DTC
DTC
DTC - Datatec - Audited Results For The Year Ended 29 February 2008 And
Capital
Reduction
DATATEC LIMITED
Registration number 1994/005004/06
Share code: DTC ISIN: ZAE000017745
("Datatec")
www.datatec-group.com
AUDITED RESULTS FOR THE YEAR ENDED 29 FEBRUARY 2008 AND CAPITAL REDUCTION
Financial highlights
Revenue $4,0 billion - up 27% (2007: $3,2 billion)
Gross margin 13,7%(2007: 13,1%)
Operating profit $123,6 million - up 25% (2007: $99,1 million)
Underlying* earnings per share 47,3 US cents - up 21%(2007: 39,2 US cents)
12 US cents distribution to shareholders, - up 20% (2007: 10 US cents)
*excluding goodwill impairment, amortisation of intangible fixed assets,
profit or loss on sale of assets and businesses and unrealised foreign
exchange movements on inter-company loans.
Operational highlights:
* Major acquisitions transform Westcon`s European business and diversify
product mix
* Significant second half turnaround in the performance of Logicalis US
* Creation of South American market leader with completion of $77,2 million
merger for Logicalis
Condensed Group income statement
Audited Audited
year ended year ended
29 Feb 08 28 Feb 07
US$000 US$000
Revenue 4 007 932 3 167 772
Continuing operations 3 623 024 3 075 344
Acquisitions 384 908 92 428
Cost of sales (3 460 802) (2 752 601)
Gross profit 547 130 415 171
Operating costs (401 630) (302 129)
Unrealised foreign exchange gains 5 315 6 314
Operating profit before finance costs, 150 815 119 356
depreciation and amortisation
("EBITDA")
Depreciation (16 460) (13 676)
Amortisation related to intangible (10 345) (5 396)
assets
Operating profit before goodwill 124 010 100 284
adjustment
Goodwill adjustment (421) (1 142)
Operating profit 123 589 99 142
Interest received 11 533 9 641
Financing costs (26 841) (19 295)
Loss on disposal of investments - (55)
Profit before taxation 108 282 89 433
Taxation (28 246) (27 305)
Profit for the year from continuing 80 036 62 128
operations
Profit for the year from discontinued - 24
operations
Profit for the year 80 036 62 152
Attributable to:
Minority interests 4 382 2 103
Equity holders of the parent 75 654 60 049
80 036 62 152
Number of shares (millions)
Issued 169 155
Weighted average 166 150
Diluted weighted average 170 153
Earnings per share (US cents)
Basic EPS 45,4 40,0
Diluted basic EPS 44,6 39,2
SALIENT FINANCIAL FEATURES
Headline earnings 75 910 61 226
Headline earnings per share (US cents)
Headline 45,6 40,8
Diluted headline 44,7 40,0
Underlying earnings 78 796 58 860
Underlying earnings per share (US
cents)
Underlying 47,3 39,2
Diluted underlying 46,4 38,5
Net asset value per share (US cents) 386,9 346,9
Cash generation per share (US cents) 52,7 12,9
KEY RATIO
Gross margin % 13,7 13,1
EBITDA on ongoing operations % 3,8 3,8
Effective tax rate % 26,1 30,5
Exchange rates
Average Rand/US$ exchange rate 7.1:1 7.0:1
Closing Rand/US$ exchange rate 7.7:1 7.2:1
Condensed Group balance sheet
Audited Audited
29 Feb 08 28 Feb 07
US$000 US$000
ASSETS
Non-current assets 421 074 242 096
Property, plant and equipment 32 220 22 307
Capitalised development expenditure 16 638 14 068
Goodwill 284 348 162 586
Other intangible assets 54 956 20 720
Investments 3 652 -
Deferred tax assets 29 260 22 415
Current assets 1 463 245 1 149 138
Inventories 341 036 268 944
Receivables 877 527 656 587
Cash and cash equivalents 244 682 223 607
Total assets 1 884 319 1 391 234
EQUITY AND LIABILITIES
Ordinary shareholders` funds 654 707 537 744
Minorities` interest 23 576 14 852
Total equity 678 283 552 596
Long-term liabilities 58 760 50 176
Deferred tax liabilities 24 498 13 232
Current liabilities 1 122 778 775 230
Payables and provisions 893 880 674 095
Amounts owing to vendors 2 000 4 044
Taxation 16 395 14 876
Bank overdrafts 210 503 82 215
Total equity and liabilities 1 884 319 1 391 234
