| Datatec - Unaudited Interim Results for the six mo | |
| 1 November 2006 8:00 | |
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Datatec - Unaudited Interim Results for the six months ended 31 August 2006
DATATEC LIMITED
Registration number 1994/005004/06
Share code: DTC
ISIN: ZAE000017745
("Datatec")
UNAUDITED INTERIM RESULTS for the six months ended 31 August 2006
- Revenue up 16% to $1,7 billion (2005: $1,4 billion)
- Operating profit up 44% to $43,3 million (2005: $30,1 million)
- Headline earnings per share up 30% to 15,65 US cents (2005: 12,02 US
cents)
- Completion of London listing provides broader access to international
investors
"We are pleased to report strong revenue and earnings growth so soon after
our listing in London. With our focus on the fast growing networking and
IT services sector, we are in an excellent position to exploit our scale
and resources to develop the Group internationally through organic and
acquisitive growth. We remain committed to delivering sustainable value
to our shareholders."
- Jens Montanana, Chief Executive of Datatec
GROUP INCOME STATEMENT
Unaudited Unaudited Audited
six months six months Year
to to ended
US$ 000"s 31 Aug 06 31 Aug 05 28 Feb 06
Revenue 1 674 790 1 441 578 2 975 635
Continuing operations 1 651 813 1 415 045 2 870 381
Acquisitions 22 977 26 533 105 254
Cost of sales (1 483 897) (1 278 168) (2 637 471)
Gross margin 190 893 163 410 338 164
Operating costs (138 907) (123 899) (253 013)
Operating profit 51 986 39 511 85 151
before finance costs,
depreciation and
amortisation
("EBITDA")
Depreciation and (8 727) (7 621) (15 757)
amortisation
Operating profit 43 259 31 890 69 394
before goodwill
impairment
Goodwill impairment - (1 776) (425)
Operating profit 43 259 30 114 68 969
Interest received 6 071 2 455 6 380
Financing costs (10 833) (4 601) (11 554)
Profit before taxation 38 497 27 968 63 795
Taxation (15 014) (11 898) (24 532)
Profit for the period 23 483 16 070 39 263
from continuing
operations
Profit/(Loss) for the 34 (1 445) (76)
period from
discontinuing
operations
Profit for the period 23 517 14 625 39 187
Attributable to:
Minority interests 659 1 041 1 415
Equity holders of the 22 858 13 584 37 772
parent
23 517 14 625 39 187
KEY RATIOS
Gross margin % 11,4 11,3 11,4
EBITDA % 3,1 2,7 2,9
Effective tax rate % 39,0 42,5 38,6
Exchange rates
Average Rand/US$ 6,7:1 6,4:1 6,4:1
exchange rate
Closing Rand/US$ 7,1:1 6,5:1 6,2:1
exchange rate
SALIENT FINANCIAL
FEATURES
Headline earnings 22 936 16 786 38 293
Number of shares
(millions)
Issued 147 142 146
Weighted average 147 140 142
Diluted weighted 150 143 146
average
Earnings per share
(cents)
Basic 15,59 9,73 26,54
Diluted 15,19 9,50 25,93
Headline 15,65 12,02 26,91
Diluted headline 15,24 11,74 26,28
Cash (utilisation)/ (11) 10 55
generation per share
Net asset value per 322 294 307
share (cents)
Net tangible asset 209 208 207
value per share
(cents)
GROUP BALANCE SHEET
Unaudited Unaudited Audited
US$ 000"s 31 Aug 06 31 Aug 05 28 Feb 06
ASSETS
Non-current assets 211 660 161 491 189 959
Property, plant and 22 019 18 844 20 178
equipment
Capitalised 11 229 12 026 12 317
development
expenditure
Goodwill 140 536 105 575 125 294
Other intangible 14 732 4 405 8 098
assets
Investments - 6 -
Deferred tax assets 23 144 20 635 24 072
Current assets 1 041 837 908 130 951 613
Inventories 225 337 201 343 210 728
Receivables 575 367 498 798 492 782
Cash and cash 241 133 207 989 248 103
equivalents
Total assets 1 253 497 1 069 621 1 141 572
EQUITY AND LIABILITIES
Ordinary shareholders" 474 112 416 879 448 846
funds
Minorities" interest 13 978 25 068 12 505
