Cash-rich Datatec warns of weaker 2021 revenue
The group says it will not issue any forward-looking guidance, given the uncertainty brought about by the Covid-19 crisis
With about $850m in total net assets on hand, Datatec says it has the liquidity and capital to keep its business afloat for the next 12-months but warned of weaker revenues for its 2021 financial year, given the negative effects of Covid-19.
“The economic effects arising from the Covid-19 pandemic may materially affect the consolidated results of the group for the first half and full year”, the company told shareholders on Wednesday. The situation has caused the company to put on hold plans to list its Logicalis Latin American business.
“While the potential listing remains of high interest, current market conditions are making the timing ... increasingly undeterminable,” Datatec said.
The group has said it will not issue any forward-looking guidance, given the uncertainty on the Covid-19 crisis. This comes as Datatec said it had returned $60m to shareholders through a special dividend and share repurchases.
Datatec said its group revenue for the year ended February 2020 was down 0.7% to $4.30bn, compared to $4.33bn in 2019. Earnings before interest, tax, depreciation and amortisation (ebitda) grew for the period to $158.7m from $86.8m previously.
Datatec said Logicalis was the largest profit contributor for the period. The division also had the widest geographical exposure, and Datatec intends to continue to develop and grow the unit globally, both organically and through acquisitions.
Locally, Logicalis has made two acquisitions recently. It bought Mars Technologies, a technology services business, and Clarotech, an internet protocol (IP) telephony cloud and managed services business based in Cape Town.
The group’s cash tripled from $69.0m last year to $215.6m from operations. Earnings per share were at US6.8c for the period, up from US5.5c in the previous year, while headline earnings per share stood at 5.9 US cents, up from the meagre US0.7c in 2019.
Jens Montanana, Datatec’s CEO, said in a note to shareholders:
“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.
“The group generated significantly improved cash flows, while we returned $60m to shareholders through a special dividend and ongoing share repurchases during the year.” The company said Westcon International returned to profitability in the period, supported by “excellent costs containment” with cost-reduction targets being met.
“Following multiple years of restructuring, as well as system and process changes in Westcon International, no restructuring charges were incurred in the full-year 2020,” said Datatec.
The Covid-19 pandemic has affected businesses around the world, but the group, now worth R4.43bn, said trading had remained steady since March, though some delays and supply disruptions were experienced, especially in countries with highly restrictive lockdowns.
Initial indications are that Westcon International’s revenues and order intake for the first quarter of the 2021 financial year are similar to the same period in 2019. For Logicalis, order intake for the first quarter is also similar to the corresponding period in 2019, with revenues “slightly lower”.
Montanana said the company was able to adjust and move rapidly to a remote working environment across the group and all divisions in response to the crisis.
“We have seen increased demand for technologies and services required to enhance remote working in areas such as security and network access solutions, cloud migration and infrastructure virtualisation, as well as unified communications.”
Datatec stock was trading 0.28% lower in lunchtime trade on Wednesday, bouncing back in the afternoon to close at R22.01 a share, up 4.26%.
Correction: May 28 2020
An earlier version of this article said that Datatec would return $60m to shareholders via a special dividend and share repurchases, when, in fact, this amount has already been returned.