Westcon's poor performance pummels parent's profits

Datatec warns on full-year outlook again as distributor endures continued softness in Europe and the US

A disappointing Christmas performance from Westcon has led Datatec to warn shareholders for the second time in six weeks that its results for the 2013 fiscal year are likely to fall short of previous forecasts.

The firm closes its financial year at the end of next month and previously predicted that revenue would come in as high as $5.8bn (£3.6bn), compared with $5bn in FY12. But the Westcon and Logicalis parent now believes the top line will finish at about $5.4bn. Margins are set to take a hit, with post-tax profit expected to fall between $80m and $90m, compared with $89m last year.

In a trading update issued today, Datatec outlined that Westcon "has reported continued softness in its performance; December was particularly challenging, particularly in the US and Europe". Today's statement follows another shareholder warning, which was issued at the start of December following an unexpectedly tepid Q3 performance from Westcon.

But it isn't all bad news for the South African giant, with Logicalis showing strongly during the second half of the year. The integrator's operating margins for H2 are set to show an improvement both sequentially and year on year.

Datatec's IT consulting businesses have been something of a mixed bag in the year's second half, with Analysys Mason "expected to report a solid year", but other brands "have experienced weaker trading conditions" during H2.

Datatec chief executive Jens Montanana said: "Our global reach and diversity are continuing to provide relative resilience against the poor economic backdrop of many of the world's economies. Although disappointed by the recent developments in Westcon, we are not immune to the continuing weakness in many sectors, especially in the more mature markets. We are already adjusting our business model accordingly."