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RNS Number : 7435S
Datatec Limited
05 October 2017
 

5 October 2017

 

Datatec Limited                                                                

                                            

TRADING STATEMENT

 

Datatec Limited (JSE/AIM: DTC, "Datatec" or "the Group"), the international Information and Communications Technology (ICT) company is publishing a trading statement for the six months ended 31 August 2017 ("H1 FY18").

 

In terms of the JSE Limited Listings Requirements, companies are required to publish a trading statement as soon as they are satisfied that a reasonable degree of certainty exists that the financial results for the period to be reported on next will differ by at least 20% from the previous corresponding reporting period ("H1 FY17").

 

Accordingly, the Group now expects that for H1 FY18:

 

·      Underlying** earnings per share will be between 1 and 2 US cents, 84% - 92% below H1 FY17: 12.5 US cents

·      Headline loss per share will be between 5 and 6 US cents  (H1 FY17: earnings per share of 9.1 US cents)

·      Loss per share will be between 5 and 6 US cents (H1 FY17: earnings per share of 9.1 US cents)

 

Consolidated revenue for H1 FY18 is expected to be $2.99 billion* (H1 FY17: $3.04 billion*) with a gross margin of 13.3%* (H1 FY17: 13.8%*).

 

The year over year decline in earnings is primarily as a result of a worse performance in the Group's Westcon subsidiary ("Westcon-Comstor"). Westcon-Comstor continued to experience disruption to the business as a result of the final SAP implementation in Europe, Middle East and Africa ("EMEA"). Further details are given in the Westcon-Comstor section below.

 

Earnings for H1 FY18 were further impacted by higher finance charges, amortisation expense and effective tax rate than in H1 FY17.

 

* Please note that these figures include the performance of Westcon North America and Latin America, which were sold to SYNNEX with effect from 1 September 2017. In accordance with IFRS 5, these regions will be re-presented as a disposal group and shown separately as discontinued operations in the interim financial statements for H1 FY18.

 

Westcon-Comstor

 


H1 FY18

H1 FY17

Movement

Revenue *

$'m

$'m

$'m

North America

843

819

24

Latin America

288

221

67

Europe

730

760

(30)

Middle East and Africa

177

198

(21)

Asia-Pacific

241

258

(17)

Total Revenue

2 279

2 256

23

 

 


H1 FY18

H1 FY17

Movement

Gross profit *

$'m

$'m

$'m

North America

56

62

(6)

Latin America

39

36

3

Europe

73

87

(14)

Middle East and Africa

17

22

(5)

Asia-Pacific

31

30

1

Total Gross profit

216

237

(21)

 

North America revenues were up $24 million compared to H1 FY17 due to increased security sales, however gross profit was down $6.1m year over year due to product mix and lower volume rebates on unified communications and Comstor sales.

 

Latin America revenues were up $67 million compared to H1 FY17, mainly due to growth in Brazil. Gross margin decreased due to competitive pricing pressures, but gross profit increased by $3.4 million.

 

There was a decline in the financial performance of the EMEA region. Continued business transformation challenges in EMEA led to a drop in revenues of $51 million in H1 FY18 compared to H1 FY17. The drop in revenue resulted in a reduction in gross profit of $19 million in EMEA, representing the bulk of the drop in gross profit in Westcon-Comstor. Trading conditions in MEA were weak, particularly in South Africa.

 

Asia Pacific revenues decreased $17 million due to lower China sales, however gross profit was $1.6 million better than H1 FY17.

 

* Please note that these figures include the performance of Westcon North America and Latin America, which were sold to SYNNEX with effect from 1 September 2017. In accordance with IFRS 5, these regions will be re-presented as a disposal group and shown separately as discontinued operations in the interim financial statements for H1 FY18.

 

Logicalis

Logicalis delivered revenues of $694 million (H1 FY17: $757 million) and flat gross profit in H1 FY18 compared to H1 FY17 ($175 million). North America experienced a decline in product sales, but performance there is expected to improve in the second half.

 

During H1 FY18 Logicalis Latin America secured a very large multi-year contract to supply and support regional network infrastructure to a global service provider. This is expected to have a significant impact on the performance of the region going forward.

 

Logicalis completed the acquisition of PT Packet Systems in Indonesia in September 2017.

  

Forecast information

The forecast financial information contained in this trading statement has not been reviewed nor reported on by the Group's external auditors.

 

This announcement contains inside information.

 

The company expects to release its interim results for H1 FY18 on 13 November 2017.

 

Use of proceeds relating to the SYNNEX transaction

Further to the announcement of the completion of the SYNNEX transaction on 1 September 2017 (SENS announcement dated 4 September 2017), the Board will provide detail on the use and distribution of the cash proceeds from the SYNNEX transaction with its interim results on 13 November 2017.

 

The proceeds of the sale comprise US$630 million in cash on completion and up to US$200 million payable as a cash earn-out, subject to Westcon Americas meeting certain agreed gross profit performance targets.

 

The Board intends to retain US$130 million for various operational and working capital and expansion funding requirements. The Board will consider returning the majority of the remaining US$500 million to shareholders by way of share repurchases and / or a specific dividend.

 

 

** underlying earnings per share excludes impairments of goodwill and intangible assets, profit or loss on sale of investments and assets, amortisation of acquired intangible assets, unrealised foreign exchange movements, acquisition-related adjustments, fair value movements on acquisition-related financial instruments, restructuring costs relating to fundamental reorganisations, SYNNEX deal-related expenses and the taxation effect of all of the aforementioned

 

 Enquiries:

 

Datatec Limited  (www.datatec.co.za)


Ivan Dittrich, Chief Financial Officer

+27 (0) 11 233 3301



Jefferies International Limited - Nominated Adviser and Broker

Nick Adams / Simon Hardy

+44 (0) 20 7029 8000



Instinctif Partners


Frederic Cornet/Keagile Makgoba (SA)

+27 (0) 11 447 3030

Adrian Duffield/Chantal Woolcock (UK)

+44 (0) 20 7457 2020

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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