ICT group Datatec has hinted at more acquisitions and deals in the next three to five years as it seeks to close the gap between the value of its assets and the share price.
The JSE-listed technology group, which on Thursday reported sharply higher earnings for the first half of the financial year thanks to strong performances by Westcon International and Logicalis International, has concluded a number deals recently and is looking at more.
In January, Datatec bought UK-based Rebura to augment its cloud-based solutions. The deal, for an undisclosed amount of cash, was concluded through its Westcon-Comstor subsidiary.
“Datatec’s goal is to improve shareholder returns over the medium term through a combination of corporate and business development actions aimed at enhancing the competitiveness and profitability of its subsidiaries and operating divisions,” the group said in a statement accompanying its results for the six months to end-August.
Headline earnings per share for the six months to end-August rose 66.7% to 10.5 US cents, while earnings per share grew 79.4% to 11.3 US cents.
Revenue was down 5.5% to $2.6bn, though gross profit was up 3.5% to $432.7m and an interim cash dividend of 75 SA cents was declared.
The shares rose as much as 5.2% after the news, but had given up some the gains by 4pm and were trading 2.5% higher at R38.49, valuing the company at just under R8.8bn.
CEO Jens Montanana and his team have been fighting to restore the value Datatec has lost over the years. The majority of those losses are attributed to the firm’s international operations — the bulk of its business — which have struggled over the past decade, resulting in a series of corporate actions to slim down the group.
The group assembled a team from global investment bank Lazard, to assist in unlocking value. The company said it was considering all options, including separate listings of Logicalis and Westcon International or selling to a larger group.
“The group’s much improved year-on-year financial performance was underpinned by Westcon maintaining its positive profit growth trajectory and Logicalis International increasing its profitability strongly,” Montanana said.
“Logicalis Latin America’s overall performance also improved compared to the first half of the 2024 financial year.”
Westcon International’s gross profit increased 6.1% to $216.1m and Logicalis International’s gross profit rose to $164m from $157.5m. However, Logicalis Latin America’s gross profit was down 14.8% to $48.3m.
The group is bullish about its full-year prospects across its various, though it sounded a note caution about the outlook in Europe.
The group expects that all divisions will deliver a better full year-over-year performance, despite some softening in certain European markets.
The US remained robust, while Latin America appeared to be recovering, it noted.
Sectors such as cybersecurity and cloud infrastructure remained strong, while the networking industry was experiencing a period of slower demand, Datatec said.
Update: October 24 2024
This story includes information on Datatec’s growth strategy.
With Jackie Mackenzie
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