The Group's subsidiary Westcon-Comstor is struggling in EMEA and North America.
Companies: Datatec Limited
Datatec (LON: DTC) has released a worrying trading update this morning outlining the Group's H1 18 performance so far.
According to the update, the Group now expects Underlying EPS to be 84%-92% below that of H1 17m.
Management said the YoY decline in earnings...
'Is primarily as a result of a worse performance in the Group's Westcon subsidiary ("Westcon-Comstor"). 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 impacting the figures were higher finance charges, amortisation expense and a higher effective tax rate, it said.
Revenue for the period is also expected to drop slightly YoY, down from £3.04bn in H1 17 to an expected £2.99bn.
In its North American operations, margins have been impacted due to "product mix and lower volume rebates on unified communications and Comstor sales."
And in Asia, revenues decreased due to lower sales in China, yet Gross Profit was slightly better than in H1 17.
The Group's second subsidiary Logicalis has seen a slight decline in Revenues from H1 17's $757m to $694m and flat Gross Profit of $175m.
At the time of writing, shares were down 2% on Thursday.
With a market cap of c. £699m DTC trades at a PE ratio of 9x, half the industry median of 18x. The Group has experienced 4% CAGR in YoY Revenues in the five years to 2017 and an average Operating Margin of 2% in the same period.