Datatec in the black

Von Computing SA

Datatec Ltd., the international IT and networking services group, reports returning to profitability in the six months to end August, with headline earnings per share back in the black at US$0.10, after a restated loss of $0.40 per share in the first six months of the previous financial year. Revenue for the period grew by 11 percent to $1.25 billion, while operating profit rose to $2.6 million from $80,000.

Chief executive, Jens Montanana, says the group?s performance would have been substantially better had it not been for $8 million in once-off expenses in the Westcon Group, and poor gross margins from units of Westcon?s European operation. Datatec ended the six months with net cash of $97.4 million, compared to $88.7 million at the February year-end.

Montanana says the improved operating profit in the six months reflects encouraging turnarounds at the group?s Logicalis, Analysys Mason Group (AMG), OnLine Distribution and Westcon AME subsidiaries. He says the group?s prudent financial management and control has also strengthened Datatec?s balance sheet, cash position and profitability.

?The tech sector recovery is proceeding much along the lines that we expected. 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.

Datatec says revenue at Westcon increased across all divisions and geographic regions, rising by 21.4 percent to $1.04 billion. However the gross margin for the period declined to 7.6 percent, compared with 8.9 percent in the previous comparable period. This was reportedly due mainly to lower margins in Europe, coupled with continuing pressure on global channel margins.

Westcon?s Ebitda is reported to have decreased from $17.8 million to $9.9 million. This was allegedly due to the decline in gross margins, a poor performance in Europe and once-off costs of about $8 million for consolidation of facilities, separation costs of the former CEO, and expensing of previously capitalized IPO costs.