News Column

Datatec Maintains Total Dividend As Pretax Profit Declines

May 14, 2014

Hana Stewart-Smith

LONDON (Alliance News) - Datatec Ltd Wednesday maintained its total dividend for the full year to February 28, as it saw pretax profit decline slightly, hit by higher sales and operating costs and by an impairment charge.

The IT products company maintained its total dividend at 17 cents per share.

Datatec posted a pretax profit of USD101.8 million in the recent year, down from USD127.2 million the year before, despite revenue rising to USD5.7 billion from USD5.2 billion. In addition to the higher sales and operating costs, Datatec posted a USD5.5 million impairment charge on intangible assets.

In the company's Westcon business, revenues rose 6%, boosted by contributions from acquisitions. Westcon's gross margins declined to 11.2% from 11.6% due to increased competitive pressures across its territories, and a reduction in early payment discounts for Cisco Systems Inc products in Europe.

Westcon is transitioning its enterprise resource planning software system to a new platform. However, the roll out of the new system was temporarily suspended as it addressed and fixed operational problems. The roll-out of the new system has recommenced in the Asia Pacific region since the year end, Datatec said.

In its Logicalis business, revenue rose 15%, boosted by acquisitions and improved gross margin in the second half of the year. However, North American revenue was hit by declines in product revenues from its partner International Business Machines Corp. In Latin America revenues were also hit by government imposed import restrictions in Argentina, and the continued strengthening of the dollar against the Brazilian real.

Datatec warned that although trading conditions for Logicalis are stable, its outlook for the Latin America region has weakened as import restrictions continue to disrupt its activities.

In its Consulting services division, which accounts for 1% of the company's total revenues, revenue declined to USD72.6 million from USD74.0 million. This was a result of a strong performance from its Analysys Mason business' consulting and research units being offset by declines at its Intact and Via businesses.

Based on its current trading conditions, Datatec forecast revenues of over USD6 billion for 2015, and underlying earnings per share of more than 40 cents.

Shares in Datatec were trading up 1.1% at 288.00 pence Wednesday afternoon.

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Source: Alliance News