Johannesburg - Global technology group Datatec [JSE:DTC] has managed to generate sizeable cash reserves in the financial year to end-February 2010, and plans to put this money to work in the year ahead.
Datatec CEO Jens Montanana told Fin24.com the group is looking at possible acquisitions following its purchase of Chinese company NetStar late 2009. NetStar has operations throughout the Asia-Pacific region.
"Asia is an area of focus for possible acquisitions," said Montanana. "NetStar was our first step into China, but we're still just a pimple in that region."
He said the strengthening of Datatec in Asia will accompany expansion in the rest of the world.
"We're already strong in six South American countries, and now we're looking at Brazil and others. But that's not to say you won't see us in Europe or North America," he added.
Montanana said Datatec has a stronger balance sheet than most of its competitors, which will allow it to gain ground in the year ahead.
"We will continue incrementally to improve things, but we don't expect to see a big leap forward. Our guidance illustrates leverage, however. Our revenues for the current financial year are expected to be up 10% and earnings will be up 20%, so that's a two to one leverage."
Datatec's results for the reporting reflected a tough first half of the year, but showed strong recovery in the second half.
The group generated revenue of $3.74bn, down 10.5% from $4.19bn in the previous financial year. Earnings before interest, taxes, depreciation and amortisation (Ebitda) fell 13.5% from $126m in 2009 to $109m in 2010. But underlying earnings per share fell by 8.5% to 30.3 US cents from 33.1 for the previous year.
However, Montanana pointed out that second-half underlying earnings per share are up 77%.
The group's balance sheet reflects net cash of $186m, up 81% from $36m the previous year.
"We saw a big jump in the second half of the year and we've managed to reduce our operating costs by more than our revenues. That means our margins have stayed stable - in fact, our margins hardly budged," said Montanana.
"We also generated a lot of cash. Now we expect to put it to work.
"One generally hoards at the bottom of a cycle and spends on the way up. I believe we are past that inflection point now."