Datatec flags Westcon-Comstor APAC revenue slump
- 06 October, 2017 11:15
Datatec’s Westcon-Comstor distribution business in the Asia Pacific region, which includes Australia and New Zealand, saw a year-on-year revenue decline for the six months ending August.
The South African IT group published its latest trading statement for the six months ended 31 August 2017 on 5 October, revealing falling revenues within its Westcon-Comstor subsidiary in Asia Pacific, the Middle East and Africa, and Europe.
The latest figures include the performance of Westcon North America and Latin America, which were sold to Synnex, with effect from 1 September 2017.
Overall, Datatec’s consolidated revenue for H1 FY18 is expected to be US$2.99 billion, down from US$3.04 billion for the same period the year prior, with a gross margin of 13.3 per cent.
Datatec told its shareholders that the year-over-year decline in earnings was primarily as a result of a worse performance in the Group’s Westcon subsidiary.
“Westcon-Comstor continued to experience disruption to the business as a result of the final SAP implementation in Europe, Middle East and Africa (“EMEA”). Further details are given in the Westcon-Comstor section below,” the company said.
Earnings for H1 FY18 were further impacted by higher finance charges, amortisation expense and effective tax rate than in H1 FY17.
Weston-Comstor’s year-on-year revenue in the Asia Pacific region for the six-month period fell by US$17 million to US$241 million. However, other regions saw a surge in revenue, including North America and Latin America. Globally, Westcon-Comstor’s revenues were up by around US$23 million, to US$2.28 billion.
In terms of gross profit, Westcon-Comstor’s Asia Pacific business saw a marginal year-on-year increase of US$1 million for the half year, to US$31 million. By comparison, the company’s North American business saw gross profit drop by US$6 million, to US$56 million, year-on-year for the period.
Asia Pacific revenues decreased US$17 million due to lower China sales, however gross profit was US$1.6 million better than H1 FY17.
Globally, Westcon-Comstor’s total gross profit dropped by around $21 million year-on-year, to US$216 million, during the period.
North America revenues were up US$24 million compared to H1 FY17 due to increased security sales, however gross profit was down $6.1m year over year due to product mix and lower volume rebates on unified communications and Comstor sales.
Meanwhile, the company said that the proceeds from the sale of part of its Westcon-Comstor business to Synnex comprise US$630 million in cash on completion and up to US$200 million payable as a cash earn-out, subject to Westcon Americas meeting certain agreed gross profit performance targets.
The company’s board said it intends to retain US$130 million for various operational and working capital and expansion funding requirements.
Synnex Corporation completed its plans to become a minority shareholder in the Asia Pacific business of Westcon-Comstor in early September, finalising a 10 per cent stake for US$30 million.
In addition to the regional agreement, the distribution giant also wrapped up the acquisition of the Americas divisions - spanning North America and Latin America - in a deal valued at US$800 million.
The latest figures come several months after the company revealed that disruption caused by its SAP implementation in some regions, along with rising finance charges and tax rates, had hit Westcon-Comstor’s results for the financial year ending February.