Datatec increases final dividend after strong annual financial performance
Datatec's chief executive Jens Montanana says increasing IT complexity driven by AI and the big rise in interconnected digital communities is driving infrastructure demand in areas like networking and cyber security, where the group has "deep domain knowledge and many years of experience".
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Datatec, the international information and communications technology (ICT) group, lifted its final dividend to 200 cents for the year ended February 28 versus 130 cents at the same time last year after solid profit improvements in its biggest subsidiaries.
The dividend policy was being changed to a more shareholder-accommodative two times dividend cover ratio, versus three times cover previously, due to a management incentive plan in some of the divisions that has resulted in upstreaming of cash to the parent company in the form of returns on fixed return equity instruments, resulting in more cash at the parent company.
"I am pleased to report a very strong operating and financial performance across all regions and metrics for the group," chief executive Jens Montanana said in the results.
He said the improving profitability and cash generation of the group's divisions enabled them to increase their dividend payout policy to 50% of underlying earnings per share.
Earnings before interest, tax, depreciation, and amortisation (Ebitda) increased 24.6% to $221.3 million (R4 billion) from $177.6m. Revenue fell 8.8% to $3.99bn. Headline earnings per share increased 79.6% to 25.5 US cents, from 14.2 US cents. Net debt fell to $62.1m from $123.1m previously.
Montanana said increasing IT complexity driven by AI and the big rise in interconnected digital communities was driving infrastructure demand in areas like networking and cyber security, where the group has "deep domain knowledge and many years of experience."
Revenue declined mainly due to a mix change and more software and services being accounted for in net revenue. Gross profit increased 5.6% to $910.3m, largely due to changes in the revenue mix, contributing to a big gross profit increase in Westcon International and Logicalis International.
He said their strategy was to improve shareholder returns over the medium term through a combination of corporate and business development actions, to enhance the competitiveness and profitability of the subsidiaries and operating divisions.
"The group continues to see good demand for its technology solutions and services worldwide," said Montanana.
He said a strategic review continued to address the gap between Datatec's valuation and the inherent value of its subsidiaries, while also ensuring the group was positioned to take advantage of the positive market dynamics for its technology solutions and services.
"We expect that the trend toward higher software sales and annuity services will continue, improving the group's margins and cash flow profile. There is continued strong demand for the group's products and solutions, which positions the group well in an increasingly complex environment," the board said in the results.
"The board expects that all divisions will continue to improve their financial performance in the year ahead," it said in a statement.
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