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Audited provisional results for year ended 29 February 2016, declaration of scrip distribution with cash alternative
Datatec Limited
Incorporated in the Republic of South Africa
Registration number 1994/005004/06
Share code JSE and LSE: DTC
ISIN: ZAE000017745 (“Datatec” or the “Group”)
AUDITED PROVISIONAL RESULTS FOR THE YEAR ENDED 29 FEBRUARY 2016, DECLARATION OF SCRIP DISTRIBUTION WITH CASH ALTERNATIVE
Datatec Limited (“Datatec” or the “Group”, JSE and LSE: DTC), the international information and communications
technology (ICT) group, is today publishing its audited provisional results for the year ended 29 February 2016 (“the Period”
or “FY16”).
Financial results
• Group revenue $6.5 billion (FY15: $6.4 billion)
• Group revenue in constant currency** up 8.6%
• EBITDA $162.1 million (FY15: $206.4 million)
• Underlying* earnings per share 32.0 US cents (FY15: 41.8 US cents)
• Final distribution maintained at 9 US cents per share
Group headlines
• Profitability impacted by foreign exchange losses, restructuring and translation
• Stable underlying operating performance
• Acquisitions enhancing Logicalis scale and capabilities
Current trading and prospects
• Improved geographic balance
• Low revenue growth environment
• Business Process Outsourcing (“BPO”) initiative to be expanded to Asia-Pacific
Jens Montanana, Chief Executive of Datatec, commented:
“FY16 was a notably challenging year for the Group. We were affected by a combination of a strong US dollar impacting
the contribution from our emerging market operations and major income statement charges, including foreign exchange
losses due to capital controls in Angola and the reorganisation of Logicalis UK.
“As we stated previously, we have taken significant actions to enhance our operational performance across our Westcon
EMEA operations. This BPO initiative is being extended to the Asia-Pacific region.
“Looking ahead, we are confident that our diversification and geographical portfolio strategy as well as global
positioning in the ICT market remain sound. Therefore, the Board has recommended an unchanged full year dividend.”
OVERVIEW
Datatec is an international ICT solutions and services group operating in more than 60 countries across North America,
Latin America, Europe, Africa, Middle East and Asia-Pacific. The Group’s service offering spans the technology,
integration and consulting sectors of the ICT market.
Datatec operates through three core divisions:
Technology - Westcon: distribution of security, unified communications, networking and data centre products;
Integration - Logicalis: ICT infrastructure solutions and services; and
Consulting: strategic and technical consulting.
A fourth division, Datatec Financial Services is continuing its development of financing/leasing solutions for ICT
customers through proof of concept to business model and growth prospects. For FY16, this division is included in
the “Corporate” sector of the business which encompasses the costs of the Group’s head office entities.
The Group’s businesses are managed on a standalone basis, able to respond quickly to technology changes and focused
on collective strategic initiatives based on a shared strategy.
Datatec’s strategy is to deliver long-term, sustainable and above average returns to shareholders through portfolio
management and the development of its principal subsidiaries in technology solutions and services to targeted customers
in identified markets.
GROUP RESULTS
Datatec’s revenues for the year ended 29 February 2016 were flat at $6.5 billion (FY15: $6.4 billion) compared to the
prior financial period (“FY15”) in US dollar (reporting currency) terms.
In constant currency** terms, using the exchange rates prevailing in FY15, Group revenues for FY16 increased 8.6% to
$7.0 billion (FY15: $6.4 billion) with Westcon constant currency** revenues up 7.6% and Logicalis constant currency**
revenues up 12.0%.
Westcon’s revenues in FY16 were 0.3% higher than FY15 with growth in North America and Europe offset by a decline in
Latin America and Africa.
Logicalis’ revenue in FY16 was supported by a strong performance in the US and the full year effect of the
acquisition of inforsacom Holding GmbH (“Inforsacom”) in Germany offset by a decline in Latin America.
Revenue % contribution by division
FY16 FY15
Westcon 75% 75%
Logicalis 24% 24%
Consulting 1% 1%
100% 100%
Revenue % contribution by geography
FY16 FY15
North America 35% 32%
Latin America 14% 17%
Europe 34% 32%
Asia-Pacific 9% 9%
Africa & Middle East (AME) 8% 10%
100% 100%
North America generated 35% of Datatec’s revenues (FY15: 32%) and 28% of gross profits (FY15: 25%) signalling the
value of the Group’s geographically diversified revenue stream.
Gross profit % contribution by geography
FY16 FY15^ FY15
North America 28% 25% 25%
Latin America 21% 26% 25%
Europe 33% 31% 31%
Asia-Pacific 11% 10% 10%
Africa & Middle East (AME) 7% 8% 9%
100% 100% 100%
^ adjusted representation of Westcon freight out costs
Gross margins deteriorated in comparison with FY15 but improved in the second half of FY16. Group gross margins were
13.5% (FY15: 14.5%). From FY16 onwards, Westcon is disclosing outbound freight as part of cost of sales rather than
operating costs as this matches the expense with corresponding revenues more accurately. The adjusted gross margin for
FY15 was 13.9%. In addition, Group gross margins have been impacted by the mix of geographic contribution and the lower
services contribution to Logicalis revenues.
