Confident Datatec closes busy year

In a year marked by its listing on London's Alternative Investment Market, Datatec has delivered strong performances on all fundamentals for the year ended 28 February.

Revenue for the year increased by 17%, to $3.2 billion (around R22 billion), from its restated 2006 figures of $2.7 billion. Nine percent of this growth was organic, said the company. Datatec has restated its 2006 revenue and margin percentages in line with its earlier announcement that it would change its accounting practises on revenue recognition of vendor maintenance contracts.

An increase in gross margin to 13.1%, from 12.5%, boosted earnings before income tax, depreciation and amortisation (EBITDA) by 40%, to $119 million (R833 million), from $85 million in 2006.

Headline earnings per share (HEPS) increased by 52%, to 40.8 US cents (R2.85), from 26.9 cents in the previous year. Basic earnings per share are 40 US cents (R2.80), up from 26.5 cents in 2006.

In the year under review, Datatec issued 7.2 million new shares for its London listing, as well as a further 0.9 million shares to share option holders and 0.7 million shares for acquisitions.

The company says it is pleased with the significant progress in performance reported across all businesses. And, in an increasingly global market, Datatec says it has been able to leverage its scale and geographic reach to establish a strong position as a channel intermediary of ICT products, solutions and professional services.

Growth has also been underpinned by market share gains. Divisions, Westcon and Logicalis have both benefited from increased vendor support as a result of their ability to add significant value in the converged voice and data network space, as well as a growing exposure to key growth geographies.

In addition to opening up new offices in Malaysia and New Zealand, Westcon completed the acquisition of the distribution arm of Ronco Communications and Electronics for $13 million in cash.

On the hunt for growth opportunities, Logicalis acquired the consulting business of Alliance Consulting for $5 million in cash and shares; Computech Resources for $6 million in cash; CSF Solutions for $11 million in cash and shares; and an equity interest in re:solution, a small German ICT services business.

Locally, Datatec merged its South African operation with African Legend Technologies as part of a black economic empowerment programme, retaining a 55% shareholding. The merged services entity was named African Legend Indigo.

Moving forward, Datatec is confident. Jens Montanana, Datatec chief executive, explains: "The current financial year has started in line with our expectations. We are confident that the scale of the group's operations and its improving business mix should deliver further efficiency gains resulting in continued margin improvement."

Datatec says it intends to make a cash distribution to shareholders out of share premium of approximately 10 US cents (R0.70) per share. This is in lieu of a dividend.