Datatec leans on Cisco in up-and-down FY12

Logicalis and Westcon parent laments weak UK environment, but services and Latin American growth help provide robust sales and profit growth

Services and emerging markets growth allowed Datatec to post an upbeat set of FY12 numbers, but the Westcon and Logicalis owner lamented a weak UK environment.

For the 12 months to 29 February, the South Africa-headquartered firm saw revenue grow 17 per cent year on year to a little more than $5bn (£3.1bn). Operating profit was up 43 per cent $150.6m.

The combined revenue provided by Europe and North America fell from 71 per cent in FY11 to 67 per cent this time out. The two regions' contribution to group gross profit dipped from 65 to 60 per cent, with South America proving to be the key profit growth engine.

Datatec chief executive Jens Montanana said: "I am delighted to report on another successful year for the group. Our unrelenting focus on operational performance has meant that once again we have been able to substantially increase revenue and expand margins, resulting in the bottom line growing at twice the rate of revenue.

"Our global reach and diversity continues to serve us well, helping to insulate the group against the challenging trading conditions in North America and Europe. South America and Asia-Pacific remain our best-performing markets, with Brazil, once again, doing exceptionally well."

Divisional differences
Logicalis' worldwide sales rose 18 per cent annually in FY12 to more than $1.2bn, while operating profit spiked 36 per cent to $42.6m. Some 24 per cent of the integrator's revenue was generated in the UK, compared with 28 per cent in FY11.

Three quarters of the firm's turnover came from product, as services increased its share of the sales pie from 22 to 25 per cent. Global revenue also shifted somewhat towards Cisco and away from IBM. In FY12 Cisco sales provided 56 per cent of Logicalis' total, while Big Blue chipped in 19 per cent. In FY11, these figures stood at 48 and 30 per cent respectively.

Westcon's global sales rose 17 per cent to $3.7bn, with operating profit up 32 per cent to $120.4m. The distributor's vendor sales mix remained broadly similar to the prior year, with 51 per cent of the top line coming from Cisco business. Other convergence vendors accounted for 15 per cent, security players contributed 19 per cent and all other manufacturers took the remaining 15 per cent.

Europe and South America were the only two regions to show increases in gross margin, with this continent seeing margins grow from 10.5 to 10.9 per cent. Latin America was way out in front of all other regions with gross margins of a meaty 19.5 per cent.

In a stock market announcement issued today, Datatec made several references to the "weak" and "challenging" UK market. Montanana issued a note of caution about the European market as a whole, but saluted the predictability of the business.

"We have a mature and robust business model, which has become increasingly predictable and demonstrates defensive attributes in difficult economic circumstances," he explained. "This gives us the confidence to continue our capital distribution to shareholders, having seven years of distributions and having paid our first interim distribution in November.

"We remain cautious about the near term. While Europe looks likely to remain challenging, we expect trading to improve in the US and a continued strong performance from our businesses in the rest of the world."