Datatec sees challenging first half in UK


Datatec sees challenging first half in UK

Alex Scroxton
Westcon and Logicalis parent Datatec has said that business in the UK remained "challenging" during the first half of its fiscal 2011, which closed at the end of August.

Although the South Africa-based tech firm reported a 31% rise in EBITDA to $58.5m (£36.8m) and booked revenues of $2.13bn, up 19%, continuing uncertainty surrounding the UK economy and growing worries over the impact of the coalition government cuts have not helped matters, particularly at Logicalis.

However, an improving business mix, and signs of recovery in Datatec's largest, US market, helped mitigate some of the damage caused by the global downturn, and across the board all the group's divisions reported improvement.

CEO Jens Montanana conceded that the pace of the recovery "is staggered" but said he was "cautiously optimistic" in general.

"We are confident that our profitability and margin expansion across all divisions will continue in line with our previously published forecasts," he said.

Westcon, which now accounts for 76% of group sales, turned in a solid performance, with revenue up 19% to $1.62bn, although as larger deals started to filter through to distribution it did see a slight decline in its margins.

The distributor currently makes 55% of its sales from Cisco and its dependence on the world's largest networking firm was writ large across the results, as the distie burned through $203m in cash - up from $146m in H1 2010 - due to a decrease in accounts payable resulting from the expiration of extended payment terms for Cisco product and the decision to take advantage of early pay discounts for Cisco product in Europe.

Logicalis, meanwhile, posted 22% of group revenues, with sales up 22% to $479.2m. Product sales were up 23%, services 17%, and annuity services up 27%.

The unit saw strong increases in Cisco and IBM sales, with its APAC and Brazilian operations posting especially strong growth.

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