DTC
DTC
DTC - Datatec Limited - Audited results for the year ended 28 February 2010
and cash distribution by way of capital reduction
DATATEC LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1994/005004/06)
ISIN: ZAE000017745
Share Code: DTC
("Datatec" or the "Group")
JSE and LSE: DTC the international Information and Communications Technology
(ICT) group, is today publishing its audited results for the year ended 28
February 2010.
AUDITED RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2010 AND CASH DISTRIBUTION BY
WAY OF CAPITAL REDUCTION
Very strong cash generation and stable margins in a tough economic environment
positions Group well for recovery
Financial highlights
Revenue $3,74 billion (2009: $4,19 billion)
EBITDA $109 million (2009: $126 million)
Underlying* earnings per share 30,3 US cents (2009: 33,1 US cents)
Second half underlying* earnings per share up 77%
Net cash $186 million (2009: $36 million)
Capital distribution per share 12 US cents (2009: 12 US cents)
Operational highlights
Strong recovery in second half of financial year
Group continues to benefit from international scale and business
diversification
All divisions have returned to revenue growth
Very strong operational cash generation
Continued geographic expansion; Logicalis establishes pan Asian footprint
Increased predictability and reduced volatility in financial performance
*Excluding goodwill and intangibles impairment, amortisation of acquired
intangible assets, profit or loss on sale of assets and businesses, fair value
movements on acquisition related financial instruments and unrealised foreign
exchange movements
Jens Montanana, Chief Executive of Datatec, commented:
"This is a very solid financial performance, particularly by Westcon, despite
the continued difficult trading conditions in many countries. It is a
testament to our strategy of international and business diversification and to
our overall operational capabilities.
The sound results delivered in the first half continued into the second half
of the financial year. All of the Group`s operating divisions now appear to
have passed their inflexion points and returned to revenue growth. The Group`s
performance improved in the traditionally stronger second half of the year;
second half revenues and profits improved sequentially over the first half of
the year and comparatively over the second half of the previous financial
year.
Our rapid reaction to the recent global crisis resulted in significant cost
reductions being initiated over a year ago. This enabled us to lower our cost
base and consequently maintain margins even as our revenues fell. Our cash
generation remains very strong and margins remain stable.
Following on from our successful advances in Brazil and India, we completed
the acquisition of NetStar Asia which provides Logicalis with a pan Asian
platform and a presence in mainland China.
We are actively reviewing a number of strategic initiatives in Asia and Latin
America, and in particular China and Brazil, which we see as key market
opportunities for the Group.
Having very tightly managed the Group`s business whilst expanding the
geographic footprint over the last few years, we are well positioned to take
advantage of improving market conditions and the recovery that we have seen in
our major geographies."
PROFILE AND GROUP STRUCTURE
Datatec Group is an international Information Communications Technology
("ICT") networking and related services business with operations in many of
the world`s leading and emerging economies. The Group`s main lines of business
comprise: the global distribution of advanced networking and communications
convergence products ("Westcon" and "Westcon Emerging Markets"); ICT
infrastructure solutions and services ("Logicalis"); and Consulting Services
("Analysys Mason" and "Intact"). "Corporate and Other" encompass the net
operating costs of the Group`s head office entities and two months` trading of
African Legend Indigo ("ALI") prior to its disposal effective 24 April 2009.
OVERVIEW Datatec delivered a sound financial and operational performance,
particularly by Westcon. The year was marked by very strong operational cash
generation and steady margins, despite tough trading conditions which impacted
revenues particularly in the first half of the year.
The second half of the financial year was both sequentially and comparatively
better than the first half of the financial year and the second half of the
prior financial year. The Group benefited from the twin effects of an
improvement in trading conditions and high operational gearing, as a result of
the significantly reduced cost base reflecting the actions taken by the
management team. The Group has now returned to revenue growth in all its
divisions.
Datatec`s geographic diversity, global presence and improving mix of business
continue to be a key benefit, helping to mitigate the impact of the global
economic downturn. Trading in South America, the Middle East and Asia Pacific
has remained robust, helping to compensate for softer business conditions in
the USA and Europe.
Datatec revenues were $3,74 billion (2009: $4,19 billion), with second half
revenues of $1,94 billion compared to $1,92 billion in the second half of the
previous financial year. Overall gross margins remained stable at 13,3% (2009:
13,5%).
