Technology group Datatec is optimistic about its prospects, citing AI-driven spending as a key growth driver for its global IT business. With operations in over 50 countries, Datatec is one of the JSE's largest ICT services firms. The company operates mainly through two divisions: Logicalis and Westcon International, which distributes security and networking technology products. Datatec's CEO, Jens Montanana, believes that AI adoption is accelerating investment in IT infrastructure.
Datatec reported 18% growth in gross invoiced income to $4.835bn compared with the same period last year. Of this, $2.024bn was recognised as revenue, up 13.9%. The company's earnings before interest, tax, depreciation and amortisation (ebitda) fell 7.8% to $128.1m, but adjusted ebitda, which excludes restructuring and corporate action costs, rose 16.6% to $150.7m. HEPS, which strip out the effect of one-off items, rose 1.4% to 22.3 US cents.
The company's performance was driven by strong demand for its products and services, particularly in the area of AI infrastructure investment. Datatec said AI infrastructure investment is driving demand for its products and services. "AI adoption is accelerating investment in IT infrastructure as it expands into the enterprise and the edge of the internet, increasing the need for secure networked environments," the group said.
Datatec's results reflected the continued excellent performance at Westcon and record results from Logicalis International, with weak operating results in Logicalis Latin America. Montanana said the results reflected "the continued excellent performance at Westcon and record results from Logicalis International, with weak operating results in Logicalis Latin America". The company declared an interim dividend of 250c, up 42.9% on the previous comparable period.
In June, Datatec, through Westcon International, concluded agreements with General Atlantic's Atlantic Park Strategic Capital II Designated Activity Company and Atlantic Park Strategic Master Fund III for the refinancing of Westcon International Group Holdings. The transaction returned R7.1bn ($438m) to shareholders, which Montanana said continues to advance Datatec's value realisation journey.
The group's focus is on improving operating leverage, quality of earnings and cash generation, and improving Logicalis Latin America's financial performance. Montanana has been working to restore value Datatec has lost over the years, much of it in its international operations, which make up the bulk of its business. This has led to a series of corporate actions to slim the group down.
Despite a positive outlook, the group warned that its performance in the second half "will be impacted by the Westcon International minority investment and refinancing transaction and additional shares in issue as a result of the scrip take-up of the special dividend". Datatec's share price closed 2.02% lower at R59.77 on Thursday. The group expects a robust full-year outlook driven by strong AI infrastructure demand.
Key points
- Datatec reports 18% growth in gross invoiced income to $4.835bn.
- AI-driven spending is expected to boost sales of hardware and software for Datatec's global IT business.
- The company declared an interim dividend of 250c, up 42.9% on the previous comparable period.
