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Disposals hit Datatec’s FY18 earnings

International information and communications technology (ICT) group Datatec posted earnings per share (EPS) of 20.5c for the year ended February 28, compared with the 1.4c reported in 2017, owing to the profits on the disposal of two businesses during the period under review.

The company, however, reported an underlying loss a share of 5.6c for the 12 months under review, compared with EPS of 11c the year before, while headline earnings a share plunged into the red from earnings of 2c a share in 2017 to a loss of 19.1c in the 2018 financial year.

Datatec attributed the decline to the sale of Westcon Americas to Synnex and a weaker financial performance from Westcon International.

Continuing earnings before interest, taxes, depreciation and amortisation contracted to $26.7-million in 2018, from $29-million in 2018, while the group’s gross profit was up 2% to $636-million.

Datatec’s operating loss widened from $23.3-million in 2017 to $81-million in the 2018 financial year, while the loss before tax expanded from $31.8-million to $99.4-million.

The continuing operations achieved a 2% uptick in revenue to $3.92-billion during the year under review.

Net debt for the year under review improved significantly from $396.5-million to $6.4-million, and the year ended with Datatec delivering a stronger balance sheet with higher tangible net asset value of $452-million in 2018, compared with the $264-million posted in the 2017 financial year.

Logicalis, the largest profit contributor to the group, delivered good double-digit growth during the year, supported by a much improved performance across the Latin America, Europe and Asia-Pacific businesses in the second half of the year and the strategic acquisitions completed during the year, said Datatec CEO Jens Montanana.

The group unlocked value through the disposal of Westcon-Comstor's businesses in North America and Latin America, 10% of Westcon International to Synnex for $630-million and the noncore Logicalis SMC consulting business to DXC Technology Company for $42-million.

Westcon Americas and the Logicalis SMC business are classified as discontinued operations.

"Westcon International's performance was disappointing, especially in the Europe, Middle East and Africa region where business disruptions relating to enterprise resource planning and business process outsourcing continued. Our plans to return Westcon International to profitability and growth are progressing and the central cost base is being actively addressed,” he added.

The restructuring of Westcon International is under way with committed plans to cut costs and streamline its operations to return the business to profitability and resume growth.