Logicalis hit by US slump

VAR set to post lower profits after encountering sluggish market conditions in the US

IT group Datatec has prepared investors for a dip in profits at its Logicalis arm after the VAR was hit by sluggish market conditions in the US.

South Africa-listed Datatec, which also owns distributor Westcon, saw its share price slide seven per cent after issuing a downbeat pre-close statement for its fiscal first-half results ended 31 August.

Interim group revenues are on course to boom 26 per cent year-on-year to $1.9bn, generating a 15 per cent jump in earnings before interest, tax, depreciation and amortisation (EBITDA) to $60m.

However, Datatec has braced shareholders for lower profits at Logicalis after slowing growth and rising costs forced US management to chop 12 per cent of the VAR’s local workforce in Q2.

With the resultant restructuring costs burning a hole in its first-half balance sheet, Datatec admitted Logicalis would post lower profits than a year earlier.

Datatec emphasised that Westcon continued to perform well following its recent acquisition of Noxs and Crane in Europe.

Logicalis' European and South American operations also "performed strongly", Datatec added.