Datatec — Upgrading on strong performance

Datatec reported strong growth in gross profit, adjusted EBITDA, underlying EPS (uEPS) and cash generation in FY25. Restructuring in prior years has improved the operational efficiency of each division and the supply chain has normalised, allowing customer demand to be met on a timely basis. As digital transformation specialists, the group continues to benefit from strong demand for cybersecurity solutions, hybrid infrastructure and cloud-based solutions, and expects the growing adoption of AI to prompt enterprises to upgrade their IT infrastructure. Increasing confidence in the group’s ability to generate cash supports the ongoing share buyback programme and raised dividend payout target. We have upgraded our FY26 and FY27 estimates to reflect better performance, which in turn lifts our valuation.