EDITDA was $108,5 million (2009: $125,6 million), and EBITDA margins were 2,9%
(2009: 3,0%). The Group achieved EBITDA of $63,9 million in the second half,
compared to $54,2 million in the second half of the previous financial year.
Profit after tax was $31,6 million (2009: $60,0 million). Underlying earnings
were 30,3 cents per share (2009: 33,1 cents), with 18,8 cents per share in the
second half, an improvement of 77,4% over the 10,6 cents per share in the
second half of the previous financial year.
The Group achieved very strong operating cash generation as a result of
continued effective working capital management and extended credit terms
received from major suppliers. Datatec ended the year with a net cash
position of $186 million (2009: $36,2 million).
In our industry we see the highest growth technology segments being those
associated with connecting data, voice and video over IP networks (unified
communications) and growing demand in data centres for security, storage and
virtualisation.
Westcon performed particularly well, with gross and EBITDA margin improvement
and improved profitability. Westcon benefited strongly from the high
operational gearing that exists as a result of its significantly reduced cost
base, continuing improving working capital and improved operational
efficiencies. Trading in the Americas, particularly in the US, improved
throughout the financial year, with conditions in Europe remaining stable and
the Asia Pacific region performing strongly.
Westcon Emerging Markets (Africa, Middle East and India) continued to trade
well with an improved financial performance over the prior year. This
business will be folded into Westcon during the second half of the current
financial year. Its financial performance will be included with Westcon`s
figures from the second half of the current financial year.
As we have stated previously, Logicalis is a business that typically improves
later in the economic cycle, in part due to the longer term and contractual
nature of its customer relationships. As anticipated, its recovery has lagged
that of Westcon by five to six months, but appears to be now well underway.
The first half was impacted by challenging conditions in the US and the UK,
but the performance improved markedly in the second half, with UK operations
enjoying a very strong year-end and the US passing its inflexion point.
Trading and profitability in South America remained robust throughout the year
in line with the Group`s expectations. Logicalis gained an Asia Pacific
presence with the acquisition of Netstar Group Holding Ltd ("NetStar") in
January 2010.
Consulting Services improved in the second half after a difficult first half,
as a result of additional cost reductions being made to improve profitability.
Overall performance has been significantly impacted by telecommunications
operators and service providers reducing spend resulting in lower strategy
consulting revenues.
Of the $3,74 billion revenues generated during 2010, some 76% came from
Distribution; 17% from ICT Solutions and 7% is attributable to revenues
derived from Services. The spread of activities across these three business
activities not only provides the Group with multiple points of leverage in the
ICT market, but also with industry diversification with no particular vendor,
technology, geography or industry sector dependency.
Analysis by business stream Revenue % Gross %
($`million) 2010 Profit
2010
Distribution 2,828 76 292 59
ICT Solutions 645 17 116 23
Services 265 7 90 18
3,738 498
STRATEGY
Despite the economic downturn, Datatec continues to pursue its long term
strategy to deliver sustainable above average returns to shareholders by
focusing on a combination of organic growth in the faster growing sectors of
the ICT market, geographic expansion and earnings enhancing acquisitions.
Datatec is now in a much stronger market position following the successful
strategy over the last few years to reduce the Group`s dependency on any
single market, territory or technology sector, as well as improving supplier
and customer diversification.
Datatec Group is creating shareholder value through actively managing its
complementary but standalone businesses. In addition to the allocation of
capital and financing resources for each activity, the central team supports
each division`s growth strategies, providing corporate and business
development opportunities, market and sector intelligence plus geographical
and industry expertise.
During the year the Group has primarily focused on improving operational
performance and cash generation, whilst at the same time, reviewing a number
of acquisition opportunities to enhance margins, facilitate consolidation in
proven markets and extend the Group`s geographical reach.
The Group is actively pursuing a number of acquisition opportunities and
completed the Netstar acquisition for $19,8 million in January 2010. In one
transaction the acquisition of NetStar established a sizeable presence for
Logicalis across South East Asia and Australia and significantly includes an
operation in mainland China, one of the most important developing markets.
Other opportunities in Asia and Latin America are also being reviewed, and in
particular China and Brazil, which the Board sees as key market opportunities
for the Group.
FINANCIAL RESULTS
Group revenues were $3,74 billion (2009: $4,19 billion). In the second half,
revenues were $1,94 billion compared to $1,92 billion in the second half of
the previous year.
