TIDMDTC
RNS Number : 7851E
Datatec Limited
11 May 2017
11 May 2017
Datatec Limited
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
Africa 380 501 (121)
----------------- ------ ------ ---------
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
Africa 33 56 (23)
-------------------- ----- ----- ---------
Asia-Pacific 57 55 2
-------------------- ----- ----- ---------
Total gross profit 456 497 (41)
-------------------- ----- ----- ---------
FY17 FY16 Movement
------------------- ----- ----- ---------
Adjusted EBITDA** $'m $'m $'m
------------------- ----- ----- ---------
North America 66 70 (4)
------------------- ----- ----- ---------
Latin America 26 24 2
------------------- ----- ----- ---------
Europe 49 54 (5)
------------------- ----- ----- ---------
Middle East and
Africa (12) 6 (18)
------------------- ----- ----- ---------
Asia-Pacific 6 14 (8)
------------------- ----- ----- ---------
Central costs (63) (59) (4)
------------------- ----- ----- ---------
Total adjusted
EBITDA** 72 109 (37)
------------------- ----- ----- ---------
FY17 FY16
----------------------------- ----- -----
$'m $'m
----------------------------- ----- -----
Adjusted EBITDA** 72 109
----------------------------- ----- -----
Restructuring costs (14) (15)
----------------------------- ----- -----
Unrealised foreign exchange
losses (3) (5)
----------------------------- ----- -----
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 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 Officer +27 (0) 11 233 3301
Jefferies International Limited - Nominated Adviser and
Broker
Nick Adams/Simon Hardy +44 (0) 20 7029 8000
Instinctif Partners
Frederic Cornet/Pietman Roos (SA) +27 (0) 11 447 3030
Adrian Duffield/Chantal Woolcock (UK) +44 (0) 20 7457 2020
This information is provided by RNS
The company news service from the London Stock Exchange
END
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