Wrap Text
Further trading statement
Datatec Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1994/005004/06)
ISIN: ZAE000017745
Share Code: DTC
(“Datatec” or “the Company”)
FURTHER TRADING STATEMENT
Datatec Limited (Datatec” or the “Group”, JSE/AIM: DTC), the
international Information and Communications Technology (ICT) group,
is publishing a further trading statement for the year ended 28
February 2017.
On 7 April 2017,the Group issued a trading statement to the effect
that underlying earnings per share* for the financial year ended 28
February 2017 (“FY17”) was expected to be more than 50% lower (or at
least 16 US cents per share lower) than the prior year (“FY16”).
Datatec also advised that headline earnings per share and earnings
per share were also expected to be more than 50% lower (or at least
10 US cents lower) than the prior year.
In compliance with rule 3.4(b)(iii)(3) of the JSE Listings
Requirements the Company can now advise that:
- Underlying earnings per share is expected to be 11.0 US cents
for FY17 (66% lower than FY16: 32.0 US cents)
- Headline earnings per share is expected to be 2.0 US cents for
FY17 (90% lower than FY16: 19.4 US cents)
- Earnings per share is expected to be 1.4 US cents for FY17 (93%
lower than FY16: 19.3 US cents)
Consolidated revenue for FY17 was $6.08 billion (FY16: $6.45
billion) with a gross margin of 13.7% (FY16: 13.5%).
The year over year decline in earnings is as a result of a worse
than expected performance in the Company’s Westcon subsidiary
(“Westcon-Comstor”), particularly in the fourth quarter. Westcon-
Comstor experienced 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 were further impacted by higher finance charges,
depreciation, amortisation expense and effective tax rate than in
the prior year.
Westcon-Comstor
Westcon-Comstor revenues declined by 7% year over year.
FY17 FY16 Movement
Revenue $’m $’m $’m
North America 1 662 1 773 (111)
Latin America 518 494 24
Europe 1 484 1 626 (142)
Middle East and 380 501 (121)
Africa
Asia-Pacific 488 476 12
Total Revenue 4 532 4 870 (338)
FY17 FY16 Movement
Gross profit $’m $’m $’m
North America 121 129 (8)
Latin America 80 84 (4)
Europe 165 173 (8)
Middle East and 33 56 (23)
Africa
Asia-Pacific 57 55 2
Total gross 456 497 (41)
profit
FY17 FY16 Movement
Adjusted $’m $’m $’m
EBITDA**
North America 66 70 (4)
Latin America 26 24 2
Europe 49 54 (5)
Middle East and (12) 6 (18)
Africa
Asia-Pacific 6 14 (8)
Central costs (63) (59) (4)
Total 72 109 (37)
adjusted
EBITDA**
FY17 FY16
$’m $’m
Adjusted EBITDA** 72 109
Restructuring costs (14) (15)
Unrealised foreign (3) (5)
exchange losses
Other (1) -
EBITDA 54 89
** Adjusted EBITDA includes the same adjustments as used for
underlying earnings per share*, where relevant.
There was a decline in the financial performance in the EMEA region.
Transformation challenges in EMEA led to a drop in revenues of $263
million (12%) in FY17 compared to FY16, which constituted 78% of the
overall year over year revenue decline for Westcon-Comstor. The
drop in revenue resulted in a reduction in gross profit of $31
million in EMEA, representing 76% of the overall year over year
gross profit decline for Westcon-Comstor.
Europe went live on SAP during November 2016, resulting in
transitional challenges and delayed financial reporting, exacerbated
by the business process outsourcing (“BPO”) in that region. Trading
conditions in MEA were weak, resulting in a poor performance across
the region, with additional receivables write-offs in Africa and the
Middle East.
North America (“NA”) revenues were down $111 million or 6% year over
year. This was mainly due to softer Cisco and Avaya sales. The year
over year decrease in EBITDA was mainly as a result of lower gross
profits associated with the lower revenues.
Latin America performed well, with revenues up $24 million (5%) to
$518 million, and adjusted EBITDA increasing by 8% to $26 million.
In the Asia-Pacific region revenues were up 2% and gross profits
were up slightly over the prior year. This was mainly attributable
to a strong performance in the Asia security business. EBITDA was
lower than the prior year, due to higher operating costs, which
included additional one-time employee related costs, sales tax
reserves and increased investment costs in China.
Logicalis
Logicalis performed in line with expectation and produced revenues
of $1.51 billion (FY16: $1.53 billion) and EBITDA of $79.0 million
(FY16: $80.9 million). Logicalis EBITDA before restructuring
charges was $81.2 million. Logicalis results continued to be
impacted by the weak performance of its UK operations, which are
undergoing restructuring.
Forecast information
The forecast financial information contained in this trading
statement has not been reviewed or reported on by the Company’s
auditors.
The company expects to release its full year results on 22 May 2017.
This announcement contains inside information.
Cautionary Announcement
Shareholders are reminded that the Company released a cautionary
announcement on SENS on 25 January 2017, which was renewed on 8
March 2017 and updated on 7 April 2017, advising shareholders that
negotiations are in progress in relation to a possible sale of a
major share of Westcon-Comstor’s operations, which, if successfully
concluded, may have a material effect on the price of the Company's
shares.
There can be no certainty that the transaction will be completed,
nor as to the precise terms on which the transaction might be
completed. Shareholders are therefore advised to continue to
exercise caution when dealing in the Company’s securities.
*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 and the taxation effect of all of the
aforementioned
Enquiries:
Datatec Limited
(www.datatec.co.za)
Ivan Dittrich, Chief Financial +27 (0) 11 233
Officer 3301
Jefferies International Limited – Nominated Adviser and
Broker
Nick Adams/Simon Hardy +44 (0) 20 7029
8000
Instinctif Partners
+27 (0) 11 447
Frederic Cornet/Pietman Roos (SA)
3030
Adrian Duffield/Chantal Woolcock +44 (0) 20 7457
(UK) 2020
Sandton
11 May 2017
Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Date: 11/05/2017 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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