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Datatec reports 15% rise in interim revenue

The special dividend ‘is a give-back to shareholders from a large disposal we did over three years ago to an American company’: CEO Jens Montanana.

FIFI PETERS: We are dialling into the first set of results for the show today. There was several numbers that came out on the JSE today, and one set came out of Datatec. It’s a technology group that reported results to which markets gave the thumbs-up because at one stage the share price was up over 6%. They have increased their profits and resumed a dividend. It’s an interim dividend. I’m wondering if perhaps that’s the reason behind the joy at the numbers.

We have Jens Montana, CEO of Datatec, joining us for more. Jens, thanks so much for your time, sir. You’ve resumed your dividend; is this a signal of confidence in the road ahead, and does it suggest that the battle against the Covid-19 effects on your business is over?

JENS MONTANANA: Yeah. I’ll address the second bit in a moment. Let’s call it the Covid effect or Covid dynamics. The dividend that we paid was actually a special dividend. We resumed dividend payments a few years ago, a full-year dividend, and this dividend now, the interim, is a special dividend, which is still a give-back to shareholders from a large disposal we did over three years ago to an American company; we sold half of our distribution network and security-distribution business in the Americas to a company called Cinex, and we kept back some of that money for reorganisation and working-capital purposes. But [after the] really good, strong last two years that money has been returned to Datatec, the parent and the subsidiary, and that was the expectation – to give that back to shareholders.

FIFI PETERS: All right. Just for clarity, I’m looking at your statement here and it does say that in the six months to August, 2020 there wasn’t a dividend declared.

JENS MONTANANA: Oh no, we paid full–

FIFI PETERS: Apologies for the error on that front. The Covid impact on your business – would you say that you’re completely out of the woods at this stage?

JENS MONTANANA: Yeah, completely. In fact, this has been the case probably since the initial shock in March, April, May last year. Since then, and certainly since the end of last year and the beginning of this year, in the post-Covid world there’s been a rising demand for technology everywhere, especially [in terms of] cloud, cybersecurity and IT services.

In this period, if you look back just over the last three years, our earnings have tripled, and in fact our profits in this first half are 30% bigger than they were for the whole of FY 19. That’s quite a significant step up. I think part of it – you can also look at international and global tech companies – is that we’re in an environment now where maybe permanently there’s going to be this new elevated demand for the way businesses and individuals are configured in terms of greater online use [of] at-home working, hybrid cloud infrastructure. We think all these things are here to stay and all of this, let’s call it, extra online activity of course is creating more and more security problems. So the cybersecurity industry is growing rapidly on the back of this as well.

FIFI PETERS: So what are you doing? What kind of investments are you making in the space of security to ensure that your clients are protected?

JENS MONTANANA: We have a very large security business. Our portfolio of security products and what we provide in cybersecurity is over a billion dollars a year. Now that might sound enormous, but we are in over 50 countries, so we already have that part of our business and it’s pretty significant. We don’t really need to do acquisitions to move that business forward. We’re constantly trying to attract the latest and best technology providers. Of course, a lot of them come to us because we’ve got such a large international footprint.

The area where we are making investments in new ……4:33 is around Microsoft and their cloud Azure, and helping our clients migrate to the cloud. So that’s a big-bet area for us. We’re also making investments in, of course, helping our customers understand their information. That whole world is called, ‘data analytics’ and ‘artificial intelligence’ and so on. There’s just so much data around that, of course, as customers move to the cloud, they want to know what the value of all this information is. So that’s an area of our investment as well.

FIFI PETERS: And how much of that migration to the cloud has been taking place in the past year, particularly for companies which were not in the essential services space and had to do things remotely? How much of an adaptation to the cloud did you see in your business?

JENS MONTANANA: That’s a very good question. For most companies, most small and mid-sized companies, IT or technology is a must-have, something they use. It’s not necessarily a critical differentiator, but it’s that ‘everything runs on IT now’. In the post-Covid world it had already been going on for four or five years, but there’s been this acceleration in what everybody refers to as digitisation, which is basically increased cloud-computer usage, and businesses that have been born in the last two, three years are most probably unlikely to have their own infrastructure and their own premises. They don’t need it any more.

Of course, what’s hastened this is people’s remoteness and not being able to go to the office. Don’t forget that doesn’t just include ourselves. It includes people at work in the IT department. They can’t go to the office either. So that has been a big catalyst for organisations moving everything into the cloud. We think that’s not just a temporary thing, we think that’s going to be sustained.

FIFI PETERS: And then, in terms of your future and what your shareholders can look forward to under those expectations – what is it?

JENS MONTANANA: We have embarked upon a proper strategic review, which we announced to the market a few months ago. We have a number of business streams and, while our performance has improved significantly in the last few years, we do feel that we’ve been left behind from a shareholder. Obviously our share price has done well in the last few months. But when you look at us over two years, three years, four years, we really have been left behind, we think in the global tech move. That’s something that we are very conscious of and we’re going to think about ways to address that and continue to remove or narrow the let’s call it valuation.

FIFI PETERS: All right, Jens, thanks so much for your time given to us this evening. That’s Jens Montanana, CEO at Datatec.

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