Capital expenditure incurred in current 18 502 10 633
year
Capital commitments at end of year 11 283 11 878
Lease commitments at end of year 116 686 108 039
Payable within one year 20 320 17 871
Payable after one year 96 366 90 168
Condensed Group cash flow statement
Audited Audited
year ended year ended
29 Feb 08 28 Feb 07
US$000 US$000
EBITDA 150 815 119 356
(Profit)/loss on disposal of property, (80) 6
plant and equipment
Non-cash items 12 015 2 629
Cash generated before working capital 162 750 121 991
changes
Working capital changes (85 335) (101 924)
Increase in inventories (65 598) (58 984)
Increase in receivables (88 049) (121 289)
Increase in payables 68 312 78 349
Cash generated from operations 77 415 20 067
Net finance costs paid (15 308) (9 654)
Taxation paid (29 809) (14 039)
Net cash inflow/(outflow) from operating 32 298 (3 626)
activities
Net cash outflow from investing in (180 744) (44 741)
subsidiaries
Net cash outflow from other investing (27 640) (15 562)
activities
Net cash outflow from disposal of operations - (31)
and investments
Net cash inflow from financing activities 70 574 31 485
Capital distribution to shareholders (16 775) (6 589)
Decrease in cash and cash equivalents (122 287) (39 064)
Translation difference on opening cash 15 074 8 205
position
Cash and cash equivalents at beginning of 141 392 172 251
period
Cash and cash equivalents at end of year(*) 34 179 141 392
(*) Comprises cash resources, net of bank overdrafts and trade finance
advances
Segmental analysis
Audited Audited
year ended year ended
29 Feb 08 28 Feb 07
US$000 US$000
Revenue
Westcon 2 853 636 2 271 557
Logicalis 845 112 693 113
Analysys Mason 63 476 61 352
Other Holdings 245 708 141 750
Revenue from ongoing operations 4 007 932 3 167 772
EBITDA
Westcon 101 955 82 671
Logicalis 36 195 26 795
Analysys Mason 6 944 6 202
Other Holdings 5 721 3 688
EBITDA from ongoing operations 150 815 119 356
Operating profit before goodwill adjustment
Westcon 86 588 72 504
Logicalis 26 141 18 783
Analysys Mason 6 240 5 752
Other Holdings 5 041 3 245
Operating profit from ongoing operations 124 010 100 284
Total assets
Westcon 1 270 967 873 966
Logicalis 391 979 343 189
Analysys Mason 55 594 42 518
Other Holdings 165 779 131 561
1 884 319 1 391 234
Determination of headline earnings
Equity holders of the parent per the income 75 654 60 049
statement
Headline earnings adjustments: 234 1 179
Goodwill adjustments 314 1 142
(Profit)/loss on disposal of plant and (80) 6
equipment
Loss on disposal and closure of discontinued - 31
operations
Tax effect 24 (2)
Minorities` interest (2) -
Headline earnings 75 910 61 226
DETERMINATION OF UNDERLYING EARNINGS
Headline earnings 75 910 61 226
Underlying earnings adjustments: 5 030 (918)
Unrealised foreign exchange gains (5 315) (6 314)
Amortisation of intangible assets 10 345 5 396
Tax effect (3 074) (1 607)
Minorities` interest 930 159
Underlying earnings 78 796 58 860
Abridged statement of changes in equity
Audited Audited
year ended year ended
29 Feb 08 28 Feb 07
US$000 US$000
Balance at beginning of year 552 596 461 351
Translation of foreign subsidiaries (4 934) (4 290)
Translation difference on equity loans 2 236 8 758
Recognised directly in equity (2 698) 4 468
Attributable profit for year 75 654 60 049
Total income recognised for the year 72 956 64 517
Shares issued 64 605 26 830
Capital distribution to shareholders (16 775) (6 589)
Share buy back (6 131) -
Share-based payments 2 308 1 375
Acquisitions/disposals - 2 765
Minority interests 8 724 2 347
Balance at end of year 678 283 552 596
Jens Montanana, Chief Executive of Datatec, commented:
"2008 was another year of strong performance for the Group with further
improvements in revenues and earnings. We continue to benefit from our scale
and geographic diversity.
