Datatec - Mixed performance in H123, special dividend

Datatec’s trading update indicated slowing momentum in H123, with geopolitical and economic headwinds and the strengthening dollar offsetting demand-driven technology tailwinds. Weakness was principally down to Logicalis LatAm. Management expects reported EPS of between 4.5 and 5.5 US cents, a year-on-year fall of between 13% and 29%, with underlying EPS expected to be between 3.0 and 4.0 US cents, a year-on-year fall of between 52% and 64%. Our estimates anticipate a year-on-year rise in FY23 revenues and earnings of 6% and 5% respectively, which now appears optimistic. We will review our estimates with the full H123 results, due on or around 3 November 2022. On the brighter side, Datatec will return the initial gross proceeds from the disposal of Analysys Mason to shareholders via a £135.1m cash dividend (ZAR12.50 per share), with a payment date of 5 December 2022. There is also a scrip alternative. Recognising the different factors affecting their underlying performance, management will break out Logicalis LatAm from Logicalis International from the H123 results onwards. This could also be seen as a statement of intent for unlocking the strategic value of Logicalis in the future.