Johannesburg- and London-listed IT group Datatec’s has managed to keep profit margins relatively stable and grow its cash balance strongly, despite a sharp decline of more than 10% in revenue in its financial year to February 2010.

In the year, Datatec’s revenue fell nearly $500m, from US$4,2bn in the 2009 financial year, to $3,7bn in 2010. Underlying earnings per share fell from $0,331 to $0,303. And

“Our rapid reaction to the recent global crisis resulted in significant cost reductions being initiated over a year ago,” says Datatec CEO Jens Montanana (pictured).

“This enabled us to lower our cost base and consequently maintain margins even as our revenues fell.”

The group’s financial year was a tale of two halves. The second six months saw a strong turnaround from the first six months. Earnings before interest, tax, depreciation and amortisation (Ebitda) in the second half of the year was $63,9m compared to $44,6m in the first half and $54,2m in the second half of the previous financial year.

“Datatec made an impressive turnaround in the last half of the financial year considering the rather poor performance in the first six months,” says Frost & Sullivan ICT industry analyst, Spiwe Chireka.

“Its product operations, in particular Westcon, have improved both in terms of margins and profits,” she says.

Westcon continued to be the standout performer with the group, accounting for 69% of revenues and 60% of Ebitda.

“Though Datatec reported healthy margins in the product segment, there is some concern that revenue generation continues to decline, as was the case with Dimension Data,” Chireka says. “Though Datatec has managed to run a lean ship in that area and hence enjoyed growing earnings, it is questionable how sustainable cost management driven growth is.” — Staff reporter, TechCentral