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Datatec splashes red ink

Strong rand

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Datatec, the South African-owned networking equipment reseller, fell into the red for the year to Feb end.

The company blames the cost of restarting the European reseller operations of Landis and a strong rand for what it calls the "headline loss" of -R224m before tax on revenues of R20.2bn (approx US $2.6bn).

Also, Datatec's tax planning went awry during the year, with the "effective tax rate on profit before exceptional items and goodwill rising from 30.6% in 2002 to 75.2% in 2003.

Jens Montanana, CEO, said: "The effective tax rate is disproportionate because some subsidiaries made losses which will be carried forward for tax purposes, while others made taxable profits in countries with tax rates equal to or higher than the South African tax rate," he says.

Gross margins fell from 14.1% in 2002 to 12.2% in 2003. This was due "mainly to the reduction in margins from sales of Cisco products and a decrease in professional services revenue".

In March 2003, Datatec walked away from Landis' distie operations. It had agreed to buy the Dutch-owned business, but walked away following an argument over price. ®

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