Westcon Pulls Datatec Further Into the Red

Datatec has warned earnings will sink even further than first anticipated in the recently-ended financial year, as it issued another profit warning as shareholders prepare for up to a staggering 93% annual drop in earnings.

IT company Datatec’s financial year ran until the end of February and, in April, the company warned that underlying earnings per share was expected to drop by over 50%, or at least 16.0 cents, from the the financial year to the end of February 2016.

Datatec also warned headline EPS and reported EPS were both also expected to drop by over 50%, or at least 10.0 cents, from the previous year.

However, Datatec said on Thursday that the results will be considerably worse while also revealing that annual revenue dropped, partly saved by a slightly better gross margin.

Datatec did provide some firm numbers for revenue, reporting a year-on-year fall to USD6.08 billion from USD6.45 billion, but partly cushioned this blow with a better gross margin of 13.7% from 13.5%.

The further deterioration has been attributed to the poor performance delivered by the company’s subsidiary Westcon-Comstor during the year, particularly in the final three months when the unit experienced disruption as a result of the final SAP implementation in Europe, Middle East and Africa.

In April Datatec revealed it was in talks over the possible sale of a “major share” of its Westcon-Comstor operations, for a potential price of over USD800.0 million.

Westcon’s overall revenue declined 7% in the year to USD4.53 billion from USD4.87 billion the year before. Normalised Ebitda for Westcon fell to USD54.0 million from USD89.0 million the year before.

“Trading conditions in MEA were weak, resulting in a poor performance across the region, with additional receivables write-offs in Africa and the Middle East,” said Datatec.

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David Dungay

Editor - Comms Business Magazine