Stock in dual-listed Datatec lost 4.02% yesterday, as the company said an ERP project help up sales in a region of its largest revenue contributor, and it trimmed its full-year revenue prediction.
The group saw its shares on the JSE lose 241c, to close at R57.59. The broader market, measured by the JSE's all-share index, gained 0.27%.
Datatec says, in its half-year results, Westcon's contribution continued to be impacted by the rollout of the ERP system, and expected growth in the US did not materialise. In addition, currency weakness in many countries has impacted market demand.
In the six months to August, revenue gained slightly, to $2.77 billion from $2.62 billion. Datatec now expects full-year income to be between $5.6 billion and $5.8 billion, lowering the top end of the range from its previously stated $5.9 billion.
CEO Jens Montanana says the group is "experiencing varying trading conditions in many parts of the world, with Europe recently showing signs of improvement, while developing markets have been impacted by currency volatility".
Westcon, which accounts for 71% of revenue, had a "disappointing" performance as it was adversely impacted by roll out of an ERP system in North America, which had a big effect on transaction volumes, says Datatec.
Acquisition gains
Its Logicalis unit performed "very well" and benefited from its purchase of 2e2's European operations, in March. It grew operating profit 45%, to $32.7 million. "Logicalis continues to execute strongly and in line with our expectations; Analysys Mason has also performed well," says Montanana.
Logicalis bought the European subsidiaries of 2e2, excluding the UK business, for EUR24 million - then some R283 million - in shares and cash from the company's administrators. This came a few months after its UK operations were put under administration after the group, one of the UK's largest IT services companies, failed to secure finance to repay its "considerable debt", reported InformationAge.
Datatec says Latin America continues to be its strongest performing region. "There have been signs of nascent economic recovery in Europe; however, the market there remains weak. In many other markets currency fluctuations contributed to a mixed performance."
The company earns 39% of its revenue and 44% of gross profits outside of North America and Europe. This compares with 35% of income and 41% of gross profit a year ago.
The group, also listed on the London Stock Exchange, previously based its resilience in tough times on the fact that it has geographical diversity.
"Datatec has a strong market position with no particular dependency on any single market, territory or technology sector." It adds that it will continue to focus on organic growth in the faster-growing sectors of the ICT market, geographic expansion and earnings-enhancing acquisitions.
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