"As a result of strong organic growth and acquisitions we exceeded our
revenue target of $4 billion. Despite a slowdown in the US, tight operating
cost controls and improving productivity have underpinned our solid progress
which has resulted in improvements in margins.
"The current year has started well and in line with our expectations. We
remain confident that our increasing international reach and business mix,
together with operating leverage brought through scale, will enable us to
continue to grow the Group organically above industry averages, even in more
difficult market conditions. We are also continuing to expand our business by
acquisition in faster developing markets."
PROFILE AND GROUP STRUCTURE
Datatec Group ("Datatec" or the "Group", JSE and LSE: DTC) is an
international Information Communications Technology ("ICT") networking and
related services business with operations in many of the world`s leading
economies. The Group`s main lines of business comprise: the global
distribution of advanced networking and communications convergence products
("Westcon"); ICT infrastructure solutions and services ("Logicalis"); and
telecommunications strategy consulting ("Analysys Mason"). "Other Holdings"
encompasses the Group`s distribution and ICT services businesses in the
Middle East and Africa as well as the Head Office.
STRATEGY
The Group continues to make good progress with its strategy to deliver long
term, sustainable above average returns to shareholders by focusing on a
combination of organic growth in the faster growing sectors of the ICT
market, geographical expansion and through earnings enhancing acquisitions.
During the year, the Group completed a number of acquisitions which have
improved its competitive position, geographic reach, and vendor mix as well
as enhanced its overall scale and global presence. Datatec will continue to
look for additional margin enhancing business opportunities to improve the
Group`s returns and to facilitate the consolidation of a market, the entry
into or extension of a territory or the faster access to a technology.
A common theme of Datatec`s acquisitions is the active ongoing participation
of the local management of the acquired companies. Through empowering these
individuals and ensuring that their interests are aligned to the Group`s,
Datatec benefits substantially from their local knowledge and contacts and
allows the Group to scale rapidly without adding substantially to head office
costs.
The Group`s increasing scale and international reach is attracting
significant vendor and customer interest as Datatec continues to broaden its
solutions and services offerings, as well as offering a greater exposure to
key higher growth emerging markets and developing economies.
Specifically, Datatec will continue to target faster growth emerging markets
and developing countries, as demonstrated by the recent transactions in
Brazil, Turkey and Africa. These markets are attractive because of their
superior growth characteristics and often lower cost of entry compared to
more mature markets. Further expansion in Latin America is expected as the
Group believes incremental opportunities will exist for Datatec to leverage
its scale. Expansion into new markets such as India and other parts of Asia
are also being evaluated.
The Board has set a number of core objectives which include:
* Achieving greater alignment in financial performance between regions;
* Improving profit margins;
* Improving return on investment and capital employed metrics; and
* Improving working capital ratios.
OVERVIEW
2008 was another year of strong performance for the Group, with further
improvements in revenues and earnings. Datatec continues to benefit from its
international reach, scale, sector diversity and focus on providing ICT
solutions and services to local and multinational corporate customers,
resellers, integrators, service providers and business users around the
world.
The Group exceeded its revenue target of $4,0 billion, with the non-US
operations now accounting for 58% of total revenues (2007: 52%). The Group`s
operations in Asia-Pacific, Africa and the Middle East and South America
continue to grow and now account for 15% of the Group`s revenues (2007: 14%).
Datatec continued to expand its gross margins to 13,7% and increased
operating profit before finance costs, depreciation and amortisation
("EBITDA") by 26%. Operating profits rose 25% to $123,6 million from $99,1
million, and headline earnings per share ("HEPS") grew 12% to 45,6 US cents
(2006: 40,8 US cents). Importantly underlying* earnings per share grew by 21%
from 39,2 US cents to 47,3 US cents. There will be a 20% increase in the
capital distribution to 12 US cents per share (90 SA cents) (2007: 10 US
cents per share (72 SA cents)).
Despite a slowdown in the US and the impact of this on certain other markets,
tight operating cost controls and improving productivity have underpinned
solid progress for the year as a whole. Performance over the prior year
improved in each of the Group`s three main business divisions.
In addition to divisional segment reporting, below is an analysis of revenue
and gross profit contribution across the Group`s principal business streams.
The spread of activities across these business streams not only provides the
Group with multiple points of leverage in the ICT market, but also provides a
more defensive business model with no particular vendor, technology,
geography or industry sector dependency.
