JSE-listed multinational IT group Datatec is to put a freeze on hiring new staff in the light of toughening global conditions internationally.
Despite this, Datatec disclosed today in an interim management statement, covering the period 1 March to 31 May, that it expects revenue for the six months to 31 August this year to exceed $2.2 billion, compared with $1.9 billion for the same six months last year.
Speaking from London in a conference call this morning, Datatec CEO Jens Montanana said the company's growth margins were coming under pressure and there was a need to ensure its cost margins were "well managed".
"Our cost base is people, and we have taken actions in the last year in terms of trimming our cost base, so we have seen a contraction of people."
He noted that while this "contraction" is not necessarily set to continue, the company will halt the employment of new people for the time being.
"We are, in other words, freezing operating costs, even while we are still expecting revenue growth."
With regard to the individual business units in Datatec, Montanana says Logicalis and the consulting services are expected to see growth margin expansion while the Westcon unit is not.
Westcon accounted for 71% of Datatec's revenue and 67% of earnings before interest, tax, depreciation and amortisation (EBITDA) for the 2008 financial year, while Logicalis accounted for 21% of the group's revenue and 24% of EBITDA.
However, Montanana says the economic conditions in the US and Europe "are not as bad as the markets are reacting".
"There is not a collapsing of trading conditions. The market is clearly sluggish, but it is not falling off a cliff."
Datatec says in its interim management statement: "The group's broad international base, which includes strong contributions from the fast-developing markets of South America, Africa and the Middle East as well as Asia-Pacific, is improving the balance of business and helping to mitigate and offset lower growth in the US and European markets."
In the year to end-February, Datatec passed the $4 billion annual revenue mark for the first time, and indicated at the time that it planned to achieve $5 billion for the current financial year.
On the back of this performance, the group achieved a 26% increase in attributable profit, from $60.05 million to $75.65 million.
Montanana said at the release of those results in May that the board had set several core objectives, including achieving greater alignment in financial performance between regions, improving profit margins, improving return on investment and capital employed metrics, and improving working capital ratios.
The group anticipates publishing its interim results on 15 October.
Datatec's share was trading 4c or 0.2% higher at R23.64 on the JSE late this morning.
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