While some of the markets it serves might remain depressed, JSE- and Aim-listed information and communication technology (ICT) group Datatec was confident that the worst of the recession was generally behind it.

Datatec CEO Jens Montanana on Tuesday told analysts at a presentation in Johannesburg that the group was already more optimistic about global growth prospects than six months ago.

He noted that while developing markets, such as Brazil, India and China had underpinned most of the growth in the past year, demand in developed markets, and especially the US, would likely start picking up later this year.

Higher global growth, the fact that its financial performance was generally better in the second half of any financial year and the fact that it was now operating more efficiently than before the recession would likely drive higher profits, better margins and improved cash generation, Montanana stated.

The group had left its revenues forecast for the full 2010 financial year unchanged at between $3,7-billion and $4-billion, despite its revenues for the first half of the year having dropped nearly 21% to $1,8-billion, compared with $2,27-billion in the first half of the previous financial year.

It had earned revenues of $4,2-billion in the 2009 financial year.

The distribution businesses contributed 76% of the overall revenues and 60% to the gross profit in the first half of the year, compared with 73% and 54% the year before.

The consulting and services businesses had contributed 7% of the group’s overall revenues and 18% of the overall gross profit for the first half, compared with 6% and 16% the year before.

However, the ICT solutions businesses had contributed less with its contribution to revenues in the first half of the year dropping to 17%, compared with 21% the year before, while its contribution to the group’s overall profit fell to 22%, compared with 30% the year before.

Datatec’s net profit declined nearly 73% to $8,7-million in the six months ended August 31, 2009, compared with $32-million the year before, while basic earnings a share fell to $0,04 a share, compared with $0,17 a share in the first half of the 2009 financial year.

The group had pushed its cash generation to a record of $184-million in the first half of the year.

Montanana was confident that the group would return to revenue and profit growth in the second half of the year, saying that it had reached a bottom in the first half.

He added that there were a number of significant advances in software and broadband opportunities in the longer term that would likely boost its growth, while the group could also expand its operation in existing markets, as well as enter new markets, such as China and other parts of Asia.

DIVISIONAL PERFORMANCE

Datatec’s Westcon division, which formed part of the group’s distribution business, saw an 18% decline in revenues to $1,2-billion in the first half of the financial year, while its costs had been reduced by 17%, in line with the fall in revenues, said Montanana.

Westcon, which comprised the European, Asia Pacific and Americas regions, had also improved its debt position, ending the period with a net cash position of $97-million, compared with a net debt position of $179-million the year before.

It had also become the first company to sign a global distribution contract with network management supplier Cisco, which would allow for an improved engagement with large international service providers and systems integrators, said Montanana.

Further, Westcon would also take Cisco’s data centre products to market later this year, he added.

The Westcon Emerging Markets division, meanwhile, had also seen a 14% drop in revenues, but a 17% improvement in gross margins.

The division, which comprised the India, Africa and Middle East distribution businesses, would be consolidated under the Westcon division, as its fourth region, in the 2011 financial year, said Montanana.

Revenues in the Logicalis division fell by 27% to $394-million in the first half of the year, as customers remain cautious, while a number of capital equipment projects by Logicalis’ customers have been cancelled.

However, customers’ budgets might see real growth next year, said Montanana, adding that this would not likely reach the levels it had been at before the downturn.

Good growth and profit margin expansion would likely happen in the second half of the year, said Montanana.

Datatec’s consulting services division was expected to see a much improved second half, as there have been some signs of stabilisation for this business since June.

As the division was underrepresented in North America and Asia, Datatec planned to increase its presence in these regions.