Analysis by business stream Revenue % Gross %
($`m) Profit
($`m)
Distribution 3,029 76 317 58
ICT Solutions 721 18 164 30
Consulting & Services 258 6 66 12
4,008 547
FINANCIAL RESULTS
Group revenue increased by 27% (12% organic) to over $4,0 billion (2007: $3,2
billion), while gross margin increased from 13,1% to 13,7%.
Of the Group`s $4,0 billion revenue in the period, 42% was generated from
North America, 43% from Europe, 6% from Asia Pacific, 3% from South America
and 6% from Middle East and Africa.
Gross profit increased by 32% from $415,2 million to $547,1 million, while
operating costs increased 34% from $295,8 million to $396,3 million, mainly
as a result of the European businesses acquired, which operate at higher
margins with higher operating costs.
In line with revenue growth EBITDA increased 26% to $150,8 million (2007:
$119,4 million), which include unrealised foreign exchange gains of $5,3
million (2007: $6,3 million). Amortisation of intangible assets arising from
acquisitions rose to $10,3 million (2007 $5,4 million) as a result of
intangible assets recognised on the acquisitions made during the past year.
Operating profit increased by 25% to $123,6 million (2007: $99,1 million).
The net interest charge in the period was $15,3 million (2007: $9,7 million)
as a result of cash expenditure on acquisitions and higher utilisation of
Westcon facilities resulting in profit before tax of $108,3 million which
increased by 21% from $89,4 million.
The Group`s effective tax rate decreased to 26,1% from 30,5% in 2007,
primarily due to the utilisation and recognition of previously unrecognised
tax losses, as well as the recognition of deferred tax assets for assessed
losses for a number of business units. The effective tax rate for the
financial year ended 28 February 2009 is expected to be approximately 30%.
Underlying* earnings per share rose 21% to 47,3 US cents (2007: 39,2 US
cents). HEPS increased by 12% to 45,6 US cents (2007: 40,8 US cents).
The Group issued 14,5 million new shares during the year. 7,2 million shares
were issued in May 2007 in connection with an institutional placing, 5,1
million shares were issued for acquisitions and 2,2 million shares were
issued for exercised share options. In February 2008 the Group executed a
share-buy back and repurchased and subsequently cancelled 0,6 million shares.
A further 1,1 million shares were repurchased by the company share trust and
are held as treasury shares.
The Group intends to make a cash distribution of 12 US cents per share (2007:
10 US cents per share) out of share premium, which represents a cover of 3,8
times headline earnings.
Working capital remained tightly controlled. Receivables increased 34% over
the year, inventory increased by 27% and payables and provisions increased by
33%. The increase in receivables, inventory and payable balances is in line
with revenue growth and is, to a large extent, as a result of the
acquisitions made during the year.
Cash generated from operating activities (after working capital changes)
amounted to $32,3 million (2007: cash outflow: $3,6 million). The Group paid
$16,8 million to shareholders as a capital distribution in July 2007 and
$35,4 million was received from an institutional placing in May 2007. The
Group ended the year with net debt of $31,9 million, including long-term and
short-term debt (28 February 2007 net cash: $98,0 million).
The Group spent approximately $180 million on acquisitions which has improved
its geographical reach, vendor relationships, market position and product mix
as well as enhanced its overall scale.
The revenue included from these acquisitions in 2008 was $384,9 million. Had
the acquisition date been 1 March 2007, the pro-forma revenue would have been
approximately $500 million. Since these acquisitions are fully integrated
into existing operations it is not practical to establish the profit after
tax contributed by the acquisitions in 2008, or the profit after tax which
the acquisitions would have contributed to the Group if they had been
included for the entire year.
DIVISIONAL REVIEWS
Westcon
Westcon accounted for 71% of the Group`s revenues and 68% of EBITDA.
Westcon is the world`s leading specialty distributor in networking, security,
mobility and convergence for leading technology vendors, including Cisco,
Nortel, Avaya, Juniper and Polycom. Westcon`s revenue increased 26% from $2,3
billion to $2,9 billion, and increased in all of its regions. Westcon`s
acquisitions contributed $319 million in revenue, in addition to an organic
revenue increase of 12%.
