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Westcon recovery boosts Datatec to new heights

Datatec CE Jens Montanana provides the company's full-year results for the year ended 28 February 2015.

13th May 2015

By: Schalk Burger

Creamer Media Senior Deputy Editor

  

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The recovery of networking and data centre division Westcon helped to boost the revenue of holding company Datatec by 13.3% to $6.4-billion and operating profit by 9.1% to $726.5-million for the year ended February 28.

Westcon’s revenue grew by 19% year-on-year to $4.85-billion, while its gross profit increased by 20% to $542.2-million and its operating profit by 60% to $100.2-million for the year under review.

Datatec Group CE Jens Montanana, on Wednesday, noted that Westcon had recovered owing to achieving reasonable operational leverage, as it had improved its earnings before interest, taxes, depreciation and amortisation (Ebitda) by 37% year-on-year to $125.1-million, while its operating costs rose by only 15% to $417.1-million.

Further, Westcon had improved its working capital management and reduced its net debt by $30-million.

“[The] net debt reduction is mirrored in the improved Ebitda. We believe that these operating levels are sustainable, as the business mix moves to include more software and the requirements to hold physical inventory decrease,” he said.

Montanana noted that Westcon would, going forward, retain its focus on cost and process and organisational efficiencies, which included a shared services organisation across the Europe, Middle East and Africa regions.

“The multiple back offices and depots in Europe are a legacy of acquisitions and, as we roll out our [enterprise resource giant] SAP enterprise resource planning systems, we should improve the efficiency of doing business in this geographically and linguistically diverse region, as well as in Middle East and Africa.”

Security products and services were growing at a faster rate than other technologies, and offset decreased demand for information technology (IT) products and infrastructure.

Meanwhile, the performance of Datatec division Logicalis reflected the changes in market conditions, with product revenue having decreased by 5% year-on-year, while revenue from services increased by 8%.

Logicalis improved its Ebitda by 7% to $97-million and its operating profit by 10% to $74.2-million, despite only growing revenue by 1% to $1.53-billion.

Logicalis’s revenue was impacted by weaker product demand and a strong US dollar. However, revenues from other regions were stable and the division reported a strong recovery in Argentina over the period.

The division’s annuity revenues grew by 9% and professional services revenue increased by 5%. The market for IT products and services was forecast to improve in the current financial year.

Strong growth in cloud-based services was challenging traditional areas of the IT market, the group noted in its results. Datatec achieved headline earnings a share of $0.37, up from $0.31 in the prior comparable period.

“Overall, we had a reasonable year in an environment of mixed economic conditions, currency volatility and dollar strength. Despite this, we achieved double-digit organic growth, demonstrating modest improvements in operating leverage. We have maintained a dividend of $0.17 a share.

“Cheaper energy will benefit emerging markets and lift production and consumption. Many regions also continue to benefit from the rapid proliferation of wireless and mobile broadband.

“There are many new opportunities for us to explore as the industry shifts to using computer infrastructure on demand, fuelled by fast growth in mobile connectivity over continually expanding wireless broadband, as well as managing the increased complexity facing corporate users,” Datatec stated.

Further, there was a need to enhance the security protection business, as more IT functionality became mobile, adding to complexity and security requirements.

“The group remains well positioned for organic and inorganic growth, as well as increasing market share in many areas. We will continue to focus on better profitability and improving financial returns,” said Montanana.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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