How Datatec plans to revive loss-making unit
Technology group is making progress in turning around its loss-making Westcon business
Technology group Datatec, which operates in more than 50 countries, expects its operational performance to further improve in the second half of the financial year as it hopes to turn around a loss-making unit.
Its loss-making technology distributor, Westcon International, is expected to turn a corner from early 2019 while IT solutions unit Logicalis, the biggest contributor to profits, will benefit from a multiyear project in Latin America, the company said.
Westcon International has undergone a shake-up, terminating its business process outsourcing in Europe, Middle East and Africa and Asia-Pacific. Datatec has said the outsourcing is costly and negatively affected customer service and financial performance.
Westcon recorded a $7.95m net loss in the six months to end-August, an improvement on the $11.71m loss recorded in the matching period a year ago, the results statement showed on Thursday. By contrast, Logicalis’s net profit doubled to $17.43m, from $8.28m the year before.
“The group’s first-half results came in ahead of our expectations, backed by improved operational execution across all divisions,” CEO Jens Montanana said.
Operating in markets across North America, Latin America, Europe, Africa, the Middle East and Asia-Pacific, the JSE-listed company is sensitive to foreign exchange markets, which have been highly volatile of in recent months.
The foreign exchange loss was $68.8m in the six months to end-August, swinging from a gain of $8.5m in the matching period a year ago, as the rand and Brazilian real weakened against the dollar, respectively.
Emerging-market currencies in particular have borne the brunt of a strong dollar in recent months, mainly due to the higher interest rate environment in the US.
Group revenue was up 8.7% to $2bn in the review period, whilegroup gross margins dipped to 15.9%, from 16.2% in the year-earlier period.
Datatec did not declare an interim dividend but said it would continue to its general share buyback programme, subject to market conditions.
The share price closed 0.2% weaker to R23.95 on the JSE, valuing Datatec at R5.6bn.