Gross margins increased from 9,5% to 10,4% with gross profit increasing 37%
from $216,2 million to $296,7 million. The increase is attributable to
contributions from acquisitions coupled with increased gross margins in
Europe and Asia Pacific.
EBITDA increased 23% from $82,7 million to $102,0 million while overall
EBITDA margins remained steady at 3,6% as improving EBITDA margins in Europe
and Asia Pacific were offset by slightly lower EBITDA margins in the
Americas.
Westcon used $156,0 million for investing activities. Of this amount, $145,1
million was used for acquisitions. $163,3 million was drawn against credit
lines to fund the acquisitions and working capital needs.
After charges for depreciation and amortisation of intangible assets,
operating profit was $86,6 million (2007: $72,5 million).
Cisco products made up 55% (2007: 60%) of Westcon`s revenue, 11% Nortel
(2007: 13%), 11% Avaya (2007: 9%), 13% security (2007: 4%) and 10% other
developing vendors (2007: 14%). 46% of Westcon`s revenue was generated in
Europe followed by 45% in the Americas and 9% in Asia-Pacific.
Westcon completed two significant acquisitions in Europe during April and May
2007 respectively; NOXS Europe BV, a leading European security distributor
for $69 million in cash, and Crane Telecommunications Group, a leading UK-
based European value added distributor of voice, data and converged
communications solutions for $44 million in cash and Datatec shares. Net
assets acquired with NOXS and Crane were $37,0 million and $1,3 million
respectively and goodwill arising was $42,8 million and $48,5 million
respectively. Westcon also acquired the assets of ReView Video LLC, a leading
US distributor of audio, network, videoconferencing and voice over IP (VoIP)
solutions, for $24,9 million in cash in July 2007. Net assets acquired were
$13,8 million and goodwill of $11,1 million arose on the acquisition.
The acquisitions were important steps in Datatec`s strategic plans to
leverage Westcon`s financial strength and scale of operations, including both
broadening and strengthening its vendor relationships. These businesses also
brought new opportunities in convergence, security and mobility to both new
and existing customers. Each of these acquisitions has been successfully
integrated into Westcon and are performing well.
While the financial markets in the US and other regions continue to tighten,
opportunities in networking, particularly convergence, security and mobility,
continue to expand. As end user companies face pressure to be more efficient,
it is becoming more important for their networks to be able to support
productivity-enhancing applications. Demand for effective IT security remains
paramount as companies begin to rely increasingly on mobile applications.
This has created significant demand for VoIP security products.
Logicalis
Logicalis accounted for 21% of the Group`s revenues and 24% of EBITDA.
Logicalis is an international provider of integrated ICT solutions,
delivering secure, converged computing and communications infrastructure and
services. Specialising in the areas of advanced technologies the Group`s
integrated services portfolio comprises the architecture, deployment,
integration and management of customers` networks and systems to deliver
optimum solutions that meet their business needs now and into the future.
During the year Europe and South America have performed strongly. Tougher
market conditions in the US in the first half of the year caused planned
revenue growth not to materialise. This accelerated a strategic assessment of
the US business model and resulted in service delivery being unified under a
focused management team and a streamlining of the cost base to match the
ongoing activity level.
Revenue for the year increased by 22% to $845,1 million (2007: $693,1
million) including $14,4 million contribution from acquisitions. Excluding
the impact of acquisitions made in 2007 and 2008 organic revenue increased by
10%.
Product sales growth of 19% year on year generated additional demand for
consulting and technical services which increased by 27%. Managed services
and annuity revenues grew 33% year on year.
Gross margin percentage for the year was 22,9% (2007: 22,3%) with services
and annuity margins offsetting slightly weaker product margins. The gross
profit increased 25% on the prior year to $193,8 million (2007: $155,0
million).
Operating expenses increased by 23%, lower than the 25% growth in gross
margin. EBITDA rose to $36,2 million (2007: $26,8 million), an increase of
35%.
After charges for depreciation and amortisation of intangible assets,
operating profit was $26,1 million (2007: $18,8 million).
On 31 May 2007, Logicalis US acquired Carotek`s Information Technology
Division, based in Matthews, North Carolina for $7,1 million in cash and
shares. Net assets of $4,4 million were acquired and $2,7 million of goodwill
arose on acquisition. The Group also purchased the 20% minority interest in
its South America operations and increased its stake in a Germany based
services business to 75%.
