Dual-listed Datatec, which recently bought Comztek for R88 million, says it is unlikely it will hit its previously expected revenue target of between $5.5 billion and $5.8 billion.
The news, announced yesterday, sent its shares 4.13%, or 23c, lower at close of trade to end at R53.40. The JSE's All Share index closed 0.14% down by comparison.
Datatec previously expected turnover for the year to February to come in at between $5.5 billion and $5.8 billion, while after tax profit was anticipated to be around $104 million and headline earnings per share would equate to about $0.50. At the end of the last financial year, Datatec turned over $5.03 billion, a 17% gain.
Westcon's performance, into which Comztek will be brought, was weaker than expected in the third quarter of the year, and comparatively lower year-on-year. Westcon is Datatec's largest unit.
Budget cuts
CEO Jens Montanana says there has been a slowdown in investment in the US as the so-called fiscal cliff approaches. The recently-coined term refers to the effect of a number of laws that, if left as is, could lead to tax increases, spending cuts, and a reduction in the budget deficit from next year.
"Continued weak conditions in Europe, business disruption in North America, due to hurricane Sandy, and lower than expected Federal business have negatively affected trading so far in the second half," says Datatec in its announcement.
Dean Douglas, president and CEO of the Westcon Group, said in a presentation yesterday that the company has been increasing its revenue from emerging markets and has become less reliant on North America since 2005. Westcon handles $4 billion in distribution and is present in 55 countries and turned over $3.7 billion in the year to February 2011.
Douglas said Westcon aims to continue broadening its geographic footprint to mitigate reliance on any marketplace as well as creating scale through its vendor and skills portfolio. Two-thirds of its revenue comes from outside North America.
Datatec says Logicalis continued to trade strongly and is performing in line with expectations, but demand for its Consulting Services division weakened in the second half.
In the first half of the year to August, revenue gained 7%, to $2.62 billion, while its operating profit gained 7.3%, to $71 million, despite a 10.4% increase in operating costs. Datatec has increasingly been boosting its exposure to emerging markets.
Datatec says it is on track to hit revenue of between $5.5 billion and $5.8 billion in the full year, a gain on last year's $5.03 billion. Its unchanged full-year forecast is despite an increasingly uncertain economic outlook.
The group will issue a statement in January, which will include an updated forecast for the full year.
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