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Westcon Emerging Markets divisional reportDownloads
Overview Westcon Emerging Markets Group (Pty) Limited (“WEM”) is the holding company for Datatec Limited’s distribution subsidiaries operating in Africa, the Middle East and India. These subsidiaries previously formed part of the Group’s “Other Holdings”.
During the year in review the above operations were consolidated under the WEM umbrella to ensure a more regional approach towards management and reporting, with a strong focus on existing business development and cross-group operational efficiencies. Westcon SA’s performance was impacted by softness in the South African market in the second half of the year and a weakening South African Rand. On 24 April 2009 Datatec increased its shareholding in Westcon SA from 55% to 74,9% . Westcon Africa underwent a period of integration aligned with operational and management restructuring during the year. The business is now better positioned to address developing market opportunities and has received recognition as Distributor of the Year for sub-Saharan Africa from key vendors including both Cisco and Symantec. Westcon ME has continued to enhance a longstanding reputation as a value-added distributor for a complementary selection of advanced technology vendors such as Motorola and Juniper Networks. Comstor ME, Datatec’s Cisco business in the Middle East, started operations in February 2007 and in two years has established itself as the leading Cisco distributor in its nominated territories. Inflow’s presence in nine key Indian cities provides Datatec with an excellent entry point and initial footprint in India and is an important step in the Group’s international strategy to increase its exposure to the world’s major emerging and developing markets.
Markets WEM is focused on the distribution of higher growth complex technology products within the networking, convergence, security and mobility arenas. The global slowdown has had a less pronounced impact on the developing economies and current market dynamics are presenting opportunities for technology intermediaries including:
WEM’s geographical footprint aligned with its proven channel development track record positions the business for strong growth in the years ahead.
Like the rest of the Datatec Group, WEM’s strategy is to focus on a combination of organic growth in the fastest growing sectors of the ICT market, geographical expansion and earnings enhancing acquisitions. The entrepreneurial outlook, local market experience and vendor relationships within WEM’s constituent businesses aligned with the strong Westcon global brand and depth of distribution expertise, presents a significant organic growth opportunity for WEM. Critical to the success of the consolidation of the businesses under the single WEM umbrella is the identification and leveraging of profitable commercial relationships, successful market engagement methodologies and best operational practices.
Focus on advanced technologies within networking, convergence, security and mobility.
WEM’s revenues were up 46% to US$283,3 million (2008: US$194,6 million) and generated EBITDA of US$0,6 million (2008: US$6,5 million) after deduction of US$4,5 million of restructuring costs and provisioning in Africa. All units other than Africa were profitable. Westcon SA revenues were US$74,5 million (2008: US$85,0 million), mainly as a result of the weakening South African Rand. EBITDA was US$2,2 million (2008: US$3,5 million). Westcon Africa revenues were US$101,7 million in its first full reporting period as part of the Group. (2008: US$50,8 million). These operations generated an EBITDA loss of US$5,6 million (2008: profit of US$0,1 million) after inclusion of US$4,5 million of costs associated with restructuring the business and discontinuing non-core activities. Westcon ME’s revenues increased by 17% to US$65,3 million (2008: US$55,6 million) while EBITDA increased by 14% to US$3,3 million (2008: US$2,9 million). Comstor ME’s revenues increased by 120% to US$28,7 million (2008: US$13,1 million) and achieved EBITDA of US$1,0 million (2008: EBITDA loss of US$0,4 million). Since acquisition, Inflow has contributed US$13,1 million to revenues and US$0,2 million to EBITDA.
The management of WEM strongly believes that people are a company’s most important asset and are committed to making Westcon Emerging Markets a stimulating, challenging and rewarding place to work. Key initiatives planned during 2009 include the extension of the use of employee satisfaction surveys successfully deployed by WEM’s Middle East businesses, the roll-out of regional in-house training programmes and a commitment to full utilisation of vendor funded staff development activity.
Medium-term prospects are positive in WEM’s developing markets, particularly India which is expected to experience strong growth after the global slowdown eases. Management sees significant opportunities in partnering existing vendors in new markets and Westcon’s appointment as Cisco’s first global distributor in April 2009 is expected to be a key business enabler. The current year outlook is for flat to modest revenue growth in WEM with an expectation of much improved operating profitability. Current trading conditions in South Africa and the Middle East are soft and management’s focus is on positioning the two units for the next stage of growth when these comparatively developed economies emerge from slowdown. It is expected that African revenues for the current financial year will be significantly reduced with gross margins enhanced following the exiting of lower margin personal computer, peripherals and low-end server Inflow is expected to report significantly increased revenues through organic growth and the inclusion of full year revenues for the first time following acquisition. |
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