Datatec upbeat as turnaround strategy bears fruit
Technology group will continue to explore possibilities for bolt-on acquisitions
Datatec says it is likely to continue with its strategy of making acquisitions to grow its business and turn around its business.
The technology group said on Thursday it “will continue to explore all markets for bolt-on acquisitions” after its acquisition of Stelacon, a Swedish consulting company earlier in 2019 for $2.6m (R38.5m).
Locally, its subsidiary Logicalis made two acquisitions in SA over the past year. It bought Mars Technologies, a technology services business, and Clarotech, an IP telephony cloud and managed services business based in Cape Town.
Though the company says it does not set aside specific funds for acquisitions, it is in a good cash position. Datatec generated $77.8m for the six months to August, bringing its total cash and cash equivalents to $295m.
In the 2018 financial year the company spent $25.45m on acquisitions. Some of these deals included $5m for 100% in Nexia Management Consulting, a telecoms management consultancy company registered in Norway; $3.8m for 51% in NubeliU, a South American company specialising in cloud computing projects; and $20.2m for 100% of Coasin Chile, a Chilean and Peruvian ICT services and solutions provider.
Datatec, whose SA operations accounts for just 2% of its total business at the moment, said on Thursday its multiyear turnaround strategy at its subsidiary Westcon is expected to continue to pay off, with headline earnings per share (Heps) tripling in its six months to end-August.
Heps rose 228% during the period, with the company also benefiting from improved profitability at both Westcon and its Logicalis subsidiary.
Gross profit grew 12% at Logicalis, supported by a multiyear project in South America, with that subsidiary contributing 38% of group revenue and 59% of group profit.
Datatec’s previously loss-making technology distributor subsidiary 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.
It said Westcon now had a solid base to support growth after disruptions in previous years, with management optimistic about opportunities for the business. Logicalis’s financial performance is expected to be maintained in the company’s second half to end-February 2020.
“Looking ahead, despite growing uncertainties globally, we remain confident that the improvements in both the operational and financial performance of the group will continue for the remainder of the year,” said CEO Jens Montanana.
The company operates in more than 50 countries across North America, Latin America, Europe, Africa, Middle East and Asia-Pacific, offering technology, distribution, integration and consulting to sectors of the information and communications technology (ICT) market.
Datatec shares closed 2.20% up at R32.49.