A worse-than-expected performance from subsidiary Westcon-Comstor has dragged the earnings of information and communication technology group Datatec for the year ended February 28.
The JSE-listed group expects to report double-digit decreases in earnings for the period under review, with headline earnings a share dropping 90% year-on-year to 2c and earnings per share (EPS) decreasing by 93% year-on-year to 1.4c.
The group’s 2017 underlying EPS was expected to be 66% lower than the year before at 11c, Datatec said in a trading update on Thursday.
Consolidated revenue for the 2017 financial year was $6.08-billion, compared with $6.45-billion the year before, while the gross margin was 13.7%, compared with 13.5% in 2016.
“Westcon-Comstor experienced disruption to the business as a result of the final SAP implementation in Europe, Middle East and Africa (Emea),” the company explained, pointing to transformation challenges resulting in a 12% revenue drop for the region, which constituted 78% of the overall year-on-year revenue decline for the subsidiary.
The revenue decline further resulted in a $31-million reduction of gross profit in Emea, representing 76% of the overall gross profit decline for Westcon-Comstor.
Earnings were further impacted by higher finance charges, depreciation, amortisation expense and effective tax rate than in the prior year.
Datatec remained in talks for the possible sale of a major share of Westcon-Comstor’s operations.
The company expects to release its results on May 22.