Datatec has reported a set of interim financial results that CEO Jens Montanana describes as "a pretty solid all-round performance, which was blunted by a weaker than expected first half in our Logicalis US business".
"This area of our business represents about 10% of the group`s total business," he says.
"We took prompt action to restructure our US Logicalis business in order to protect the second half and deliver full-year profit growth in that division," he says.
The actions resulted in the removal of about $12 million of annualised operating costs, including reducing staff numbers by more than 80. Logicalis reported an operating profit of $3.28 million for the six months to 31 August, compared with $8.55 million for the same period a year before.
This was despite a 28% increase in revenue from $308.38 million to $395.51 million. Pre-tax income fell from $7.39 million to $1.94 million.
Montanana says the group is expecting full-year growth from the division as a result of the restructuring in the first half.
Strong demand
The performance of the rest of the group has been in line with the board`s expectations.
Group revenue for the six months to 31 August increased 26% year-on-year, from $1.52 billion to $1.92 billion, while the profit for the period rose 20.5%, from $23.52 million to $28.35 million.
The US now accounts for 43% of the group revenue mix, with most of the revenue growth coming from Europe, Asia-Pacific, the Middle East and Africa, Montanana says.
CFO David Pfaff says the group is pleased with its improvement in the gross margin from 12.6% to 12.9%, mainly as the result of an improved performance from the Westcon subsidiary.
Westcon recorded revenue growth of 23%, from $1.13 billion to $1.39 billion, with pre-tax income rising 12%, from $28.48 million to $32.02 million.
Commenting on market conditions, Montanana says: "We continue to see the dynamic of slower growth in the US contrasting with stronger growth elsewhere in the world. This has also been reported by vendors such as Cisco and IBM, and many in our peer group.
"In our sector, we specifically see ongoing robust demand for converged networks, fuelled by widespread broadband usage."
He also points to increased demand for IP infrastructure and security solutions.
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