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Datatec reveals impact of coronavirus on business strategy

Westcon and Logicalis owner has seen a ‘structural shift’ as the result of the changes accelerated by the coronavirus pandemic

Westcon and Logicalis parent Datatec has shared provisional numbers for its financial year ending 28 February, indicating that the coronavirus pandemic had a profound effect on the business.

It has almost become a channel pastime trying to assess what the legacy of the pandemic will be and how much customers will have changed attitudes to digitisation and remote working because of their experiences of the past 18 months.

At Datatec, its CEO described a “structural shift” as the firm moved away from traditional software and hardware due to the impact of Covid-19.

“Datatec’s solid execution during a year beset with unprecedented Covid-19 pandemic-related disruptions has proven our operational resilience. Our divisions provide many of the products and services required to support a remote IT networked-based way of doing business,” said Jens Montanana, chief executive of Datatec.

“This digitisation trend is set to continue, and we have already seen a structural shift in our business away from many forms of traditional hardware to software and services with growing annuity revenue,” he said.

Overall, Datatec saw its revenues decline by 2% to $4.1bn and gross profit fell by 7% to $690.5m. The firm has also accelerated its move away from traditional hardware and software sales to line up behind the growth areas of digitisation and remote work solutions.

Westcon International revenue increased by 4.6% to $2.6bn on the back of cloud networking demand, remote access solutions and unified comms.

“Our financial results demonstrate great resilience and agility, in what can only be described as an unprecedented year” said David Grant, CEO of Westcon-Comstor.

“But beyond the strong trading performance, I’m especially proud of our people. The flexibility and tenacity our team has shown in shifting to new business models and working practices has been impressive – and the results speak for themselves as our partnerships are stronger, our productivity enhanced, and innovation is being accelerated through our data-driven approach to distribution," he added.

Logicalis is the largest contributor to the group in terms of profitability, and the operation also has the widest geographical reach. The trading statement indicated that the plan was to keep that situation going with more acquisitions and organic growth on the cards

Overall revenues at Logicalis decreased by 13.8% to $1.45n, but at a micro level things improved in Europe and it was the conditions in other places, notably Latin America, that hit the numbers. Expectations are that challenges will remain in the short term, but looking further ahead the business is well-placed, helped by its focus on cloud infrastructure and remote access computing solutions.

“All the group’s divisions delivered strong results and operating cash flows as well as excellent working capital management. The group also ended FY21 [financial year 2021] with much reduced net debt and enhanced liquidity following the refinancing of key facilities, including with new banking partners, on substantially improved terms, reflecting the improvement in fundamentals across the business over the past few years,” said Montanana.

“Although uncertainty remains around the Covid-19 pandemic, with many countries still in lockdown, Datatec is well-positioned to support its customers’ requirements and we anticipate the positive momentum generated in FY21 to continue into the current financial year,” he concluded.

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