38% of Group revenue was generated from North America (2009: 35%), 39% from
Europe (2009: 41%), 9% from Asia Pacific (2009: 7%), 8% from South America
(2009: 9%) and 6% from Middle East and Africa (2009: 8%).
Gross margins remained stable at 13,3% (2009:13,5%). Gross profit was $498,4
million (2009: $563,8 million), while operating costs reduced by 11% to $389,8
million (2009: $438,2 million) as a result of significant cost reduction
across the Group.
EBITDA was $108,5 million (2009: $125,6 million), which includes net
unrealised foreign exchange losses of $2,1 million (2009: gains of $0,4
million). The Group achieved $63,9 million EBITDA in the second half of the
financial year, compared to $54,2 million in the second half of the prior
financial year. Amortisation of intangible fixed assets arising from
acquisitions was $15,4 million (2009: $17,7 million) as a result of intangible
assets recognised on the acquisitions made during the past and prior years.
Operating profit was $76,0 million (2009: $84,8 million). The net interest
charge in the period was $9,6 million (2009: $16,6 million). The net interest
charge was significantly reduced as a result of working capital leverage,
strong cash flow generation and decreased debt levels.
Profit before tax was $54,1 million (2009: $85,5 million), after fair value
movements on put option liabilities referred to below.
The Group`s reported effective tax rate increased to 42% from 30% in 2009. If
the fair value movements on put option liabilities are excluded from profit
before tax, the effective tax rate would have been 34% (2009: 37%). The
Group`s effective tax rate is higher than the South African statutory tax rate
of 28%, primarily due to profits being realised for a number of business units
in jurisdictions with higher effective tax rates, most notably North and South
America. The effective tax rate for the financial year ended 28 February 2011
is again expected to be approximately 34%.
Underlying earnings per share were 30,3 US cents (2009: 33,1 US cents), with
18,8 US cents in the second half of the financial year, compared to 10,6 US
cents in the second half of the prior financial year, a 77,4% increase.
Headline earnings per share ("HEPS") were 17,0 US cents (2009: 36,3 US cents).
This includes the effect of the fair value adjustments of the put option
liabilities detailed below. HEPS, excluding the effect of these put option
fair value adjustments, is 23,8 US cents (2009: 26,6 US cents).
The Group issued 6,7 million new shares during the year, with 6,2 million
shares issued as part of acquisitions completed, while 0,5 million shares were
issued for exercised share options.
Following the increased cash generation for the year and the overall strength
of the Group, the Board plans to maintain its cash distribution in lieu of a
dividend of 12 US cents per share (2009: 12 US cents per share) out of share
premium.
Working capital remained tightly controlled, resulting in $225 million cash
being generated from operations (2009: $195 million). The Group continues to
enjoy comfortable head room in terms of its working capital lines.
Operating cash flows have continued to improve as the Group de-leveraged on
the back of lower than expected revenues and better payment terms from major
creditors. Cash generated from operating activities (after working capital
changes) amounted to $196 million which represents an increase of 29% over
2009 which had cash generated of $151,7 million.
The Group paid $22 million to shareholders as a capital distribution in July
2009.
The Group ended the year with net cash of $186 million (2009: $36,2 million),
including long-term debt of $17,7 million and short-term debt of $36,2 million
included in the payables and provisions line on the balance sheet.
Outstanding liabilities to vendors of businesses acquired have increased
slightly since last year-end from $51 million to a total of $52,8 million, of
which $32,9 million is included under short term liabilities. The largest
portion of the total balance relates to two elements of the Promon acquisition
- potential further cash payments of $14,2 million to the sellers, based on
future profitability and the performance of the Datatec share price, as well
as a liability of $32,6 million initially recognised against equity in
accordance with IAS 32 Financial Instruments: Presentation, for a put option
held by minority shareholders. Under IAS 39 Financial Instruments: Recognition
and Measurement, companies are required to re-measure such liabilities at each
reporting date, with changes in the fair values booked in the income
statement. An increase in put option liabilities has resulted in a non-
operating non-cash charge of $12,0 million being recognised in the period
(2009: gain of $16,8 million).
The Group spent approximately $29,7 million on acquisitions, net of cash
acquired. As a result, goodwill and intangible assets increased by $16,3
million and $6,1 million, respectively. The revenue and EBITDA included from
these acquisitions in 2010 was $39,9 million and $2,2 million respectively.
