World Cup puts $50m hole in Logicalis H1 numbers

Brazilian business suffers major setback, while product revenues in Europe also take a hit

A solid performance in Europe was not enough to offset a World Cup-fuelled decline in Brazilian sales for Logicalis during its fiscal first half.

The setback may not be quite so catastrophic as the humiliating 7-1 defeat suffered by Brazil in the tournament's semi-final. But in the integrator's numbers Europe once again comes out on top against South America, much as it did when Germany beat the hosts and Argentina to claim their fourth World Cup title.

For the six months to the end of August, the VAR saw global sales decline 6.9 per cent year on year to $714.4m (£448.75m). Group product revenues plummeted 13.1 per cent, with Brazil picked out as the main offender. Turnover in the South American country shrivelled 21.7 per cent, which Logicalis chalked up to a $50m negative impact on business caused by the World Cup.

Europe fared better, with sales growing 3.1 per cent annually. The firm posted a 1.5 per cent increase in Asia-Pacific sales, while North American turnover fell 4.8 per cent. Europe and Latin America each contributed 32 per cent of total revenue in H1 – compared with 37 and 29 respectively in the corresponding period last year.

But the European news was not all good, with today's results announcement pointing to a marked decline in Logicalis' product business across the continent.

"Structural demand for IT products is weak due to customers' increasing shift to services-based solutions, impacting Logicalis as it results in lower demand in the server and storage segments," states the announcement. "Product revenues were lower in all regions with the exception of Asia-Pacific. The Europe region – in particular the UK – continued to be adversely impacted by the decline in product revenues experienced by IBM, a major vendor partner."

Services and distribution
The firm's services sales jumped 7.6 per cent annually during H1, fuelling a year-on-year increase in gross margins from 23.1 to 25.1 per cent, although EBITDA fell 4.9 per cent to $41.6m

Distributor Westcon – which is also owned by South African IT giant Datatec – saw its first-half revenue grow 14.3 per cent to $2.2bn. EBITDA increased 22 per cent to $55.7m. Datatec's consulting arm, the biggest component part of which is services outfit Analysys Mason, chipped in $27.8 in sales and EBITDA of $1.4m.

Datatec's overall revenue for the period came in 7.1 per cent higher than last year at $3bn, while EBITDA rose one per cent to $90.2m. Chief executive Jens Montanana saluted his firm's performance in varying conditions across the globe.

"We have delivered revenue growth and margin improvements in mixed trading conditions across the group," he said. "Westcon's return to a growth trajectory has been very encouraging, with recovery in market share and sales volumes in North America following successful resolution of the ERP transition issues. We have also seen strong growth in our security practice globally. Logicalis experienced a reduction in sales as anticipated; largely due to delays as a result of the FIFA World Cup in Brazil."