Our opinion on the current state of DATATEC(DTC)

Datatec (DTC) is an international IT and telecommunications company, operating across multiple continents including North America, South America, Europe, Africa, the Middle East, and Asia. The company is structured into three main divisions: Westcon International, which focuses on technology distribution; Logicalis, which handles integration and managed services; and Datatec Financial Services along with Analysys Mason, specializing in consulting and financial services. The company’s CEO, Jens Montanana, holds a significant 10% shareholding.

Recent strategic moves have included the acquisition of 70% of Cilnet, a Cisco systems integrator in Portugal, and Orange Networks in Germany, expanding Datatec’s presence on the Iberian Peninsula and in Germany. Other acquisitions include Stelacon in Sweden, Nexia in Norway, and in South Africa, Mars Technologies and Clarotech, indicating a continuous growth strategy through "bolt-on" acquisitions. A notable acquisition was Siticom in Germany, a 5G specialist, which was announced on 1st June 2021.

For the six-month period ending 31st August 2023, Datatec reported a 14.7% increase in revenue and a 34% rise in headline earnings per share (HEPS). However, the net asset value (NAV) per share saw a decrease of 16.1% to 210c (US). The company highlighted strong performances from its Westcon International division and improvements in Logicalis Latin America, despite challenging market conditions in Argentina and Brazil.

In the most recent trading update for the fiscal year ending on 29th February 2024, Datatec reported a 5.8% increase in group revenue, driven by a 7.6% rise in Westcon and a modest 1.5% increase in Logicalis International. The trading statement for the year projected HEPS to be between 13c and 15c (US), marking a significant improvement from a loss of 9.3c in the previous fiscal year.

The share price trajectory reflects the broader economic impacts, with a decline during the COVID-19 pandemic to approximately 2067c, followed by a rally to 4119c. However, the onset of the Ukraine crisis saw the share price dip to 3100c on 8th March 2022. Since then, the share has been on a recovery path, and the ongoing strategic acquisitions and market expansions suggest a positive outlook for continued performance.