Datatec CEO Jens Montanana.
Datatec’s stock fell 3% this morning, despite the global technology group reporting a 109.5% increase in headline earnings per share for the interim period to end-August.
The JSE-listed company’s shares dropped to well below R70 by 10am, even as it delivered strong financial results. Over five years, the stock is up 209%.
The company reported revenue growth of 9.4% to $4.1 billion (R70.5 billion at this morning’s exchange rate of R17.20). Adjusted earnings before interest, tax, depreciation and amortisation – a key measure of profitability – grew 21.9% to $129 million (R2.2 billion).
Datatec, which is also traded in the US, adjusts earnings before interest, tax, depreciation and amortisation to strip out costs such as those incurred for restructuring, once-off tax items and share-based payments.
Over five years, Datatec’s stock is up 209%.
The company says its strong profit improvement and enhanced dividend payout ratio led to a significant increase in the interim dividend, up from 4 US cents to 10 US cents.
CEO Jens Montanana was more optimistic than investors, saying he is “pleased to report another period of outstanding operational execution and financial performance. Continued margin expansion and strong operating leverage supported further improvement in the quality of Datatec’s earnings.”
Montanana noted that IT complexity is increasing rapidly, and the significant rise in interconnected digital communities is driving infrastructure demand, while the ongoing trend toward more software and services offers expanding margins, all promising better performance in the next financial year.
“AI-ready IT and network infrastructure will become essential for most businesses. For our industry, this will also drive faster networking, distributed data centres, more local computing and increased cyber threats, all of which should continue to benefit the group,” Montanana said in a statement.
He added that the company expects improved full-year financial performance across all divisions when compared to the previous financial year.
The company, which has operations in more than 50 countries across North America, Latin America, Europe, Africa, the Middle East and the Asia-Pacific, is serviced by more than 11 000 staff.
Datatec said it was seeing continued margin expansion alongside strong profit growth in Westcon, with growing recurring software and services revenue. It reported strong operating leverage in Logicalis International, which drove “excellent performance”.
In addition, it noted considerably improved financial performance in Latin America.
In its statement to shareholders, Datatec said the group’s strategic review “continues to address the persistent gap between Datatec’s valuation and the inherent value of its subsidiaries”.
At the same time, it seeks to ensure the group is “positioned to take full advantage of the positive market dynamics for its technology solutions and services”.
Looking ahead, Datatec says current trading conditions are “marked by a higher proportion of software and services at increased margins, along with rapidly growing IT complexity that drives strong demand for our specialised services and expertise”.
In addition to its results, the company announced several board changes, including that Saleh Mayet, a chartered accountant with previous experience at Anglo American, will be appointed as an independent non-executive director.
