* Continuing revenue up 10% to $2.54 billion
* Operating profit improvement of $20 million
* HEPS up to a profit of 4c from a loss of 6.7c
* Earnings per share up to 38c from a loss of 19c
* Net tangible asset value per share up 12% to $2.30
* Net cash on hand at year-end up 58% to $140.3 million
After early signs of a recovery at the mid-year, Datatec, the international IT and networking services group, has turned a $13.2 million operating loss in 2004 into a $7.1 million operating profit for the year to February 2005.
Headline earnings per share also moved solidly into the black to 4c, up from the previous year`s loss of 6.7c, while earnings per share - inclusive of the net proceeds of the sale of the group`s interests in Australia and New Zealand - rose to 38c from a loss of 19c the previous year.
Continuing revenues rose 10% during the period to $2.4 billion with the group`s margin strengthening in the second six months to 10.5%. However, this was down marginally from the previous year`s 11.7%, reflecting the decline in margins that impacted the Group`s Westcon distribution business in Europe. Elsewhere margins were steady.
The pressure on margins was offset to a significant degree by the strong performance of the group`s Logicalis and Analysys Mason Group businesses, which collectively contributed nearly half the group`s operating profit. These businesses account for approximately 20% of total revenue.
Management also succeeded in keeping a tight rein on costs with operating expenses declining by $10 million to $241 million. Operating expenses reduced from 10.7% of revenues to 9.5%.
As a result of this positive all round performance, cash on hand at year-end rose 58% to $140.3 million. The company believes liquidity will be important to the expansion of its services businesses and has therefore not declared a final dividend.
Chief executive Jens Montanana says the encouraging turnaround is the result of significant operational and supply chain management improvements within Westcon and strong profitable growth within Logicalis and Analysys Mason Group.
"Westcon Group`s performance would have been considerably better were it not for the poor gross margins encountered in Europe. However, senior management in that region has been strengthened and we expect this business to become a positive contributor to the Westcon Group in the year ahead," says Montanana.
"Logicalis and Analysys Mason Group benefited from the global improvement in demand for IT services, particularly in solutions integration, VOIP convergence, and the roll-out of third generation (3G) networks by the major mobile phone service providers," he adds.
Montanana says Logicalis made three important acquisitions aimed at enhancing its position as a strategic IBM partner in the US and UK. "They will complement our Cisco and HP relationships and enable us to cater for a greater diversity of IT and networking integration needs. All three should contribute meaningfully to Logicalis` results in the year ahead."
On the BEE front, he says the group expects to make an announcement with regard to the formation of a BEE structure to house the group`s South African interests.
Looking to the year ahead, Montanana believes that the growth in the world`s major economies over the past two years may moderate somewhat.
"If this happens, conditions in the IT sector will slow accordingly. That said, we believe the measures we have taken to heighten operating efficiency and to grow our services business will support an ongoing improvement in revenue and margin," he concludes.
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