Total equity 488 090 441 947 461 351
Long-term liabilities 45 171 2 731 45 005
Deferred tax 10 122 1 978 5 875
liabilities
Current liabilities 710 114 622 965 629 341
Payables and 577 698 508 422 542 302
provisions
Amounts owing to 3 884 2 843 1 695
vendors
Taxation 10 718 15 486 9 492
Bank overdrafts 117 814 96 214 75 852
Total equity and 1 253 497 1 069 621 1 141 572
liabilities
Capital expenditure 6 641 4 483 12 115
incurred in current
period
Capital commitments at 2 107 4 820 10 105
end of period
Lease commitments at 104 753 112 518 97 170
end of period
Payable within one 13 624 14 687 16 546
year
Payable after one 91 129 97 831 80 624
year
ABRIDGED GROUP CASH FLOW STATEMENT
Unaudited Unaudited Audited
six months to six months to year ended
US$ 000"s 31 Aug 06 31 Aug 05 28 Feb 06
EBITDA 51 986 39 511 85 151
Loss/(Profit) on 112 (31) 46
disposal of property,
plant and equipment
Non-cash items 20 8 059 1 691
Dividends paid (6 185) - -
Cash generated before 45 933 47 539 86 888
working capital
changes
Working capital (62 712) (33 563) (9 203)
changes
(Increase)/Decrease in (7 614) 5 297 (12 361)
inventories
Increase in (62 927) (74 901) (68 303)
receivables
Increase in payables 7 829 36 041 71 461
Cash (utilised (16 779) 13 976 77 685
in)/generated from
operations
Net finance costs paid (4 762) (2 146) (5 174)
Taxation paid (7 671) (5 464) (20 304)
Net cash (29 212) 6 366 52 207
(outflow)/inflow from
operating activities
Net cash outflow from (28 275) (28 692) (54 588)
investing activities
Net cash inflow from - - 206
disposal of operations
and investments
Net cash inflow from 4 024 4 085 40 740
financing activities
(Decrease)/Increase in (53 463) (18 241) 38 565
cash and cash
equivalents
Translation difference 4 531 (10 254) (6 584)
on opening cash
position
Cash and cash 172 251 140 270 140 270
equivalents at
beginning of period
Cash and cash 123 319 111 775 172 251
equivalents at end of
period (*)
(*) Comprises cash resources, net of bank overdrafts and trade finance
advances.
SEGMENTAL ANALYSIS
Unaudited Unaudited Audited
six months to six months to year ended
US$ 000"s 31 Aug 06 31 Aug 05 28 Feb 06
Revenue
Westcon 1 258 540 1 140 002 2 302 940
Logicalis 342 632 247 278 545 791
Analysys Mason 30 703 30 072 59 904
Other Holdings 52 926 39 052 87 837
Intergroup revenue (10 011) (14 826) (20 837)
1 674 790 1 441 578 2 975 635
EBITDA
Westcon 37 951 30 768 66 635
Logicalis 11 842 7 442 16 707
Analysys Mason 3 227 3 263 6 223
Other Holdings (1 034) (1 962) (4 414)
51 986 39 511 85 151
Operating profit
before goodwill
impairment
Westcon 32 923 25 976 56 861
Logicalis 8 550 5 182 11 546
Analysys Mason 3 050 3 037 5 835
Other Holdings (1 264) (2 305) (4 848)
43 259 31 890 69 394
Total assets
Westcon 864 257 784 658 793 070
Logicalis 294 147 212 338 237 693
Analysys Mason 54 324 52 871 41 140
Other Holdings 40 769 19 754 69 669
1 253 497 1 069 621 1 141 572
DETERMINATION OF
HEADLINE EARNINGS
Equity holders of the 22 858 13 584 37 772
parent per the income
statement
Headline earnings 78 3 190 547
adjustments:
Goodwill impairment - 1 776 425
Loss/(Profit) on 112 (31) 46
disposal of plant and
equipment
(Profit)/Loss on (34) 1 445 76
disposal and closure
of discontinued
operations
Tax effect - 11 (16)
Minorities" interest - 1 (10)
Headline earnings 22 936 16 786 38 293
ABRIDGED STATEMENT OF
CHANGES IN TOTAL
EQUITY
Balance at beginning 461 351 436 316 436 316
of period - as
restated
Translation of foreign (8 533) (7 972) (14 129)
subsidiaries
Translation difference 7 825 (5 601) 1 649
on equity loans
Attributable profit 22 858 13 584 37 772
for period
Shares issued 2 118 4 107 15 498
