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South African network integrator Datatec delivered an impressive performance in H1 (see Datatec expecting double-digit H1 growth), sending its shares up almost 7%. Group revenue for the six months to 31 August was up 14% to $2.44bn (13% organic), and pre-tax profits more than doubled to $60.6m (margin of 2.5% vs. 1.4%).
Of course we’re most interested in Datatec’s UK-based network services division Logicalis, which it seems has also performed very well. Overall, Logicalis accounted for 25% of Datatec’s revenues and 31% of its EBITDA in the six months to 31 August. Logicalis’ top line revenue was up 26% to $602.2m and up 20% organically, driven by strong growth in the South America and Asia Pacific markets. Profits are also heading in the right direction thanks to an increasing focus on services with EBITDA operating profits up 52% to $17.3m, giving Logicalis a margin of 2.9% vs. 2.4% in H110.
It is clear that Logicalis is benefitting from growth across both its reselling and services activities. Although numbers weren’t split out, revenue from product sales was up 23%, and up 34% from total services. Particularly encouraging is the strong growth in annuity service revenues, which were up 38%.
Although Logicalis’ geographical performance isn’t split out either, it apparently achieved double digit growth in all regions, with the exception of the US. While growth in Asia and SA is likely to have been all organic, we think only a small percentage of UK growth will be down to its recent acquisition of £4m revenue Inca Software in March (see Logicalis inks Inca buy from Avisen). Consequently, Logicalis’ UK organic growth must currently be a pretty respectable mid-to-high single digits.
Logicalis is in something of a sweet spot with its focus on network infrastructure, data centre and related services, which it is no doubt putting to good use on client’s cloud investments. So even though Logicalis expects the US and UK markets to continue to be challenging through the rest of the year, it expects the overall performance in the second half to be ‘sequentially and comparatively better’.
