South Africa: Datatec bullish on 2012

Mergers, Acquisitions and Financial Results

Dual-listed Datatec's revenue for the new financial year will grow by at least 12%, as economic conditions in the markets in which it operates continue to improve.

The company is also looking at making more small acquisitions in fast-growing markets such as Asia and Latin America. Yesterday, Datatec reported revenue up 15%, at $4.3 billion; core earnings per share increased 25%, to 37.9c; while headline earnings per share grew 41%, to 23.9c.

CFO Ivan Dittrich says the company's performance during the year was ahead of the guidance it gave the market at the beginning of the financial period. In March, the company said it expected revenue of $4.3 billion for the year, after initially anticipating turnover of $4.1 billion and $4.4 billion.

“Despite an environment which remained challenging in many markets, our focus on operational performance has meant we have been able to increase revenue and expand margins, resulting in the bottom line growing at twice the rate of revenue,” says CEO Jens Montanana.

Dittrich says 12% of the revenue growth was organic, with the balance coming from acquisitions. Datatec has made several small acquisitions recently, none of which were “blockbuster” deals, comments Dittrich.

Datatec will continue to look at potential buyouts, but it's unlikely any deals will add more than 10% to the company's revenue in any single year, notes Dittrich. He says the company is large enough to sustain organic growth. Areas where the company is looking to expand include Asia and Latin America, adds Dittrich.

Datatec continued to see gains in trading and profitability, and its second-half results were an improvement on the first six months of the year. Full-year revenue for 2012 should be between $4.8 billion and $5.1 billion, it says.

Dittrich explains this translates into revenue growth of 12% at the bottom end of the guidance. Core earnings per share should be around 47c, which would be a 24% increase, he says. There are opportunities to gain market share trading conditions and profitability to improve in most of the markets in which Datatec trades, says Dittrich.

The US, which is the group's largest market, continues to show signs of recovery, while Asia, South America and the Middle East remain its strongest performing markets. Trading conditions in Europe are also improving, although economic recovery in the UK remains weak, Dittrich says.

Datatec also sees opportunities on the networking side as broadband providers migrate to 4G, Dittrich points out.