Datatec posts strong results as Westcon turns around fortunes

27th May 2020 By: Natasha Odendaal - Creamer Media Senior Deputy Editor

Datatec posts strong results as Westcon turns around fortunes

JSE-listed Datatec on Wednesday May 27 posted strong results for the year ended February 29, as Westcon International returns to profitability and Logicalis Latin America produces an “exceptional performance”.

The information and communications technology (ICT) group reported earnings before interest, taxes, depreciation and amortisation (Ebitda) increased from $86.8-million in 2019 to $158.7-million during the year under review.

The Ebitda margin increased from 2% to 3.7%.

Excluding the adoption of IFRS 16, Ebitda for the 2020 financial year would have been $123.5-million and the Ebitda margin would have been 2.9%.

Datatec recorded underlying earnings a share of 9.9c, up from 6.6c in the prior year.

Earnings a share and headline earnings a share increased from 5.5c and 0.7c apiece in 2019 to a respective 6.8c and 5.9c in 2020.

Datatec’s operating profit increased by 70.7% to $82.6-million and group gross profit increased by 7.8% to $741.6-million.

Group revenues contracted 0.7% to $4.3-billion in the year ended February.

"The group delivered strong results in the past year, supported by good operational execution in all divisions in the face of growing global economic uncertainty,” said Datatec CEO Jens Montanana.

“Westcon International returned to profitability and Logicalis Latin America produced an exceptional performance, as did Analysys Mason, our management consulting division, which continued to benefit from demand for fifth-generation expertise,” he added.

Further, Datatec returned $60-million to shareholders through a special dividend and on-going share repurchases during the year as significantly improved cashflows were generated.

Meanwhile, Montanana highlighted that Datatec is well positioned to navigate the current environment despite the extremely uncertain macroeconomic outlook amid the Covid-19 pandemic.

“Since the start of the new financial year, the Covid-19 pandemic has taken its toll on economies, communities and business everywhere. We were able to adjust and move rapidly to a remote working environment across the group and all divisions,” he explained.

There has been good demand for Datatec solutions and services.

“Trading has remained steady since the beginning of the 2021 financial year, although some delays and supply disruptions were experienced especially in countries with highly restrictive lockdowns.

“Increased demand for the group's technology solutions is being experienced to support remote working during the lockdowns enforced throughout the world. In particular, demand for cloud computing, remote access solutions, virtualisation, security and unified communications remains strong,” Montanana added.

Initial indications are that Westcon International revenues and order intake for the first quarter of 2021 are similar to the same period last year, while the first quarter order intake at Logicalis is similar to the corresponding period last year, with revenues slightly lower than the prior period.

However, with much macroeconomic outlook uncertainty expected in the short and medium term, Datatec will not be issuing any forward-looking guidance.

“Our focus will remain on optimising our business for the current environment which will include cost and liquidity management,” he noted.

Particular attention has been given to assessing the outlook for liquidity across the group and ensuring that sufficient cash will continue to be generated to settle liabilities as they fall due.

“Each division has carried out scenario planning and stress testing for the [next] twelve months . . . and has contingency plans in place to adapt to the more severe scenarios.”