DATATEC LIMITED - Further trading statement
11 May 2017 8:00
DTC 201705110010A
Further trading statement

Datatec Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1994/005004/06)
ISIN: ZAE000017745
Share Code: DTC
(“Datatec” or “the Company”)


Datatec Limited (Datatec” or the “Group”, JSE/AIM: DTC), the
international Information and Communications Technology (ICT) group,
is publishing a further trading statement for the year ended 28
February 2017.

On 7 April 2017,the Group issued a trading statement to the effect
that underlying earnings per share* for the financial year ended 28
February 2017 (“FY17”) was expected to be more than 50% lower (or at
least 16 US cents per share lower) than the prior year (“FY16”).
Datatec also advised that headline earnings per share and earnings
per share were also expected to be more than 50% lower (or at least
10 US cents lower) than the prior year.

In compliance with rule 3.4(b)(iii)(3) of the JSE Listings
Requirements the Company can now advise that:

  -  Underlying earnings per share is expected to be 11.0 US cents
     for FY17 (66% lower than FY16: 32.0 US cents)
  -  Headline earnings per share is expected to be 2.0 US cents for
     FY17 (90% lower than FY16: 19.4 US cents)
  -  Earnings per share is expected to be 1.4 US cents for FY17 (93%
     lower than FY16: 19.3 US cents)

Consolidated revenue for FY17 was $6.08 billion (FY16: $6.45
billion) with a gross margin of 13.7% (FY16: 13.5%).

The year over year decline in earnings is as a result of a worse
than expected performance in the Company’s Westcon subsidiary
(“Westcon-Comstor”), particularly in the fourth quarter. Westcon-
Comstor experienced disruption to the business as a result of the
final SAP implementation in Europe Middle East and Africa (“EMEA”).
Further details are given in the Westcon-Comstor section below.

Earnings were further impacted by higher finance charges,
depreciation, amortisation expense and effective tax rate than in
the prior year.


Westcon-Comstor revenues declined by 7% year over year.

                   FY17       FY16     Movement
Revenue             $’m        $’m          $’m
North America     1 662      1 773        (111)
Latin America       518        494           24
Europe            1 484      1 626        (142)
Middle East and     380        501        (121)
Asia-Pacific        488        476           12
Total Revenue     4 532      4 870        (338)

                   FY17       FY16      Movement
Gross profit        $’m        $’m           $’m
North America       121        129           (8)
Latin America        80         84           (4)
Europe              165        173           (8)
Middle East and      33         56          (23)
Asia-Pacific           57       55             2
Total gross           456      497          (41)

                   FY17       FY16      Movement
Adjusted            $’m        $’m           $’m
North America        66         70           (4)
Latin America        26         24             2
Europe               49         54           (5)
Middle East and    (12)          6          (18)
Asia-Pacific          6         14           (8)
Central costs      (63)       (59)           (4)
Total                72        109          (37)

                             FY17       FY16
                             $’m        $’m
Adjusted EBITDA**            72         109
Restructuring costs          (14)       (15)
Unrealised foreign           (3)        (5)
exchange losses
Other                        (1)        -
EBITDA                       54         89

** Adjusted EBITDA includes the same adjustments as used for
underlying earnings per share*, where relevant.

There was a decline in the financial performance in the EMEA region.
Transformation challenges in EMEA led to a drop in revenues of $263
million (12%) in FY17 compared to FY16, which constituted 78% of the
overall year over year revenue decline for Westcon-Comstor. The
drop in revenue resulted in a reduction in gross profit of $31
million in EMEA, representing 76% of the overall year over year
gross profit decline for Westcon-Comstor.

Europe went live on SAP during November 2016, resulting in
transitional challenges and delayed financial reporting, exacerbated
by the business process outsourcing (“BPO”) in that region. Trading
conditions in MEA were weak, resulting in a poor performance across
the region, with additional receivables write-offs in Africa and the
Middle East.

North America (“NA”) revenues were down $111 million or 6% year over
year. This was mainly due to softer Cisco and Avaya sales. The year
over year decrease in EBITDA was mainly as a result of lower gross
profits associated with the lower revenues.

Latin America performed well, with revenues up $24 million (5%) to
$518 million, and adjusted EBITDA increasing by 8% to $26 million.

In the Asia-Pacific region revenues were up 2% and gross profits
were up slightly over the prior year. This was mainly attributable
to a strong performance in the Asia security business. EBITDA was
lower than the prior year, due to higher operating costs, which
included additional one-time employee related costs, sales tax
reserves and increased investment costs in China.

Logicalis performed in line with expectation and produced revenues
of $1.51 billion (FY16: $1.53 billion) and EBITDA of $79.0 million
(FY16: $80.9 million). Logicalis EBITDA before restructuring
charges was $81.2 million. Logicalis results continued to be
impacted by the weak performance of its UK operations, which are
undergoing restructuring.

Forecast information
The forecast financial information contained in this trading
statement has not been reviewed or reported on by the Company’s

The company expects to release its full year results on 22 May 2017.

This announcement contains inside information.

Cautionary Announcement
Shareholders are reminded that the Company released a cautionary
announcement on SENS on 25 January 2017, which was renewed on 8
March 2017 and updated on 7 April 2017, advising shareholders that
negotiations are in progress in relation to a possible sale of a
major share of Westcon-Comstor’s operations, which, if successfully
concluded, may have a material effect on the price of the Company's
There can be no certainty that the transaction will be completed,
nor as to the precise terms on which the transaction might be
completed. Shareholders are therefore advised to continue to
exercise caution when dealing in the Company’s securities.

*underlying earnings per share excludes impairments of goodwill and
intangible assets, profit or loss on sale of investments and assets,
amortisation of acquired intangible assets, unrealised foreign exchange
movements, acquisition-related adjustments, fair value movements on
acquisition-related financial instruments, restructuring costs relating
to fundamental reorganisations and the taxation effect of all of the


Datatec                   Limited
Ivan Dittrich, Chief    Financial    +27 (0)   11   233
Officer                              3301

Jefferies International Limited – Nominated Adviser and
Nick Adams/Simon Hardy                +44 (0) 20 7029

Instinctif Partners
                                     +27 (0) 11 447
Frederic Cornet/Pietman Roos (SA)
Adrian Duffield/Chantal Woolcock     +44 (0) 20 7457
(UK)                                 2020

11 May 2017

RAND MERCHANT BANK (A division of FirstRand Bank Limited)

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