DTC - Datatec Limited - Audited results for the year ended 28 February 2010
13 May 2010 8:00
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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