The three main goals for the coming year are: to achieve revenue growth in
excess of the market rate based on the customer-driven portfolio of
solutions; integrate and leverage the Promon Tecnologia acquisition
(completed on 2 May 2008, see Subsequent Events) and; improve the operating
margins by increasing the services and annuity revenue mix.
Analysys Mason
Analysys Mason accounted for 2% of the Group`s revenues and 5% of EBITDA.
Analysys Mason provides strategic and technical consulting to many of the
industry`s leading service providers, regulators and government bodies.
Convergence in telecommunications, broadcasting, television and online media
content is being fuelled by widespread deployment of faster broadband
internet infrastructure. The Group is particularly well positioned to exploit
demand for advisory and consulting services in this market around the world.
Revenues grew to $63,5 million (2007: $61,4 million). Core telecoms
consulting revenues have seen a much stronger improvement with compound
annual growth of 12% over the last three years. Analysis Mason has also seen
further globalisation of its client base and its non-UK revenues now
represent 60% of total revenue (2007: 55%). Much of this growth has come from
the Middle East and North Africa ("MENA") region where a Dubai office was
recently opened to capitalise on the opportunity in that area.
Gross margin improved to 40,0% (2007 36,3%) resulting in improved EBITDA of
$6,9 million (2007: $6,2 million) at a margin of 10,9% (2007: 10.1%)and
operating profit to $6,2 million (2007: $5,8 million).
On 19 February 2008 Analysys Mason completed the acquisition of Redbox
Consulting Services. Net assets acquired were $1,4 million and goodwill
acquired was $2,6 million. This acquisition will further enhance the range of
services that can be offered to clients. The business will be fully
integrated into the Analysys Mason consulting model and is expected to bring
close to $3,0 million of additional revenues in 2009.
Analysys Mason has increasingly worked to deliver projects that span the full
business development cycle, including strategy, planning and implementation.
In line with its strategy of continually enhancing the value it delivers to
partners, and in response to clients who are currently engaging with all
parts of the Group, it is now moving to offer the full portfolio of client
services under a single brand, Analysys Mason.
Africa and Middle East (included in "Other Holdings")Datatec`s Africa and
Middle East operations made up 6% of the Group`s revenue and 5% of EBITDA.
Westcon Africa Middle East (Pty) Ltd ("WAME") is the holding company for
Datatec`s 55% stake in Westcon SA (Pty) Ltd ("Westcon SA"). Westcon SA
revenues were up 23% to $85,0 million (2007: $69,2 million) and EBITDA was
$3,5 million (2007: $0,9 million).
During the year WAME acquired 51% of International Technology Distributors
FZCo which has since been renamed Westcon Africa FZCo ("Westcon Africa") and
100% of Jet Distribution Ltd and Resolv Computers Ltd (collectively: "other
WAME operations"). Other WAME operations are principally African focused
businesses which distribute products similar to the rest of Westcon.
The other WAME operations revenues were $50,8 million and EBITDA was $0,1
million in its first reporting period as part of the Group. The gross margin
of 9,6% is in line with expectations and a slow upward trend on gross margin
is expected. This will be achieved by better procurement capability and the
gradual extension of the Westcon value add distribution model.
African Legend Indigo is Datatec`s 55% owned South African operation formed
in partnership with African Legend Technologies as part of South Africa`s
Black Economic Empowerment programme. This business generated revenue of
$51,1 million (2007: $28,3 million) and EBITDA of $1,7 million (2007: loss of
$0,2 million).
Online Distribution ("Online"), Datatec`s value-added distributor for data
networking products and services, covering the Middle East, Western Asia and
North Africa, revenues increased by 24% to $55,6 million (2007: $44,7
million) while EBITDA increased marginally by 7% to $2,9 million. Comstor
Middle East ("Comstor"), Westcon`s CISCO business in the Middle East, started
operations in February, 2007. Comstor revenues were $13,1 million. However,
being the start-up year, Comstor made a marginal loss. Comstor expects to
generate increased revenue growth and profitability during the next 12 months
due to the growing market in the Middle East.
The growth outlook in Westcon SA remains strong whereas it is expected that
Other WAME operations will take a further 12 months before starting to
realise the high growth opportunity in Africa and to deliver margins in line
with the rest of the Group. The growth in Middle East market has been
sustained this year and expected to remain buoyant during the next 12 months
with investments expected in finance, health and hospitality sectors.