Share buy back - - (1 863)
Share-based payments 998 534 1 358
Repurchase of equity - - (3 666)
interest
Minority interests 1 473 979 (11 584)
Balance at end of 488 090 441 947 461 351
period
COMMENTARY
1 PROFILE AND GROUP STRUCTURE
Datatec ("the Group") is an international Information & Communications
Technology (ICT) group focused on the supply of advanced ICT technology
and the delivery of professional services into the higher growth segments
of the global market. The Group"s main lines of business comprise the
global distribution of advanced networking and communications convergence
products ("Westcon"), IT infrastructure solutions and network integration
("Logicalis") and strategic telecommunications consulting ("Analysys
Mason").
Datatec has successfully listed on AIM and now has its full share capital
listed on both the JSE and AIM. Both non South African and South African
shareholders, where permitted by SA exchange control regulations, are
entitled to freely transfer their shares in the Company between the two
share registers.
2 FINANCIAL PERFORMANCE
The Group saw a strong increase in revenues of 16% to $1,67 billion (2005:
$1,44 billion), while gross margin increased from 11,3% to 11,4%. EBITDA
increased by 32% to $52,0 million (2005: $39,5 million), now 3,1% of
revenue (2005: 2,7%).
Operating profit increased by 44% to $43,3 million (2005: $30,1 million). The
2006 operating profit includes charges of $3,6 million relating to share-
based payments.
The Group pre-tax profit grew by 38% to $38,5 million (2005: $28,0 million).
The effective tax rate decreased from 42,5% to 39,0%.
Headline earnings per share grew to 15,65 cents (2005: 12,02 cents).
The Group ended the period with net cash, after long-term and short-term
debt, of $83,3 million.
This interim report has been prepared in accordance with the Group"s
accounting policies which comply with International Financial Reporting
Standards ("IFRS").
3 DIVISIONAL REVIEWS
3.1 Westcon
Westcon"s revenue increased by 10% to $1,26 billion (2005: $1,14 billion)and
the growth was attributable to all three regions, the Americas up 6%,
Europe up 17% and Asia Pacific up 17%. Excluding once-off benefits in the
prior year, gross margins increased from 8,1% to 8,3%, with increases
primarily in Europe and Asia Pacific. Operating expenses of $65,5 million
increased slightly (2005: $64,9 million). Demonstrating the operating
leverage, operating expenses as a percentage of revenue decreased from
5,7% in 2005 to 5,2%. EBITDA margins increased to 3,0% (2005: 2,7%).
Operating profit increased by 27% to $32,9 million (2005: $26,0 million).
Westcon"s operating activities used $9 million in cash compared to $10
million generated during the six months to 31 August 2005. An increase in
net income during the current period was offset by higher working capital
consumption, largely attributable to changes in the working capital of
the newly acquired Ronco business. At 31 August 2006 Westcon"s net cash
position was $80 million (2005: $50 million).
Cisco product sales made up 59% of Westcon"s revenue, Nortel 12%, Avaya 8%,
Security Solutions 6%, Affinity and Development products 15%. 54% of
Westcon"s revenue was generated in the Americas, 37% in Europe and 9% in
Asia-Pacific.
3.2 Logicalis
Revenue was up 39% to $342,6 million (2005: $247,3 million). Adjusting for
the full year impact of acquisitions, revenue increased by 11% on a like-
for-like basis. Total gross margin stayed constant at 20,1%.
Costs continue to be tightly managed, resulting in operating expenses
increasing by less than the growth in total revenue.
