Datatec earnings back in the black

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Datatec CEO Jens Montanana.
Datatec CEO Jens Montanana.

International ICT solutions and services group Datatec saw group revenue jump 10.4% to $4.33 billion, while earnings swung back into the black.

This is according to the group's audited provisional results for the year ended 28 February, which showed overall headline earnings were a positive $1.66 million compared to last year's massive headline loss of $41.3 million.

Underlying* earnings per share came in at 6.6 US cents, compared to an underlying loss per share of 17.2 US cents from continuing operations last year. Headline earnings per share were just 0.7 US cents, but this is a big improvement from a headline loss per share of 19.1 US cents last year.

"The group delivered on the commitments set in the prior year, resulting in a much improved financial and operational performance across all divisions," says Datatec CEO Jens Montanana.

Earnings before interest, tax, depreciation and amortisation (EBITDA) was $86.8 million, which is more than three times higher than the $26.7 million reported at the end of February 2018.

Datatec operates in more than 50 countries across North America, Latin America, Europe, Africa, Middle East and Asia-Pacific. The group's offerings span the technology distribution, integration and consulting sectors of the ICT market.

Delivering growth

The JSE-listed South African company operates two main divisions: its integration and managed services through Logicalis and its technology distribution business through Westcon International.

Montanana says Logicalis produced strong results despite emerging market currency headwinds, especially in its key Latin America region.

Logicalis' revenue grew by 11.3% to $1.7 billion and EBITDA by 8.4% year-on-year, to $93.4 million. It is the largest profit contributor to the group, despite only contributing 40% of the group's revenue, and also has the widest geographical exposure. Datatec says it intends to continue to develop and grow Logicalis globally, through organic and acquisition activities.

Westcon International's revenue increased by 9.8% to $2.54 billion for the year, supported by higher revenue in Europe and Asia-Pacific. It contributes 59% of group revenue. Westcon International is 90% owned by Datatec and 10% by SYNNEX.

"Westcon International's recovery is now established, having met the principal objectives around shared services and central cost reductions, with further improvements expected," Montanana adds.

The company's corporate, consulting and financial services segment accounts for just 1% of group revenue. However, the consulting unit's business, Analysys Mason, saw revenue increase almost 9% from $42 million in 2018 to $45.7 million in the 2019 financial year.

Despite global economic uncertainty, the Datatec board says it expects a continued improvement in financial performance for the next financial year.

Montanana says building on the successful turnaround of the past financial year, Datatec is "confident our operations are well positioned to improve their performances further and support our group strategy".

Shopping basket grows

The group made a number of acquisitions during the year, most of which were done through Logicalis.

In September 2018, Logicalis acquired 100% of Clarotech, an Internet protocol telephony cloud and managed services business based in Cape Town, for $3.4 million. Datatec says the acquisition enables Logicalis to combine a focused managed services operation with its existing business in South Africa, to support small and medium business (SMBs) as well as larger corporates.

Also in September, Logicalis acquired 100% of Coasin Chile SA for $17.3 million. Coasin is a Chilean ICT service and solutions provider, which also owns 100% of C2 Mining Solutions based in Peru. The group believes Coasin's experience in the mining and financial services verticals creates opportunities for Logicalis to better serve its multinational clients while broadening its services scope to new customer groups.

In October 2018, Logicalis acquired 100% of Corporate Network Integration (CNI) for $3.9 million. CNI is a Microsoft-certified gold partner based in Melbourne, Australia and brings Logicalis a full suite of Microsoft cloud service capabilities, strengthening the group's position in a growing market segment.

In July 2018, Analysys Mason acquired 100% of the issued share capital of Access Markets International-Partners (AMI-Partners) based in the United States, for $3.5 million. AMI-Partners is an SMB ICT-focused global research and consulting firm that specialises in go-to-market opportunity assessment, tracking buying behaviour, customer segmentation, channel partner ecosystem dynamics and sales enablement enhanced with predictive analytics.

*Underlying earnings excludes impairments of goodwill and intangible assets, profit or loss on sale of investments and assets, amortisation of acquired intangible assets, unrealised foreign exchange movements, acquisition-related adjustments, fair value movements on acquisition-related financial instruments, restructuring costs relating to fundamental reorganisations and the taxation effect on all of the aforementioned.

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