Datatec revenue flows due to its Logicalis business - CNBC Africa

Datatec revenue flows due to its Logicalis business


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Datatec is an international ICT provider in over 50 countries. PHOTO: Getty Images

Datatec, the global information and communications technology (ICT) business, operates in over 50 countries with more than 7500 employees worldwide.

Group revenue increased by eight per cent for the year ended 28 February 2014 from 5.25 billion US dollars in 2013 to 5.69 billion US dollars this year.

(READ MORE: Datatec reports minimal growth in second half of FY)

Logicalis reported a 23 per cent rise in operating profit of 67.5 million US dollars while Westcon, Datatec’s technology products division, took a knock in earnings.

“We continued to grow revenue and our gross margins have been stable. Logicalis had a notably strong year, reporting operating profits up 23 per cent, whilst Westcon underperformed as a result of several factors,” said Jens Montanana, chief executive of [DATA DTC:Datatec Limited]

Logicalis, which contributes 27 per cent towards Datatec’s profits, posted a revenue increase of 15 per cent to 1.55 billion US dollars, including 134.3 million US dollars contribution from acquisition made during the year.

The division acquired four European operations in 2013, such as an IT consulting business in the Netherlands and iConsult, a desktop and mail hosted solutions provider to small and medium businesses.

On the other hand, Westcon which accounts for 72 per cent of Datatec’s earnings, posted a decrease in operating profit from 98.2 million US dollars in 2013 to 62 million US dollars this year while gross margins fell from 11.6 per cent to 11.2 per cent due to a combination of increased competitive pressures across all territories and a reduction in early payment discounts for the division’s Cisco products in Europe.

Revenues however did increase by six per cent to 4.1 billion US dollars, including a 89.3 million US dollars contribution from acquisitions. Westcon acquired Comztek Holdings, a system distributor with operations in 26 African countries, in 2013.

The division also sold 54 per cent of its stake in Inflow Technologies in 2013 following Datatec’s decision to exit the distribution market in India.

In 2013, Westcon underwent a management change and appointed a new chief executive officer, as well as a new chief financial officer in March 2014.

(READ MORE: Datatec appoints Westcon CEO)

“Logicalis is expected to continue its growth trajectory. Westcon is now on a much stronger footing following the management changes and we are encouraged by its trading in the new financial year,” added Montanana.

Overall, Datatec’s earnings before interest, taxes, depreciation and amortisation (EBITDA) was at 175.3 million US dollars, compared to 185.5 million US dollars in 2013. Operating profit also fell from 141.4 million US dollars to 122.1 million US dollars.

The group believes that economic conditions remain very mixed across all Datatec’s markets; European markets have improved but Australia and North America remains challenging.

Datatec stated that they will focus on sectors that are growing, such as infrastructure services, data centres and networking managed services.

“We remain confident in the sustainability of our long-term growth strategy and have maintained our capital distribution at the same level as the previous year. The secular trends in our industry remain favourable,” concluded Montanana