IT networking and services group Datatec achieved an attributable profit of $55.28 million for the six months to August, compared with a loss of $1.98 million for the same period a year earlier.
The prior period`s results have been restated as the group`s accounting policies have been changed to comply with International Financial Reporting Standards.
Revenue grew from $1.13 billion to $1.25 billion, while operating profit before finance costs, depreciation and amortisation fell from $12.32 million to $10.25 million. The group achieved an operating profit of $2.57 million (2003: $80 000).
Exceptional items of $55.15 million helped the group report a $55.5 million pre-tax profit ($811 000 loss). "An exceptional gain of $55.1 million was incurred during the period, relating to the sale of the Logicalis Australia and New Zealand businesses," says CEO Jens Montanana.
Headline earnings of 0.1 US cents per share compare with a previous headline loss of 0.4c a share. Basic earnings per share of 39.98c compare with a previous loss of 1.43c a share.
"The tech sector recovery is proceeding much along the lines we expected," Montanana says. "Growth in IT spending is in the middle single-digits and varies across the different parts of the sector. In these circumstances, the recovery is steady but not spectacular. Every gain has to be fought for and revenue and cost trends have to be watched closely."
He says the group`s performance would have been substantially better if not for one-off expenses of $8 million in the Westcon Group and poor gross margins from units of Westcon`s European operation. The group is taking steps to fix the poor performance at those units, he adds.
These include plans to improve gross margins and return Europe to profitability by applying the US model to Europe. The programme will be implemented over the next two quarters at a cost of $3.5 million to $4 million.
"This should be viewed as a necessary investment to improve returns later on," Montanana says.
He says the group has made significant progress in turning around Logicalis, Analysys Mason Group and Westcon AME.
"Management expects that the progress made in the first half of this financial year will translate into increasingly profitable trading for the remainder of the year and that the performance in all of the group`s operations will continue to improve through the second half and into next year."
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