Flat results from Datatec

JSE-listed Datatec has reported a small decline in earnings before interest, depreciation and amortisation (EBITDA) for the six months to 30 September 2001.

The 6% fall in EBITDA is largely as a result of difficult trading conditions and disappointing results from professional services and IT network integration arm Logical, says executive chairman Jens Montanana.

While revenue rose 6% in rand terms, it contracted about 10% in dollar terms. "I think our decline in dollars is fairly commendable in the sector or the universe we operate in," Montanana says.

"The rand depreciation has obviously helped us in the rand expression of the numbers."

Headline earnings per share were up only fractionally. Montanana says the group is happy with this, given market conditions.

"Importantly, in this period of contraction, we are now generating operational cash flow and also we have paid a lot of attention to tight management control in these trading conditions.

"The fact is that economic conditions have changed. We have to adapt to the new realities to ensure that we produce the best performance possible under the circumstances.

"The speed and extent of this change has been felt deeply by virtually every player in the broader IT sector. Datatec has coped relatively well. The investments made previously in establishing streamlined and strongly focused business units have made it possible to weather the storm."

Expenses have been further reduced across the group`s operations, including staff reductions, he adds.

Staff numbers have been cut by almost 22% over the past year, from 4 008 in October last year to 3 146 currently.

He says the outlook has deteriorated since 11 September, and it is unlikely that the second half of the financial year will match the first. As a result, the full-year results are expected to be lower than the previous financial year.

This would be the first year-on-year contraction in the group`s history, he adds.

Cash generated from continuing operations improved substantially during the period, which Montanana attributes to significant improvements in working capital. This was due mainly to a sizeable reduction in inventories.

Montanana says he believes the reduction in Westcon revenues has stabilised, and monthly revenues continue to reflect a levelling out of demand. Trading conditions remain difficult and have also been affected by the events of 11 September.

The international listing of Westcon is on hold, although the group still intends to list it in the US once market conditions improve.

Logical has consolidated its previous restructuring, and management has concentrated on maintaining margins, with tough economic conditions affecting Logical`s core markets of the US, Europe and South America.

Although an analyst describes the results as disappointing, and considerably below his expectations, the Datatec share price was trading 3.67% or 45c up at R12.70 on the JSE this morning.