IT networking and services group Datatec has positioned itself to make a profit in a no-growth market, which it expects in the coming year. Yesterday the group reported its first loss in its 17-year history.
CEO Jens Montanana says although the past few months saw an improvement in conditions over the year to 28 February, trading conditions are still tough and "it is too early to call a recovery at this point in the cycle".
The group incurred a full-year operating loss of R49 million and a headline loss of 68c a share.
However, Montanana says Datatec is now positioned to make a profit in an anticipated no-growth market.
The group reduced its headcount by 6% by the year-end and has made further staff cuts since then. The recovery plan also calls for a focus on growing sales revenues off a lower operating cost base.
Datatec has targeted an improvement in professional services utilisation and Montanana says recent major customer wins are to be delivered in the first half of the current financial year.
Operations in SA have not been spared the cost-cutting measures. Staff cuts have also taken place locally and the group says it plans to eliminate loss-makers. Certain local operations have been merged and Datatec will "at some point" evaluate the non-core operations, Affinity Logic and RangeGate.
Alan Marc Smith, CEO of subsidiary Westcon, says the European-based Landis business is expected to achieve profitability in some of its operations in the first and second quarters. He anticipates that the Landis business as a whole will be profitable by the third quarter.
Losses at Landis contributed significantly to Datatec`s poor results for the year.
Overall, Datatec achieved a net cash improvement of R773 million despite the tough year, with the balance sheet showing a net cash position of R941 million at the year-end.
"While it is always disappointing to have to report a loss of any sort, the particular combination of challenges faced during the year belie the fact that the offshore core of the Datatec Group remains strong and is generating both cash and dollar profits," Montanana says.
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