Margins at Datatec under pressure despite growth

Westcon and Logicalis owner reports solid start to the year but eurozone fallout beginning to befoul top and bottom lines

Westcon and Logicalis parent Datatec is seeing growth and margins take a hit as the fallout of the eurozone crisis goes global.

The South Africa-headquartered firm issued an interim management statement today for the four-month period to the end of June. The company indicated that while revenue for all divisions was up on an annual basis, growth rates are slowing and gross margins are being pressurised.

Earlier this year Datatec forecast that revenue for the fiscal year ending 28 February 2013 will be in the range of $5.5bn (£3.5bn) to $5.8bn, which would represent growth of more than 10 per cent. FY13 post-tax profit was projected to come in at about $104m and, four months into the year, these forecasts remain unchanged.

In the opening third of the year Westcon posted top-line growth in all geographies, but today's statement claimed that the distributor "has had a relatively challenging start to the year compared to the recent past". Overall gross margins have declined as the economic woes of North America and Europe sullied the growth posted in Latin America and other emerging markets.

Westcon has also announced that it has sealed its second acquisition this month after agreeing to buy Austrian security distributor Triple AcceSSS IT and its Swiss subsidiary.

Logicalis has reportedly made "a relatively strong start" to FY13, with both sales and operating profit increasing compared with the corresponding period last year. The VAR's UK operation was praised for doing well "despite weak economic conditions", while divisions in the US and Asia "also reported improvements".

Datatec's services arm "continued the improved performance of last year", claimed today's statement. A top- and bottom-line boost at Analysys Mason offset "a more challenging sales environment" for third-party services firm Intact and comms specialist Via Group.

Datatec chief executive Jens Montanana said: "The diversity of our business streams and global footprint has once again enabled the group to improve revenue and underlying earnings in a difficult environment. Although the outlook has become more uncertain, the defensive nature of our business model continues to be a strong asset."