Had the acquisition date been 1 March 2009, the pro-forma revenue would have
been approximately $126 million. It is not practical to establish the EBITDA
that would have been contributed by the acquisitions in 2010 if they had been
included for the entire year.
Gains of $77,5 million (2009: losses of $109,3 million) arising on translation
of non USD denominated subsidiaries are included in comprehensive income of
$100,4 million (2009: losses of 88,1 million). Under previous accounting
standards these figures were included in the statement of changes to equity.
DIVISIONAL REVIEWS
Westcon
Westcon accounted for 69% of the Group`s revenues and 60% of EBITDA.
Westcon is the world`s leading speciality distributor in networking, security,
mobility and convergence products for leading technology vendors, including
Cisco, Avaya / Nortel, Juniper, Checkpoint and Polycom.
Westcon`s revenue was $2,6 billion (2009: $2,8 billion) with decreases in the
Americas and Europe offset by an increase in Asia Pacific. Cisco products made
up 56% of Westcon`s revenue (2009: 54%), 17% for Avaya / Nortel (2009: 20%),
17% for security (2009: 16%) and 10% for Development / Affinity vendors (2009:
10%). 46% of Westcon`s revenue was generated in the Americas (2009: 43%), 43%
in Europe (2009: 48%) and 11% in Asia Pacific (2009: 9%).
Gross margins increased from 10.1% in 2009 to 10.2% in 2010 due to increased
margins in Europe and Asia Pacific offset by lower margins in the Americas.
Gross profit was $263 million (2009: $281 million).
Cost reduction initiatives, including reduction in headcount, reduced
professional fees and lower travel expenses, begun in the second half of 2009,
helped to drive a $24,9 million or 12% reduction in operating expenses in
2010. As a result, Westcon`s EBITDA increased 10% from $67,8 million to $74,7
million while EBITDA margins increased from 2.4% in 2009 to 2.9% in 2010 with
increased margins in all operating regions.
After charges for depreciation and amortisation of intangible assets,
operating profit increased by 14% to $62,0 million (2009: $54 million).
Westcon`s operating activities generated $125 million of cash (2009: $126
million) as effective working capital management resulted in favourable
changes in inventory and accounts payable balances.
In April 2009, Westcon become Cisco`s first global distributor, signing a
partnership that effectively increased both organisations` ability to access
emerging market opportunities in many parts of Africa and the Middle East,
South America and across Asia. As part of its expansion, Westcon opened new
offices in the Philippines, Thailand and Vietnam in Asia, and the Czech
Republic in Europe.
To consolidate the early success of this partnership, in September 2009
Westcon created Comstor Worldwide, a new global business unit focused on its
Cisco solutions offerings in order to better manage growth and investments in
its Cisco-oriented business. This new business unit accounts for over 50% of
Westcon`s revenue.
On 1 October 2009 Westcon acquired Datastor (NZ), a New Zealand ICT
distribution business for cash. The acquisition provides Westcon with the
opportunity to add an additional operation in New Zealand to help consolidate
its existing business and create a market leading position that is
complementary to Westcon`s Asia Pacific distribution business.
Westcon Emerging Markets ("WEM")
Datatec`s WEM operations made up 7% of the Group`s revenue and 4% of EBITDA.
WEM represents Datatec`s distribution subsidiaries operating in 12 countries
across Africa, the Middle East and the Indian subcontinent. Consolidation of
these operations under the WEM umbrella has created a more regional approach
towards management and reporting, with a strong focus on existing business
development and cross-group operational efficiencies.
WEM started the year in a stronger position following an extensive
restructuring programme in Africa and South Africa. Trading conditions were
difficult in South Africa for much of the year. The Middle East region
continued to perform strongly.
WEM`s financial performance improved throughout the year, achieving revenues
of $245,7 million (2009: $283,3 million) and EBITDA jumping to $5,4 million
from $0,6 million in 2009, following the restructuring initiatives of the
prior year.
On 24 April 2009 Datatec increased its shareholding in Westcon SA from 55% to
74,9% through the disposal of its 55% stake in African Legend Indigo and the
issue of 275 578 Datatec shares.
WEM is expected to be fully integrated into Westcon Group during the second
half of the 2011 financial year.
