Datatec’s H127 trading update confirmed that Westcon and Logicalis International delivered very strong financial performances in H127, while Logicalis Latin America saw weaker trading. H127 underlying EPS is expected to be in the range of 52.9% to 60.6% higher than H126. The special dividend relating to the refinancing of Westcon was paid on 19 October, with shareholders holding around two-thirds of shares taking the scrip distribution alternative. We maintain our forecasts pending full H127 results on 29 October.

As part of the refinancing of the Westcon division announced in June, the company had committed to paying out the proceeds of the transaction as a special dividend. It has now confirmed that it will pay out ZAR7.053bn/$435m, which is equivalent to 2900 ZAR cents/181 US cents per share. In addition to updating our forecasts for the precise payout, we have also reflected the new shares issued in July in relation to the scrip dividend.

Datatec has entered into binding agreements with funds managed by General Atlantic for the refinancing of and a minor equity investment in the Westcon business. This establishes a standalone capital structure for Westcon with Datatec retaining control of the business. The Datatec board expects to return the $434m net proceeds of the transaction to shareholders in the form of a special dividend, which at the current share price, equates to a yield of 31%. This marks further progress with the board’s strategy to reduce the gap between the value of the underlying businesses and the group valuation.