An update from Datatec on its performance in the six months to end-August has spooked shareholders, with the share trading down almost 7% this morning.
The nervousness came as the group said a slowdown in the US had affected the US business of its Logicalis subsidiary, an IT infrastructure solutions and network integration company.
"This was essentially as a result of the US market softening more than we had expected," CEO Jens Montanana said in a conference call this morning.
Essentially, growth in the second quarter slowed more than management had anticipated. As a result, operating costs, which had risen due to recent acquisitions and investment in sales infrastructure, were too high.
He said the slowdown became apparent in July and the group acted quickly to streamline the operation in the "second or third week in August". He said between 80 and 90 jobs - out of about 600 - were cut, "rightsizing" the business back to what it was in the first three months of calendar 2007.
"We had been expecting slightly more growth momentum in the US, which did not materialise," he said.
Datatec says trading in the rest of the group was in line with the board's expectations, and headline earnings per share (HEPS) for the full year will be up on the previous year's figures.
However, Montanana describes the expected 7% growth in HEPS for the six months to August as "a bit of a disappointment" as the group had expected interim HEPS of about $0.18 or slightly above that, as against the expected $0.166.
The group achieved HEPS of about $0.157 in the six months to August last year, a 30% increase on the $0.12 of the same period a year earlier.
Montanana says HEPS for the full year will be up year-on-year.
Group revenue for the six months is expected to be up 25% to about $1.9 billion, with earnings before interest, tax, depreciation and amortisation (EBITDA) of about $60 million, compared with $52 million for the previous comparable period.
Montanana says the situation in the US is temporary and the corrective action is expected to result in an improved performance in Logicalis's EBITDA for the full year, compared with the previous year.
By late morning, the Datatec share was trading at R37.56, down R2.74 or 6.8% from yesterday's close. This was after 1.9 million shares had changed hands in 408 deals.
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