South Africa-based reselling and services player, Datatec, has released its results for the first half of FY13. The firm’s diversified business is providing some protection against the economic conditions experienced by some markets - notably the UK where it describes the environment as “weak”. Group revenue increased 7% to $2.62bn, including a $29m contribution from acquisitions. The operating (EBITDA) margin on the underlying business increased minimally from 3.52% to 3.55%.
For the full year, Datatec is expecting revenues of between $5.5bn and $5.8bn, an improvement on the $5.03bn generated in FY12 (see our analysis from FY12: Logicalis still finding UK tough going).
The firm’s Westcon business (which accounted for 73% of Group revenue and 63% of EBITDA) distributes networking, security, mobility and convergence products to resellers. Revenues here increased 6% to $1.9bn – including $25m from acquisitions.
Datatec’s IT solutions and managed services provider, Logicalis, registered organic growth of 10% to $682m. Still, however, the UK market is being singled out and remained “challenging” during the period. While Logicalis has managed to expand its EBITDA margin very slightly from 4.8% to 5%, there is room for improvement given that operating expenses increased by 9% during the period. In addition, gross margins on both product resale and services were squeezed due to customer pricing pressure – in particular on the higher value deals.
Compared with last year, the UK operations now account for a smaller portion of the overall Logicalis business: down from 28% to 24%. We’ll soon be spending some time with UK management so we’ll bring additional analysis once we’ve unpicked some of the more specific trends underlying the performance of the UK business.