Datatec's R7.05bn payout was mostly shares as headline earnings barely rise

Datatec's R7.05 billion special dividend was mostly delivered through new shares, rather than cash. The JSE-listed technology group paid approximately R2.28 billion in cash and issued around R4.78 billion in shares to investors who elected the scrip alternative.

The outcome matters as shareholders assess Datatec's latest earnings forecast. In a 20 October JSE SENS statement, the company projected underlying earnings per share growth of 52.9% to 60.6% for the six months ended 31 August 2026. Headline earnings per share, the measure prescribed by JSE reporting rules, is expected to rise by only 0.5% to 7.3%.

The share count has changed

The R29-a-share special dividend followed a recapitalisation of Westcon involving General Atlantic. Investors could receive cash or additional Datatec shares. As reported by TechCentral, approximately 94.3 million new shares were issued at about R50.63 each.

That decision kept cash in the company but expanded its share base. Investors choosing scrip own more shares; the business has not paid them the equivalent amount in cash. Earnings in future periods will also be divided across a larger number of shares.

Two different earnings pictures

Datatec expects underlying earnings of 29.5 to 31 US cents a share, against 19.3 cents a year earlier. Headline earnings are forecast at 22.1 to 23.6 cents, compared with 22 cents. Basic earnings should reach 22.8 to 24.3 cents.

Underlying earnings exclude several categories of costs and adjustments, including share-based payments, amortisation of acquired intangible assets and certain acquisition costs. The two measures should not be treated as interchangeable.

The company reported record first-half adjusted EBITDA at Westcon International and Logicalis International, with particularly strong performance in the United States. Logicalis Latin America remained operationally weak, although recoverable tax credits supported its bottom line.

What investors should watch

Datatec's full interim results are scheduled for around 29 October. The trading statement has not been reviewed by its external auditors.

The detailed report should show cash conversion, debt, segment margins and how the enlarged share count affects per-share performance. Until then, the R7.05 billion headline should not be mistaken for R7.05 billion in cash received by shareholders.