Cost-cutting to hit Westcon after sale to Synnex

The parent company of Westcon-Comstor has revealed its plans to "streamline" the distributor to boost financial performance.

South Africa-headquartered Datatec owns both Westcon and IT solution provider Logicalis. The company this year sold off Westcon-Comstor Americas to Synnex Corp, and retained Westcon in Asia-Pacific, Europe, the Middle East and Africa.

The distribution arm has been the weak performer of the two businesses, according to Datatec's half-year results.

"The outlook for Logicalis, which contributed most of our profits, is increasingly positive with a number of important developments set to support an overall improvement in H2," Datatec chief executive Jens Montanana said in a statement.

"We are moving rapidly to create the appropriate structure in Westcon International to support the direction of the business."

Datatec's shares, which trade on the London Stock Exchange, fell 5.5 percent on the news.

Following the US$830 million sale to Synnex, Westcon International will be "directly managed" by the Datatec management team.

"This business, which has faced difficult trading for the last few years, will be reshaped through a combination of cost-reduction measures and business efficiency initiatives," read a company statement.

The continuing Westcon-Comstor operations – not including the business sold to Synnex – delivered revenue of US$1.15 billion for the six months, a decline of 5 percent. It made a US$12 million EBITDA loss, worse than the US$1.2 million EBITDA loss a year ago.

Revenues fell 6 percent to US$325.2 million in Westcon's Asia-Pacific business, which includes Australia.

The continuing Logicalis business also saw revenues fall, down 8 percent to $677.6 million. It posted a healthier EBITDA of $28.2 million, though this was still a fall of 13 percent.

Montanana said: "Although the first half headline results were disappointing, we have generated exceptional value through the successful sale of our Westcon Americas business and recently the smaller disposal of the non-core Logicalis SMC business.

"In the near term, we plan to return US$350 million of cash to shareholders in a structured way to give them maximum flexibility and in due course return to shareholders any deferred cash consideration from the sale of Westcon Americas."