IT networking and services group Datatec has reported a full-year headline loss of 68c a share and its first operating loss in its 17-year history.
Operating profit before financing costs, depreciation and amortisation from continuing operations amounted to R195.5 million compared with the previous year`s R896 million.
CEO Jens Montanana says the decline is mainly because of lower margins in the industry, costs associated with downsizing and restructuring, and initial trading losses from Landis Business Partners operations in Europe.
The strengthening of the rand led to foreign exchange translation losses of R104.6 million, compared with a profit of R149.2 million the previous year.
Montanana says if the foreign exchange losses and Landis`s performance were stripped out, the group would have reported headline earnings per share in excess of 50c.
Datatec has changed its year-end from March to February to align itself with subsidiary Westcon. The financial results for the period to 28 February 2003 are for the 12 months for Westcon and 11 months for the rest of the group.
<B>Salient figures</B>
Datatec results for the 11 months to 28 February 2003.
Figures for the year to 31 March 2002 in parentheses:
Revenue: R20.22b (20.68b)
EBITDA: R182m (R846m)
Operating profit: -R49m (R646m)
Profit before tax: -R224m (-R76m)
Profit after tax: -R250m (-R254m)
Attributable profit: -R248m (-R265m)
HEPS: -68c (265c)
EPS: -180c (-202c)
Current assets: R6.09b (R8.42b)
Cash and equivalents: R1.59b (R1.88b)
Current liabilities: R4.16b (R5.71b)
Cash generated by operations: R1.23b (R2.05b)
NAV per share: 1 982c (2 791c)
NTAV per share: 1 591c (2 389c)
The headline loss of 68c per share compares with prior-year earnings of 265c, although Montanana says the performance expressed in dollar terms was substantially better than the rand-denominated results.
Gross margins fell from 14.1% to 12.2% for 2003, which Montanana says is due mainly to the reduction in margins associated with the sales of Cisco products and a decline in professional service revenue.
Capitalised development costs fell by R40.6 million, with amortisation amounting to R36.6 million.
"Costs capitalised during the period arose largely in Westcon, where an additional R37.1 million was capitalised in respect of Westcon`s internally developed enterprise resource planning system known as Compass," he says.
Westcon`s revenue of R16 billion ($1.6 billion) represented a decline of 2.6% in dollar terms from a previous R15.6 billion ($1.7 billion).
Gross margins fell from 10.4% to 8.9%, which Montanana says is mainly because of the reduction in global channel margins associated with sales of Cisco products, the reduction or elimination of margin-enhancing programmes previously offered by significant vendors and the highly competitive nature of a contracting market.
Logical`s revenue slipped to R3 billion ($312.4 million) from R3.8 billion ($390 million), attributed mainly to weak economic conditions in the US and uncertainty in the market following the HP/Compaq merger. "In addition, the uncertainty over Iraq impacted the last four months of the financial year," Montanana says.
Mason`s revenue fell to R243.8 million (lb16.2 million) from R281.6 million (lb20.4 million) although earnings before interest, tax, depreciation and amortisation rose from R13.3 million (lb1 million) to R26.2 million (lb1.8 million).
"The IT, networking and telecommunications industries have experienced a period of sustained contraction. Vendors, intermediary suppliers and service organisations have seen a marked contraction in the levels of business and staffing numbers previously reported.
"The group believes that in the medium term performance should improve relative to the most recent reporting periods. However, business confidence indicators are mixed and world economic recovery remains uncertain," Montanana says.
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