South African IT firm Datatec said strengthening recovery in the United States and continued growth in emerging markets helped it to post a rise in first-half underlying earnings.
Chief executive Jens Montanana was generally optimistic about the IT market although he said it was still fragile in places.
“Businesses are generally doing OK and technology is being leaned on in terms of productivity,” he said in an interview.
Datatec, which is a major reseller for networking giant Cisco Systems, saw robust top-line growth in the US its largest market, and stable growth in Europe, although the United Kingdom remained challenging, Montanana said.
Emerging markets were strongest and now contributed a third of revenue, he said.
“Our standout markets continue to be Brazil and South America. The Middle East has been strong for us in this first half and Asia-Pacific is continuing to perform well,” he said.
The firm reported a 19% rise in revenue to $2,13-billion. Underlying earnings per share rose 37% to 15,8 cents, towards the top of the 15 to 16 cent guidance it gave in a trading update last month.
‘Happy’
CEO Montana said he was confident that the second half would be stronger than the first. This would put revenue at the middle to top end of the $4,1-billion to $4,4-billion forecast by analysts but he said he did not see any reason to up guidance beyond that range.
“We are very happy with the position and outlook,” he said.
Analysts expect the company to report full-year underlying earnings per share (EPS) of 36 cents, up from 17 cents a year ago, according to a Thomson Reuters I/B/E/S poll.
Analyst Andrew Darley at Finncap said the results showed encouraging growth and the benefits of diversification.
“Strength in emerging markets offsets UK weakness, acquisitions will continue, and the cash has been put to best use by the replacement of vendor finance with bank debt providing the opportunity for improved margins,” he said in a note.
Datatec is also expanding its operations in its home market, and on Tuesday upped its offer for South African-based distributor Comztek to R101-million from R97-million.
CEO Montanana said the company made the increase after it completed due diligence and it was a “full and fair” offer. — Reuters