Revenue on the rise at Datatec

• Technology group expects the full year’s revenue to be about $5.16bn, up from $4.55bn in the prior year

Technology group Datatec has flagged that its revenue for the 12 months to February 2023 is set to increase by more than a 10th.

Technology group Datatec has flagged that its revenue for the 12 months to February 2023 is set to increase by more than a tenth.

While hardware sales have suffered because of Covid-19 and a war in Europe, there are signs that such challenges are trending lower.

Founded 37 years ago, Datatec, which operates in more than 50 countries, has two main divisions: Logicalis and Westcon International, which distributes security and networking technology products.

Valued at R8.02bn, Datatec is one of the JSE’s largest information and communications technology services firms.

On Monday, the group told shareholders that it expected the full year’s revenue to be about $5.16bn (R94.4bn) up from $4.55bn in the prior year, representing an increase of 13%. That was supported by an 18% rise in Westcon International and a 10% increase in Logicalis International.

“The group continued to deliver a strong operational performance during the second half of FY23 benefiting from secular technology trends for networking and cyber security,” Datatec told shareholders.

The share initially dropped more than 2% on Monday, paring back some of the losses to trade 1% weaker at 2.15pm.

Since Covid-19, the group has been dealing with hardware supply-chain issues, worsened by the Russia-Ukraine war.

At the half year, open, unfulfilled sales orders were at about $1.4bn, up from $838m in the previous matching period. This issue has been felt worst in the group’s business in South America — so much so that it now reports this segment’s earnings separately.

That theme appears to still be holding back the Latin America unit, with revenue expected to dip by 6% to $490m, but the group said the constraints had started to ease.

“Westcon International delivered an excellent financial performance during the year.

“Logicalis International had a consistent performance, while Logicalis Latin America had a notably improved second half compared to the first half, with signs of supply-chain improvement materialising, although the backlog remains elevated,” said the group.

In November, the group declared a special dividend of R12.50 per share or £135m (R3.03bn) in total following the recent sale of its consulting unit, Analysys Mason, for £210m to UK fund manager Bridgepoint Development Capital.

CEO Jens Montanana has been fighting to regain much of the value Datatec has lost over the years. Much of these losses have been attributed to the firm’s international operations — the bulk of its business — which struggled to be profitable over the past decade, resulting in a series of corporate actions to slim down the group.

To deal with its valuation gap, the group recently assembled a team from Lazard, known as the world’s largest independent investment bank, to seek ways to unlock value. The firm said it was considering all options. A few on the table include listing Logicalis and Westcon International separately or selling to a larger group.

LOGICALIS LATIN AMERICA HAD AN IMPROVED SECOND HALF ... WITH SIGNS OF SUPPLY-CHAIN IMPROVEMENT MATERIALISING