REPORTING
This report complies with International Accounting Standard 34 - Interim
Financial Reporting as well as with Schedule 4 of the South African Companies
Act, the AIM Rules and the disclosure requirements of the JSE Limited`s
Listings Requirements.
The accounting policies comply with International Financial Reporting
Standards ("IFRS") of the International Accounting Standards Board and are
consistent with those applied in the prior year financial statements, except
for the adoption of IFRS 7 Financial Instruments: Disclosures. This is a
disclosure standard which has no impact on recognition, measurement and
presentation of financial instruments and consequently has no impact on
profit or loss or equity for the period. The financial information has been
audited by Deloitte & Touche whose unmodified audit report is available for
inspection at the Group`s registered office.
DIRECTORATE
John McCartney was appointed to the Board as an independent non-executive
director with effect from 16 July 2007. Colin Brayshaw retired from the Board
on 6 August 2007. Ivan Dittrich was appointed to the Board on 1 March 2008 to
succeed David Pfaff who has resigned from the Board with effect from 31 May
2008. Subsequent to the year end Leslie Boyd, the Group`s Chairman, passed
away suddenly after a short illness. Stephen Davidson, who was Deputy
Chairman, has succeeded to the role of Chairman. Leslie had indicated his
intention to retire from the Board after the Group`s AGM in August at which
time the Board had intended to appoint Stephen as Chairman.
SUBSEQUENT EVENTS
On 2 May 2008, Logicalis completed the merger of its Latin American
operations with the leading Brazilian network integration businesses of
Promon Tecnologia ("PT"). The initial announcement was on 14 March 2008.
Logicalis paid PT`s owner, Promon S.A., $77,2 million in cash and new Datatec
shares for a 70% equity holding in the combined business, which has been
renamed to Promon-Logicalis Latin America Ltd ("PLLAL"). Promon S.A. will
have a 30% equity interest in the business. The focus of the division will be
to capture synergies across Latin America by providing cross-border solutions
and services to customers in the region. The Board and management of PLLAL
comprise directors and executives from both Promon S.A. and Logicalis.
CURRENT TRADING AND PROSPECTS
During the coming year the Group will continue to benefit from its improving
business mix and geographic diversity across its principal operating
divisions. The increased exposure to high growth emerging markets and
developing economies should help balance any slowdown in the more mature
markets of the US and Western Europe. Datatec believes its business model
will remain resilient and continue to deliver growth as the shift in global
IT purchasing power, as a result of the weakening dollar, has helped underpin
global IT demand, even as other areas of the global economy show signs of
weakness.
In the year to 28 February 2009, the Group is expected to grow revenues in
excess of 20%, including acquisitions. The Group is targeting further gross
margin expansion and consolidated EBITDA margins of over 4% in future years.
The Board expects that quality of the Group`s businesses will continue to
improve driven by recent system and process enhancements, the depth of its
management and operating leverage brought through scale and geographic
diversity. Datatec will maintain prudent management of the Group`s cost base
and tight controls on working capital. The current year has started well and
in line with expectations. The Board remains vigilant to any deterioration in
global markets, but is confident of continuing improvement in Datatec`s
financial performance in the year ahead.
CASH DISTRIBUTION BY WAY OF CAPITAL REDUCTION
The Group will distribute to shareholders out of share premium, in lieu of a
dividend, 90 RSA cents per share (approximately 12 US cents per share) for
the year ended 29 February 2008, in terms of the general authority granted to
directors at the Annual General Meeting held on 6 August 2007. The capital
distribution will be paid to shareholders on the Jersey branch register in
GBP translated at the closing exchange rate on Thursday, 10 July 2008.
The salient dates will be as follows:
Last day to trade Friday, 4 July 2008
Shares to commence trading "ex" the distribution Monday, 7 July 2008
Record date Friday, 11 July 2008
Payment date Monday, 14 July 2008
Share certificates may not be dematerialised or rematerialised between
Monday, 7 July 2008 and Friday, 11 July 2008, both days inclusive.
On behalf of the Board:
SJ Davidson JP Montanana IP Dittrich
Chairman Chief Executive Officer Group Finance Director
14 May 2008
Sponsor : Rand Merchant Bank (A division of FirstRand Bank Limited)
Date: 14/05/2008 08:00:06 Produced by the JSE SENS Department.
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