Logicalis
Logicalis accounted for 22% of the Group`s revenues and 34% of EBITDA.
Logicalis is an international provider of integrated ICT solutions and
services with a breadth of knowledge and expertise in IT infrastructure and
networking solutions, communications and collaboration, data centre and
professional and managed services.
Trading was very difficult with the global economic slowdown and recessionary
conditions prevailing in most of the markets in which Logicalis operates.
Demand for technology products contracted and Logicalis` main vendor partners,
Cisco, HP and IBM, experienced double-digit declines in product revenues. In
addition, telecommunication operators and services providers in South America,
an important customer segment for Logicalis in this region, cut capital
expenditure significantly.
Revenue from product sales was down 21% with declines across all main vendor
categories, IBM product sales were down the least at 7%. However, revenues
from services were more resilient and were flat year on year. There was
particularly encouraging growth in annuity revenues of 17%.
Despite this economic backdrop, the UK had a good performance and the
contribution from the South America region was strong. Lower than expected
customer demand in the US was partially offset by effective cost management,
although activity did increase towards the end of the year.
Revenue was $838,5 million (2009: $1005,4 million), including a $19,0 million
contribution from two acquisitions. Excluding the impact of acquisitions made
in 2009 and 2010, revenue decreased by 17% on a constant currency basis.
However, the 2009 performance was boosted by an exceptionally large project
with a telecommunications operator in South America.
The gross margin slightly improved to 22,2% (2009: 22,1%). Product margins
were under pressure, particularly in the US for both HP and IBM products, but
services margins were maintained and an improved services mix kept the overall
margin similar to last year. The gross profit was $186,4 million (2009: $221,7
million).
The decline in activity was largely anticipated and the reduction in the cost
base resulted in operating expenses being 13% lower. EBITDA was $42,4 million
(2009: $57,0 million) and the EBITDA margin 5,1% (2009: 5,7%).
After charges for depreciation and amortisation of intangible assets,
operating profit was $25,2 million (2009: $39,3 million).
In May 2009 Logicalis acquired Minters GmbH, a German Cisco Systems Partner.
The enlarged Logicalis German operation is a mid-market focused ICT integrator
and provides a platform for further growth in Germany.
On 15 January 2010 the acquisition of NetStar completed. Netstar is a leading
IP network infrastructure solutions and services provider in the Asia Pacific
region with capabilities and expertise across data, voice and security
infrastructure and a strong focus on Cisco network integration and data centre
solutions. NetStar has operating units in Australia, Singapore, Malaysia,
Taiwan, Hong Kong and China. It has over 300 employees and marked an important
strategic development for Logicalis as NetStar, with its regional footprint
and a Network Operations Centre in Malaysia, provides the capabilities to
support the needs of multi-national corporations.
Consulting Services
The Group`s Consulting Services division, consisting of Analysys Mason and
Intact, accounted for 2% of Group revenues and 2% of EBITDA.
Consulting Services had a difficult start to the year but improved in the
second half as a result of additional cost reductions being made to improve
profitability. Overall performance has been significantly impacted by
telecommunications operators and service providers reducing discretionary
spend significantly throughout much of 2009, resulting in lower strategy
consulting revenues.
Analysys Mason provides management consulting advice and market intelligence
services to the telecoms, IT and digital media industries. Analysys Mason
reported revenues of $44,4 million (2009: $55,8 million) and EBITDA of $0,9
million (2009: $4,6 million).
Intact is a networking services, project management and support consultancy
business focused on providing high end professional services to its customers.
Intact reported revenues of $19,5 million (2009: $17,1 million) and EBITDA of
$1,0 million (2009: $2,0 million).
Corporate and Other
Corporate and Other encompasses the operating costs of the Datatec head office
entities of $10,4 million (2009: $10,2 million) and unrealised and realised
foreign exchange losses of $3,6 million and $0,9 million respectively (2009:
gains of $1,3 million and $0,8 million) incurred by the Datatec head office
entities.
This segment also includes two months` trading for the Group`s 55% holding in
the South African ICT business, ALI, which was sold effective 24 April 2009.
During the two months ALI generated revenues of $7,4 million (2009: $50,7
million) and an EBITDA loss of $0,9 million (2009: profit of $1,8 million).