EBITDA increased 59% to $11,8 million (2005: $7,4 million), while EBITDA
margins expanded to 3,5% (2005: 3,0%). After charges for depreciation and
amortisation of intangible assets, operating profit was up 65% to $8,5
million (2005: $5,2 million).
Net cash reduced from $26,6 million at 28 February 2006 to net debt of $2,0
million at 31 August 2006, with the reduction primarily due to cash used
for acquisitions and increased working capital as a result of much higher
revenues.
Logicalis US acquired the US Southwest focused consulting business of
Alliance Consulting Inc., and Computech Resources Inc., an IBM Premier
Business Partner and solutions business. Logicalis also acquired an
equity interest in a German ICT services organisation and opened offices
in Chile and Peru, to extend the Group"s presence in South America.
3.3 Analysys Mason
Analysys Mason revenues grew by 2% to $30,7 million (2005: $30,1 million),
despite the completion of a significant multiyear contract (a 3rd
Generation wireless network roll-out programme) which came to an end at
the start of the year. This contract had generated $3,3 million during
the same period last year. The growth areas have largely been
international assignments in the Analysys Consulting division and
increasing public sector business in the Mason division. This change in
the revenue mix led to an improvement in gross margin to 36,5% (2005:
34,4%). This resulted in EBITDA of $3,2 million, and EBITDA margin of
10,5%, similar to last year.
This division"s financial position remains strong with cash of almost $9
million.
3.4 Other Holdings - Africa and Middle East operations
Westcon AME revenue was $29,5 million (2005: $20,1 million) and EBITDA was
$0,9 million (2005: $0,1 million). OnLine revenue was $20,7 million
(2005: $16,8 million). OnLine EBITDA increased to $1,0 million (2005:
$0,8 million). RangeGate"s revenue increased to $2,7 million (2005: $2,2
million) and the company incurred an EBITDA loss of $0,2 million.
4 GROUP STRATEGY
The Group"s strategy is to deliver sustainable above average returns through
the development of its three principal operating divisions. The Group
acts as a value-added intermediary, operating at three key points in the
ICT supply chain. These divisions are run as pure-play standalone
businesses, which enables them to deliver enhanced operational and
financial performance as well as to react faster to technology change.
The key elements of the Group"s strategy include continued focus on the
higher value, faster growing sectors of the ICT market; targeted
geographic expansion; investment in higher margin services activities;
and value-enhancing acquisitions.
5 CURRENT TRADING AND PROSPECTS
Global demand for ICT products and services has remained resilient during the
year. Despite concerns of a slowdown in the United States economy, as a
consequence of rising interest rates, the market there has remained
robust.
Datatec successfully secured a listing of all of its shares on the AIM market
of the London Stock Exchange, to complement its listing on the JSE. This
will provide greater access to capital to support the continued growth of
the Group"s international businesses, both organically and by
acquisition. It will also provide an internationally accepted acquisition
currency. At the same time as the listing GBP14 million (R195 million) of
new funds were raised by way of an institutional placement. The funds
will be used for further acquisitions and any consequential growth in
working capital.
The Group expects to continue to grow revenue and margins, with a larger
contribution from its European operations. The continuing prudent
approach to managing its cost base and tight controls of working capital
should result in consistent and more predictable improvements in
financial performance. Trading so far in the second half has been strong.
6 DIRECTORATE
During the period Professor Wiseman Nkuhlu was appointed as a non-executive
director to the Board of Datatec with effect from 1 September 2006.
7 DISTRIBUTION
The Board plans to make an annual distribution to shareholders, subject to
review.
On behalf of the Board
L Boyd J P Montanana D B Pfaff
Chairman Chief Executive Officer Group Financial Director
1 November 2006
Directors:
L Boyd* (Chairman), J P Montanana# (CEO), C B Brayshaw*, W Nkuhlu*,
D B Pfaff, C M L Savage*, C S Seabrooke*, N J Temple*#
#British *Non-executive
www.datatec-group.com
Date: 01/11/2006 08:00:23 AM Produced by the JSE SENS Department
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