DTC 201710050007A
Trading statement
Datatec Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1994/005004/06)
Share code: DTC
ISIN: ZAE000017745
TRADING STATEMENT
Datatec Limited (JSE/AIM: DTC, “Datatec” or “the Group”), the international Information and Communications
Technology (ICT) company is publishing a trading statement for the six months ended 31 August 2017 (“H1
FY18”).
In terms of the JSE Limited Listings Requirements, companies are required to publish a trading statement as
soon as they are satisfied that a reasonable degree of certainty exists that the financial results for the period
to be reported on next will differ by at least 20% from the previous corresponding reporting period (“H1 FY17”).
Accordingly, the Group now expects that for H1 FY18:
- Underlying** earnings per share will be between 1 and 2 US cents, 84% - 92% below H1 FY17: 12.5 US cents
- Headline loss per share will be between 5 and 6 US cents (H1 FY17: earnings per share of 9.1 US cents)
- Loss per share will be between 5 and 6 US cents (H1 FY17: earnings per share of 9.1 US cents)
Consolidated revenue for H1 FY18 is expected to be $2.99 billion* (H1 FY17: $3.04 billion*) with a gross
margin of 13.3%* (H1 FY17: 13.8%*).
The year over year decline in earnings is primarily as a result of a worse performance in the Group’s Westcon
subsidiary (“Westcon-Comstor”). Westcon-Comstor continued to experience 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 for H1 FY18 were further impacted by higher finance charges, amortisation expense and effective
tax rate than in H1 FY17.
* Please note that these figures include the performance of Westcon North America and Latin America, which
were sold to SYNNEX with effect from 1 September 2017. In accordance with IFRS 5, these regions will be
re-presented as a disposal group and shown separately as discontinued operations in the interim financial
statements for H1 FY18.
Westcon-Comstor
H1 FY18 H1 FY17 Movement
Revenue * $’m $’m $’m
North America 843 819 24
Latin America 288 221 67
Europe 730 760 (30)
Middle East and Africa 177 198 (21)
Asia-Pacific 241 258 (17)
Total Revenue 2 279 2 256 23
H1 FY18 H1 FY17 Movement
Gross profit * $’m $’m $’m
North America 56 62 (6)
Latin America 39 36 3
Europe 73 87 (14)
Middle East and Africa 17 22 (5)
Asia-Pacific 31 30 1
Total Gross profit 216 237 (21)
North America revenues were up $24 million compared to H1 FY17 due to increased security sales, however
gross profit was down $6.1m year over year due to product mix and lower volume rebates on unified
communications and Comstor sales.
Latin America revenues were up $67 million compared to H1 FY17, mainly due to growth in Brazil. Gross
margin decreased due to competitive pricing pressures, but gross profit increased by $3.4 million.
There was a decline in the financial performance of the EMEA region. Continued business transformation
challenges in EMEA led to a drop in revenues of $51 million in H1 FY18 compared to H1 FY17. The drop in
revenue resulted in a reduction in gross profit of $19 million in EMEA, representing the bulk of the drop in gross
profit in Westcon-Comstor. Trading conditions in MEA were weak, particularly in South Africa.
Asia Pacific revenues decreased $17 million due to lower China sales, however gross profit was $1.6 million
better than H1 FY17.
* Please note that these figures include the performance of Westcon North America and Latin America, which
were sold to SYNNEX with effect from 1 September 2017. In accordance with IFRS 5, these regions will be
re-presented as a disposal group and shown separately as discontinued operations in the interim financial
statements for H1 FY18.
Logicalis
Logicalis delivered revenues of $694 million (H1 FY17: $757 million) and flat gross profit in H1 FY18 compared
to H1 FY17 ($175 million). North America experienced a decline in product sales, but performance there is
expected to improve in the second half.
During H1 FY18 Logicalis Latin America secured a very large multi-year contract to supply and support regional
network infrastructure to a global service provider. This is expected to have a significant impact on the
performance of the region going forward.
Logicalis completed the acquisition of PT Packet Systems in Indonesia in September 2017.
Forecast information
The forecast financial information contained in this trading statement has not been reviewed nor reported on
by the Group’s external auditors.
This announcement contains inside information.
The company expects to release its interim results for H1 FY18 on 13 November 2017.
Use of proceeds relating to the SYNNEX transaction
Further to the announcement of the completion of the SYNNEX transaction on 1 September 2017 (SENS
announcement dated 4 September 2017), the Board will provide detail on the use and distribution of the cash
proceeds from the SYNNEX transaction with its interim results on 13 November 2017.
The proceeds of the sale comprise US$630 million in cash on completion and up to US$200 million payable
as a cash earn-out, subject to Westcon Americas meeting certain agreed gross profit performance targets.
The Board intends to retain US$130 million for various operational and working capital and expansion funding
requirements. The Board will consider returning the majority of the remaining US$500 million to shareholders
by way of share repurchases and / or a specific dividend.
** 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, SYNNEX deal-related expenses and
the taxation effect of all of the aforementioned
Enquiries:
Datatec Limited (www.datatec.co.za)
Ivan Dittrich, Chief Financial Officer +27 (0) 11 233 3301
Jefferies International Limited – Nominated Adviser and Broker
Nick Adams / Simon Hardy +44 (0) 20 7029 8000
Instinctif Partners
Frederic Cornet/Keagile Makgoba (SA) +27 (0) 11 447 3030
Adrian Duffield/Chantal Woolcock (UK) +44 (0) 20 7457 2020
5 October 2017
Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Date: 05/10/2017 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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