Datatec expects big increase in gross profit
JSE-listed international ICT services company Datatec has published a trading update notifying shareholders that it expects to report a 10% rise in gross profits.
In a notice on the JSE News Service on Tuesday, Datatec said overall gross profits would increase from approximately $910 million (R15.6 billion) to $998 million (R17.1 billion).
This was chiefly due to Westcon International’s gross profits increasing by 13% from $441 million (R7.5 billion) to $499 million (R8.5 billion).
“The group built on the strong operational and financial performance reported for the first half of FY26 and continued to benefit from demand for the group’s technology solutions and services,” it stated.
“As indicated in the results announcement for the 6 months ended 31 August 2025 and published on 30 October 2025, an increasing proportion of software and services is accounted for on a net basis.”
This affects the comparability of reported revenues with prior periods. Therefore, Datatec’s board believes that gross profit offers a more accurate reflection of the business’s underlying performance.
“Revenue from sales arrangements where the group acts as agent is recognised on a net basis and only the commission or gross profit earned on these contracts is recognised as revenue,” it explained.
“Where the group is deemed to be acting as a principal, revenue is recognised on a gross basis.”
Datatec said Westcon International continued to deliver very strong financial performance in the second half of FY26, while Logicalis International delivered exceptional performance.
Logicalis Latin America saw a slight increase in gross profit, and its overall financial performance continued to improve compared to FY25.
Datatec said it intends to release its 2026 financial year results on the JSE News Service on or about 26 May 2026.
Datatec is cheap but has risks
Rand Swiss founder Gary Booysen previously said that, although Datatec’s stock remains relatively cheap, investors should consider several risks before buying it.
These include Datatec’s somewhat tightly held shares and traditional information and communication technology (ICT) business models facing disruption.
Booysen said Datatec is often sidelined because of how tightly it is held. CEO Jens Montanana holds over 18% of the company, and government owns 16.74% through the Public Investment Corporation.
“One of the other asset managers is also sitting at about 15%,” said Booysen.
“So, it’s an interesting one. It’s well diversified. It operates across fifty countries with 11,000 customers and is not particularly expensive at 15 times earnings either.”
Booysen also highlighted Datatec’s dividend as an attractive feature for shareholders. He said the earnings-per-share performance announced in the recent trading statement suggests a higher dividend, too.
“My issue around it is… ICT is a very complex business to invest in. Through Westcon, they look at security, network, and technology products, which is essentially reseller partnerships,” he said.
“They also do implementation agreements for people like Cisco and Palo Alto. While these are best-in-class solutions, the ICT landscape is changing very quickly at the moment.”
Booysen said there was a drive into AI, which could disrupt the business models of mature ICT companies like Datatec.
“Sure, they’ve been around since 1986. However, traditional business models might not work the same way in the next 5 years as they did for the last 5 years,” he said.
“With the disruption that’s happening in ICT and specifically around the reseller models, there’s potentially an outsized risk.”
Booysen said that could explain why Datatec is trading at a price-to-earnings ratio of 15, even though it appears to offer excellent value.
“That said, hats off to management. The business is performing exceptionally well. It’s well diversified. It’s got US dollar earnings. There’s a lot to like about it.”
Datatec FY26 expected divisional gross profit
| Division | FY26 Gross Profit | FY25 Gross Profit | % Change |
|---|---|---|---|
| Westcon International | $499 million | $441 million | +13% |
| Logicalis International | $386 million | $357 million | +8% |
| Logicalis Latin America | $105 million | $104 million | +1% |
| Corporate and Management Consulting | $8 million | $8 million | 0% |
| Total Gross Profit | 998 | 910 | +10% |
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