UK reorg takes bite out of Logicalis profit

Datatec interim numbers show integrator's sales down and margins challenged

An ongoing UK restructure has put a dent in Logicalis' profits over the course its soon-to-close fiscal year.

As it heads into the last month of its FY16, Logicalis and Westcon parent company Datatec has issued an interim management revealing that group revenues for the 10 months to the end of 2015 rose 1.8 per cent to $5.5bn (£3.86bn). However, gross margins came in at 13.3 per cent, down half a point from the corresponding period of the prior year.

UK-headquartered integrator Logicalis saw global turnover for the first 10 months of FY16 decline 1.9 per cent year on year to $1.3bn. Although firm's gross margins have reportedly improved as the year has gone on, it still has profitability challenges, as "'the weakness of the Brazilian real ... and the reorganisation of Logicalis UK [have] impacted operating profits".

The VAR's stablemate Westcon posted sales of $4.2bn for the first 10 months of FY16, an annual increase of 3.1 per cent. Gross margins were comparatively stable at 10.3 per cent, compared with 10.1 per cent in the prior year.

The distributor is currently undertaking a restructure of its EMEA business, including a major outsourcing project that could eliminate up to 300 jobs across the region. The move, which will see a number of functions outsourced to Romania, "is running successfully and is expected to deliver considerable improvements in operational efficiency", according to today's statement.

Elsewhere, issues related to the depreciation of the Angolan kwanza has seen Westcon incur foreign-exchange losses of $16.9m so far this year - almost three quarters of which have yet to be realised.

Datatec group CEO Jens Montanana said: "The slowdown in emerging markets has been challenging. However, the diversification and quality of our geographic portfolio, coupled with our strong industry position, enables us to weather these market conditions. Westcon and Logicalis both continue to make good progress in their initiatives to improve operating efficiency and adapt to market changes."

In the last four months of 2015 Datatec's consulting unit "recovered significantly". Over the course of the 10-month period the division was profitable at an EDITDA level, despite enduring a "small" loss in the first six months.

The group's financial year closes at the end of next month, with full-year results due to be published on 11 May.