REPORTING
This report complies with International Accounting Standard 34 - Interim
Financial Reporting as well as with Schedule 4 of the South African Companies
Act (Act 61 of 1973, as amended), the AIM Rules for Companies 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 by the Group of the amendments to IAS 1 - Presentation of Financial
Statements. This standard affects the presentation of owner changes in equity
and comprehensive income and does not impact on recognition, measurement and
disclosure of specific transactions as required by any other IFRS standard.
The Group has presented a `statement of comprehensive income` which replaces
the income statement and also includes all non-owner changes in equity. All
changes in equity resulting from transactions with owners in their capacity as
owners are presented in the `statement of changes in equity`. The financial
information has been audited by Deloitte & Touche whose unmodified audit
report is available for inspection at the Group`s registered office.
SUBSEQUENT EVENTS
On 9 April 2010 Analysys Mason acquired BDA Connect (Pvt) Limited ("BDA
India"), a small management consultancy business with 15 employees, based in
New Delhi, which provides Analysys Mason with a platform to develop its
consulting business in India and to support its existing operations in
Singapore and Dubai. Furthermore, BDA India`s research capabilities will
enable Analysys Mason to deliver global research coverage to its clients.
CURRENT TRADING AND PROSPECTS
The Board`s focus during the last financial year was to ensure that the
Group`s performance was sound and predictable with management taking a very
prudent approach. This also resulted in significant cash generation.
Although the Group remains cautious about trading conditions for the current
financial year, the Board expects profitability across all divisions to
improve, as the business continues to benefit from improved operational
gearing.
The main divisions are well positioned to take advantage of advances in ICT in
sectors adjacent to networking, such as data centre virtualisation and shared
computer infrastructure (often referred to as cloud computing), fourth
generation (LTM) wireless networking and increased networking security.
The Group also expects to continue making further investments to support its
business structure and management to respond to any acceleration in growth, it
also believes the current environment presents a good opportunity to recruit
excellent people and ensure all the Group`s businesses have the best
foundations for future scalability.
Based on current trading conditions and prevailing exchange rates, the Board
expects revenues for the 2011 financial year to be between $4,1 and $4,4
billion, with some margin expansion. The Board expects underlying earnings per
share to be approximately 35 US cents and both earnings per share** and
headline earnings per share** to be approximately 30 US cents. Profit after
tax** is expected to be approximately $58 million. The financial information
on which this forecast is based has not been reviewed and reported on by
Datatec`s auditors.
DIVIDEND / CAPITAL DISTRIBUTION POLICY
The Group`s dividend / capital distribution policy of paying an annual
dividend / capital distribution, which will provide cover of at least three
times relative to underlying* earnings, remains unchanged.
CASH DISTRIBUTION BY WAY OF CAPITAL REDUCTION
Following the increased cash generation for the year, the Group will
distribute to shareholders a capital reduction out of share premium, in lieu
of a dividend, 90 RSA cents per share (approximately 12 US cents per share)
for the year ended 28 February 2010, in terms of the general authority granted
to directors at the Annual General Meeting held on 12 August 2009. The
capital distribution will be paid to shareholders on the Jersey branch
register in GBP translated at the closing exchange rate on Wednesday 7 July
2010.
The salient dates will be as follows:
Last day to trade Friday 2 July 2010
Shares to commence trading "ex" the distribution Monday
5 July 2010
Record date Friday 9 July 2010
Payment date Monday 12 July 2010
Share certificates may not be dematerialised or rematerialised between Monday,
5 July 2010 and Friday, 9 July 2010, both days inclusive.
On behalf of the Board:
S J Davidson J P Montanana I P Dittrich
Chairman Chief Executive Officer Chief Financial Officer
13 May 2010
** Forecasts for profit after tax, earnings per share and headline earnings
per share do not take into account any fair value gains or losses on
acquisition related financial instruments, which are required under IFRS.
