International information and communication technology company Datatec expects its embattled Westcon International portfolio to return to profitability within the next year, with a full turnaround emerging within two years.
Datatec, which recently disposed of its businesses in North America and Latin America, along with 10% of Westcon International to Synnex, is now focused on revenue growth, margin improvement and profitability.
“Our focus has been to improve cash and fix the balance sheet, [followed by] revenue growth, margin expansion and improved profitability,” says CEO Jens Montanana, adding that “exceptional value” has been generated through the successful sale.
Following the disposal, Westcon International is now directly managed by Datatec.
“This business has had a poorer performance in recent years as a result of the significant system and process changes. “Gross profit had been affected by systemic transaction errors and month-end processing challenges,” he says.
The negative performance factors were driven by business disruption in the Europe, Middle East and Africa (EMEA) region, as the company’s business process outsourcing (BPO) challenges were compounded by the complex switchover to the new SAP system last year.
Costly TransitionThe disruptive and costly transition will now be reversed to improve customer service and transaction execution and Datatec plans to build its own shared services centres in South Africa and the Philippines for the EMEA and Asia-Pacific regions.
“The operations of Westcon had been reorganised regionally, with the remodelling of the central services progressing well,” Montanana says.
By the start of the year, the bulk of the system and process issues had been resolved and financial performance and market share had improved on the back of better execution.
The group will continue to reduce ongoing central costs to below 1% of revenue.