IT services business Datatec watched revenue slide by 21% over the first half of its financial year.
The company released its interim results set for the six months ended 31 August this morning, showing the effects of the global recession on the business.
The company's operating profit was beaten down 38% and headline earnings per share were 72% lower at 4.9 US cents per share. However, the group's balance sheet remained strong, with $318 million held in cash.
Datatec says a recovery is anticipated in the US and Europe, while South America, Middle East and Asia have remained robust. “Business conditions have become more predictable, particularly since the second quarter.”
High hopes
“The global economic slowdown has led to reductions and delays in IT spending, which has impacted on Datatec's performance. This has been particularly felt in the Logicalis business due to its focus on North America and Europe,” says Frost & Sullivan ICT industry analyst Spiwe Chireka.
However, she says IT services companies globally can start looking forward to better times and Datatec's financial report agrees. “The board is confident of a return to revenue growth in all divisions in the second half of the year. The group has seen some early signs of improvement in the macro-economic conditions in most regions in which it operates,” the company explained in its SENS statement.
According to Frost & Sullivan, over the past few years, Datatec has benefited significantly from its expansion into emerging markets. However, the effects of the global recession have had a considerable impact on the group's earnings over the first half of the current financial year.
“Businesses have somewhat adjusted to the current crisis and we can expect companies such as Datatec to be near if not over their operating targets in the second half of the year. The group's increased focus on services and consultancy is a key strategy in this regard,” adds Chireka.
The group's intention to move into China could be another major source of growth, she notes.
“The risk of moving into this market is sizeable due to the relatively high barriers to entry. However, no one can deny the potential it offers due to the huge addressable market in that country. As far as I know, Datatec would be the first among its key South African competitors to enter this market, so all eyes will be on the group to see how it fares.”
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