Condensed Group statement of comprehensive income
Audited Audited
year ended year ended
February February
2010 2009
for the year ended February 2010 USD`000 USD`000
Revenue 3 738 026 4 191 671
Continuing operations 3 698 134 3 980 830
Acquisitions 39 892 210 841
Cost of sales (3 239 650) (3 627 835)
Gross profit 498 376 563 836
Operating costs (387 750) (438 574)
Unrealised foreign exchange (2 090) 386
(losses)/gains
Operating profit before finance
costs, depreciation
and amortisation ("EBITDA") 108 536 125 648
Depreciation (17 132) (16 751)
Amortisation of acquired
intangible assets (15 438) (17 711)
Operating profit before
intangible impairment 75 966 91 186
Impairment of acquired
intangible assets - (6 375)
Operating profit 75 966 84 811
Interest income 3 904 6 194
Financing costs (13 478) (22 655)
Fair value movements on
put option liabilities (12 010) 16 829
Share of equity accounted
investment (losses)/earnings (278) 333
Profit before taxation 54 104 85 512
Taxation (22 465) (25 493)
Profit for the year 31 639 60 019
Other comprehensive income
Translation of foreign subsidiaries 77 498 (109 323)
Initial recognition and transfers
related to put option liabilities 843 (43 125)
Translation of equity loans
net of tax effect (10 582) 2 778
Other items 1 075 1 561
Total comprehensive
income/(loss) for the year 100 473 (88 089)
Profit attributable to:
Owners of the parent 29 974 58 696
Non-controlling interests 1 665 1 323
31 639 60 019
Total comprehensive income/(loss)
attributable to:
Owners of the parent 92 029 (80 012)
Non-controlling interests 8 444 (8 077)
100 473 (88 089)
Number of shares issued (millions)
Issued 182 176
Weighted average 177 174
Diluted weighted average 178 176
Earnings per share ("EPS") (US cents)
Basic EPS 17,0 33,7
Diluted basic EPS 16,8 33,4
SALIENT FINANCIAL FEATURES
Headline earnings 29 978 63 258
Headline earnings per share (US cents)
?Headline 17,0 36,3
?Diluted headline 16,8 36,0
Underlying earnings 53 553 57 655
Underlying earnings per share (US
cents)
?Underlying 30,3 33,1
?Diluted underlying 30,0 32,8
Net asset value per share (US cents) 366,4 328,0
Operating cash generation per share (US 123,7 111,0
cents)
KEY RATIOS
Gross margin (%) 13,3% 13,5%
EBITDA (%) 2,9% 3,0%
Effective tax rate (%) 41,5% 29,8%
Effective tax rate (%) excluding fair
value movements on put option 34,0% 37,0%
liabilities
Exchange rates
Average Rand/US exchange rate 7,9 8,7
Closing Rand/US exchange rate 7,6 10,1
Condensed Group statement of financial position
Audited Audited
February February
2010 2009
as at February 2010 USD`000 USD`000
ASSETS
Non-current assets 459 963 429 998
Property, plant and equipment 43 436 29 938
Capitalised development expenditure 12 181 15 268
Goodwill 315 131 292 033
Acquired intangible assets 51 780 53 356
Investments 6 818 6 646
Deferred tax assets 30 617 32 757
Current assets 1 442 081 1 246 001
Inventories 277 832 249 910
Trade and other receivables 852 390 777 606
Cash and cash equivalents 311 859 218 485
Total assets 1 902 044 1 675 999
EQUITY AND LIABILITIES
Ordinary shareholders` funds 667 879 575 863
Non-controlling interest 50 900 46 536
Total equity 718 779 622 399
Non-current liabilities 73 360 102 547
Long-term liabilities 17 676 49 904
Amounts owing to vendors 19 958 27 337
Liability for share-based payments 12 260 3 300
Deferred taxation liabilities 23 466 22 006
Current liabilities 1 109 905 951 053
Payables and provisions 992 830 791 038
Amounts owing to vendors 32 853 23 736
Taxation 12 197 12 855
Bank overdrafts 72 025 123 424
Total equity and liabilities 1 902 044 1 675 999
Capital expenditure incurred in current 21 531 15 025
year
Capital commitments at end of year 14 675 7 021
Lease commitments at end of year 97 993 89 843
Payable within one year 22 064 19 870
Payable after one year 75 929 69 973
Condensed Group statement of cash flows
Audited Audited
Year ended Year ended
February February
2010 2009
for the year ended February 2010 USD`000 USD`000
EBITDA 108 536 125 648
Loss on disposal of property, plant and 6 66
equipment
Non-cash items 23 051 27 023
Cash generated before working capital 131 593 152 737
changes
Working capital changes 93 902 42 162
(Increase)/decrease in inventories (7 852) 77 074
(Increase)/decrease in receivables (27 630) 20 923
Increase/(decrease) in payables 129 384 (55 835)
Cash generated from operations 225 495 194 899
Net finance costs paid (9 574) (16 586)
Taxation paid (19 842) (26 643)
Net cash inflow from operating activities 196 079 151 670
Investment in subsidiaries (29 689) (42 430)
Net cash outflow from other investing (23 765) (21 404)
activities
Net cash inflow from other financing 8 591 15 731
activities
Capital distribution to shareholders (21 982) (20 485)
Net increase in cash and cash equivalents 129 234 83 082
Cash and cash equivalents at the 95 061 34 179
beginning of year
Translation difference on opening cash 15 539 (22 200)
position
Cash and cash equivalents at the end of 239 834 95 061
year (*)
(*) Comprises cash resources, net of bank
overdrafts and trade finance advances.
