Networking and IT services group Datatec lost 6.8% on the JSE this morning after it warned that its interim headline earnings per share will be substantially lower than those of a year earlier.
By late morning the share was trading at 550c, 40c down on Monday`s close. The JSE was closed yesterday due to the Heritage Day public holiday.
The group says it issued the warning in response to the weakness in its share price. CEO Jens Montanana had warned previously in the Datatec annual report that he expected a drag on profits in the year ahead and that margin pressure on product sales would continue eroding the group`s operating profit performance.
The group is blaming the unquantified earnings decline on the expected initial trading losses associated with the recently acquired Landis Business Partners operation in Europe and on foreign exchange losses from the appreciation of the rand relative to last year.
It says there is also pressure on earnings resulting from lower margins in the industry, in line with expectations.
While headline earnings per share for the six months to 30 September are expected to be "substantially" below those of the same six months last year, the figure for the second half of its financial year will be better than for the first half.
However, it does not expect a recovery until at least calendar 2003.
Datatec has also announced a group reorganisation which will see it combine the head office functions of integration services arm Logical with those of the Datatec head office.
Montanana will assume responsibility for the day-to-day management of Logical in addition to his current duties. Logical CEO Stephen Lawrence will step down from his position and from the Datatec board with effect from the end of the month.
The group has not indicated whether Lawrence is to resign from his position as non-executive chairman of Mason, which Datatec acquired in 1999.
"Logical will continue to operate as a separate division, with international operations in 10 countries," Datatec says.
"Sister companies Mason and RangeGate will become more closely integrated with Logical to provide greater leverage across customers and resources."
The group, which says the move is in line with a decision to continue streamlining operations, shorten reporting lines and reduce costs, expects to save at least $2 million in annualised costs in future years by combining head office functions.
Mark Lilje, former chief operating officer at RangeGate, has been appointed RangeGate MD to replace Andrew Fosbrook, reported to have left to pursue other business interests.
"Our core focus is software solutions for improving supply chain efficiencies," says Lilje. "What we have done in the reorganisation of the business is to focus on the supply chain solutions rather than custom software solutions and unrelated hardware sales."
Datatec deputy chairman John McCartney will become non-executive chairman of Westcon to better distinguish the positioning of Westcon and to provide a sharper focus in the lines of reporting.
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