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Westcon owner says supply constraints easing

Product lead times improving, while outlook for business looks stronger than last year

Datatec is “cautiously optimistic” about its prospects for the rest of the year after an improvement in results during the last four months.
Datatec is “cautiously optimistic” about its prospects for the rest of the year after an improvement in results during the last four months.

Westcon's parent company Datatec has said that supply constraints which impacted its business last year have been alleviated amid a general improvement in trading conditions.

The networking services group, which has interests in corporate resell and IT consulting, as well as distribution, said "supply constraints, existing at the previous financial year end, have eased and product lead times are improving."

Westcon makes the bulk of its revenues from Cisco, although it also carries products from other brands such as APC, Avaya and Trend Micro.

In what also raises hopes that the market in general is beginning to stabilise, Datatec said that extended credit terms from suppliers during the previous financial year had been reduced to normal levels, resulting in a consumption of working capital.

Separately, it added that Westcon was looking at earnings enhancing re-financing activities by taking advantage of vendor supplier prompt pay arrangements. These activities will reduce Westcon's net cash position over time, it said.

Datatec revealed the developments in its latest interim management statement for the four months to the end of June, which also stated that revenues and operating profits had shown a stronger performance than the same period a year before.

Westcon produced its fourth consecutive quarter of revenue growth during the first quarter of Datatec's current financial year, with gross margins in line with historical trading patterns. It said the results were driven by the continuing recovery in the US, stable conditions in Europe and resilient performance in Asia.

Westcon's Emerging Markets business, which encompasses the Middle East, Africa and India, continued to trade well with an "improved performance" compared with the corresponding period a year ago.

"We are delighted to report that the improvement in trading and profitability reported at our recent full year results has continued in all of the group's divisions," said Jens Montanana, CEO at Datatec. "We remain cautiously optimistic for the year, in line with our previously published forecasts."

Earlier this year, Datatec forecast revenues of between US$4.1 billion and US$4.4 billion for the year ending February 2011 and an after-tax profit of around US$58m.