a footprint in most of its desired geographies. Its most significant acquisition in the year was Afina, which extended its geographical coverage in Latin America.
Logicalis's acquisition of the European 2e2 businesses after the end of the financial year is expected to "significantly" boost its presence on the continent, and the addition of the Spanish operation will complement its strong presence in Latin America.
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