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Westcon International returns to profitability

Westcon International returns to profitability

Returned to profitability in part due to cost containment efforts

Credit: Westcon-Comstor

Westcon International majority owner Datatec has flagged a resurgence within its global technology distribution business, touting a return to profitability for the company under which the Westcon-Comstor brand operates.

The South African-headquartered conglomerate has released its annual financials for the year ending 29 February, revealing a slight year-on-year dip in revenue, from US$4.33 billion in FY19 to US$4.3 billion in FY20, and a substantial rise in pre-tax earnings (EBITDA), to US$158.7 million.

"The group delivered strong results in the past year, supported by good operational execution in all divisions in the face of growing global economic uncertainty,” Datatec CEO Jens Montanana told shareholders. 

"Westcon International returned to profitability and Logicalis Latin America produced an exceptional performance, as did Analysys Mason, our Management Consulting division, which continued to benefit from demand for 5G expertise.

"The group generated significantly improved cash flows whilst we returned $60 million to shareholders through a special dividend and on-going share repurchases during the year,” he added.

Westcon International returned to profitability in part due to cost containment efforts, with the previously published target reduction in central costs for FY20 successfully exceeded, according to the company. 

This follows on from multiple years of restructuring as well as system and process changes in Westcon International. No restructuring charges were incurred in FY20, the company said. 

In September 2017, fellow technology distributor Synnex Corporation completed plans to become a minority shareholder in the Asia Pacific business of Westcon-Comstor, finalising a ten per cent stake for US$30 million.

In addition to the regional agreement, the distribution giant also wrapped up the acquisition of Westcon International’s Americas divisions — spanning North America and Latin America — in a deal valued at US$800 million.

Westcon International’s revenues for FY20 were flat, at US$2.54 billion, as higher sales in Asia-Pacific and Middle East and Africa were offset by lower sales in Europe.

However, Westcon International’s gross profit increased by 5.9 per cent, to US$275.7 million, with increases across all regions. Gross margins increased to 10.8 per cent, with higher margins in Europe and Asia-Pacific.

Datatec’s integration and managed services business Logicalis, meanwhile, which claims ownership of Thomas Duryea Logicalis in the local market, continues to be the largest profit contributor to the Datatec group. 

Logicalis once again accounted for 40 per cent of the Group’s revenues, although the segment saw a 2.3 per cent decrease in revenue, to US$1.7 billion, while gross profit was up 7.6 per cent, to US$441.2 million. Services revenues were up 6.3 per cent, with growth in both professional services and annuity revenue.

The company said that it intends to continue to develop the Logicalis division, which also has the widest geographical exposure of any of the business units within the group, and grow Logicalis globally, both organically and through acquisitions.

Meanwhile, Montanana touched upon the global developments since the end of the company’s 2020 financial year, noting that since the start of its new financial year, the COVID-19 pandemic has taken its toll on economies, communities and businesses everywhere. 

Regardless, Montanana claimed that Datatec was able to adjust and move rapidly to a remote working environment across the group and all divisions. 

“We have seen increased demand for technologies and services required to enhance remote working in areas such as security and network access solutions, cloud migration and infrastructure virtualisation, as well as unified communications,” he said. 

Additionally, Montanana said that Datatec was well positioned to navigate the current environment, in spite of the uncertain macroeconomic outlook. 

“Good demand for our solutions and services is expected to continue, while we focus on costs, balance sheet and liquidity management,” he said.


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