Condensed Group statement of changes in total equity
Audited Audited
year ended year ended
February February
2010 2009
for the year ended February FY 2010 USD`000 USD`000
Balance at the beginning of the year 622 399 678 283
Total comprehensive income/(loss) 100 473 (88 089)
New share issues 21 296 26 540
Capital distribution to shareholders (21 982) (20 485)
Share buy-back - (4 014)
Share-based payments 673 (873)
Non-controlling interest (4 080) 31 037
Balance at end of the year 718 779 622 399
Determination of headline and underlying earnings
Audited Audited
year ended year ended
February February
2010 2009
for the year ended February 2010 USD`000 USD`000
Profit attributable to owners of the 29 974 58 696
parent per the income statement
Headline earnings adjustments 6 6 441
Intangible impairment - 6 375
Loss on disposal of property, plant and 6 66
equipment
?Tax effect (2) (1 764)
?Non-controlling interest - (115)
Headline earnings 29 978 63 258
DETERMINATION OF UNDERLYING EARNINGS
Headline earnings 29 978 63 258
Underlying earnings adjustments 29 538 496
Unrealised foreign exchange 2 090 (386)
losses/(gains)
Fair value movements on put option 12 010 (16 829)
arrangements
Amortisation of intangible assets 15 438 17 711
?Tax effect (5 906) (5 689)
?Non-controlling interest (57) (410)
Underlying earnings 53 553 57 655
Segmental analysis
Audited Audited
year ended year ended
February February
2010 2009
for the year ended February 2010 USD`000 USD`000
Revenue
Westcon 2 582 500 2 779 410
Westcon Emerging Markets 245 738 283 294
Logicalis 838 492 1 005 355
Consulting Services 63 882 72 885
Corporate and other 7 414 50 727
Revenue from ongoing operations 3 738 026 4 191 671
EBITDA
Westcon 74 736 67 758
Westcon Emerging Markets 5 364 601
Logicalis 42 357 56 959
Consulting Services 1 905 6 582
Corporate and other* (15 826) (6 252)
EBITDA from ongoing operations 108 536 125 648
Operating profit
Westcon 61 972 53 804
Westcon Emerging Markets 4 068 (487)
Logicalis 25 203 39 313
Consulting Services 790 5 352
Corporate and other* (16 067) (6 796)
75 966 91 186
Total assets
Westcon 1 120 393 1 058 118
Westcon Emerging Markets 134 326 99 281
Logicalis 566 711 415 142
Consulting Services 51 542 63 140
Corporate and other 29 072 40 318
1 902 044 1 675 999
*Includes unrealised and realised losses of $3,6 million and
$0,9 million (2009: gains of $1,3 million and $0,8 million).
Directors
SJ Davidson*#(Chairman), JP Montanana# (CEO), IP Dittrich,
JF McCartney+, LW Nkuhlu*, CS Seabrooke*, NJ Temple*#
#British *Non-executive +American
Enquiries
Datatec Limited (www.datatec.co.za)
Jens Montanana, Chief Executive Officer +44 (0) 1753 797118
Ivan Dittrich, Chief Financial Officer +27 (0) 11 233 1221
Wilna de Villiers, Group Marketing Manager +27 (0) 11 233 1013
College Hill
Adrian Duffield/Jon Davies (UK) + 44 (0) 20 7457 2020
Fred Cornet/Hayley Crane (SA) +27 (0) 11 447 3030
Jefferies International Limited
Chris Snoxall/Rupert Mitchell, +44 (0) 20 7029 8000
Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Date: 13/05/2010 08:00:03 Produced by the JSE SENS Department.
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