Gross profit was $868.7 million (FY15: $932.9 million). Adjusted for the reclassification of outbound freight costs,
gross profit was down 2.7% (adjusted FY15: $892.9 million).
Overall operating costs were $706.6 million (FY15: $726.5 million). This reduction reflects the reclassification of
outbound freight costs and various cost saving initiatives offset by a $14.0 million increase in net foreign exchange
losses to $17.3 million (FY15: $3.3 million). Included in operating costs are total restructuring costs of $15.3 million,
the majority of which relates to the Westcon EMEA transformation and BPO, and a charge for provisions against accounts
receivable of $19.2 million (FY15: $7.8 million).
EBITDA was $162.1 million (FY15: $206.4 million) and EBITDA margins 2.5% (FY15: 3.2%).
Contribution to Group EBITDA
FY16 FY15
Westcon 52% 56%
Logicalis 47% 43%
Consulting 1% 1%
100% 100%
Depreciation and amortisation were in line with the prior period. Operating profit was 30% lower at $110.5 million
(FY15: $157.8 million).
The net interest charge increased to $23.9 million (FY15: $17.6 million) reflecting an increase in average net debt.
Profit before tax was $88.4 million (FY15: $140.2 million).
The Group’s reported effective tax rate for FY16 is 45.2% (FY15: 36.8%). This is higher than the South African rate
of 28% due to the profits arising in jurisdictions with higher tax rates, in particular North and Latin America. The
abnormally high effective tax rate in FY16 reflects the increased proportion of profits earned in North America,
unrecognised foreign exchange losses in Angola and trading losses in Africa and parts of Asia-Pacific. The Group continues
to target a normalised effective tax rate below 35%.
Underlying* earnings per share (“UEPS”) were 32.0 US cents (FY15: 41.8 US cents). Headline earnings per share (“HEPS”)
were 19.4 US cents (FY15: 37.0 US cents).
The Group generated $129.1 million of cash from operations during FY16 (FY15: $186.2 million) and ended the period
with net debt of $205.4 million (FY15: $87.1 million). The increase in net debt is due to reduced cash earnings and
funding increased working capital, capital expenditure and acquisitions.
During the year, the Group completed four acquisitions, all within Logicalis:
• Effective 1 May 2015, Logicalis acquired 100% of White Label Intelligence Limited (“Trovus”), a UK Business
Intelligence consultancy, which provides business insight solutions, professional services and managed services to large
enterprise clients. The fair value of Trovus was $2.2 million, with an initial cash consideration of $1.6 million and
deferred cash consideration up to a maximum of £0.4 million ($0.6 million equivalent), payable over three years. The
acquisition will strengthen Logicalis’ Business Analytics and Information Management offering.
• Effective 1 September 2015, Logicalis completed the acquisition of Advanced Technology Integration Group (“ATIG”), a
solution provider offering system integration and professional services to enterprise and commercial customers, for a
total consideration of up to $42 million, funded partly by the issue of 3.7 million new Datatec ordinary shares in terms
of a $18.0 million vendor consideration placing. The consideration payable comprised an initial cash consideration of
$37.0 million and deferred cash consideration up to a maximum of $5.0 million payable in one year. The acquisition will
consolidate Logicalis’ presence in the key Midwest region of the US and present significant cross selling opportunities
for its services offering.
• Effective 1 October 2015, Logicalis acquired Lekscom Limited, a Channel Islands based provider of networking and
collaboration services to large enterprise and commercial clients, for a total consideration of up to $2.4 million with
$1.8 million initial cash consideration and deferred cash consideration up to a maximum of £0.4 million ($0.6 million
equivalent), split into two payments over two years.
• Effective 1 December 2015, Logicalis acquired Thomas Duryea Consulting Pty. Limited (“Thomas Duryea”), an Australian
ICT services and solutions provider, for a total consideration of up to $12.4 million with $9.5 million as an initial
cash consideration and deferred cash consideration up to a maximum of AU$4.0 million ($2.9 million equivalent), split
into two payments over two years. Thomas Duryea is a provider of Data Centre, Cloud and Microsoft solutions and
services with operations in Melbourne and Sydney. The acquisition will enhance Logicalis’ scale and capabilities in the
Australian ICT market.
As a result of these acquisitions, goodwill and other intangible assets increased by $28.5 million and $29.1 million
respectively. The revenue and EBITDA included from these acquisitions in FY16 were $53.6 million and $2.9 million,
respectively. Had the acquisition dates been 1 March 2015, revenue attributable to these acquisitions would have been
approximately $138.5 million for FY16. It is not practical to establish the EBITDA that would have been contributed by
the acquisitions in FY16 if they had been included for the entire year. An assessment of the fair value of assets
acquired across all acquisitions made by the Group, ATIG and Thomas Duryea being the largest components, is set out
below.
There is both a put and call option (level 2 financial instruments) for Datatec to purchase all the shares held by the
management shareholders in Comztek Holdings (Pty) Ltd at a defined strike price. This was valued using a discounted
cash flow valuation as at 29 February 2016. During FY16, a movement of $0.02 million was recorded in the statement of
comprehensive income and the closing balance included in amounts due to vendors is $1.3 million.
The Group issued 5.8 million new shares during the year: 3.7 million shares as the vendor consideration placement for
the ATIG acquisition; and 2.1 million shares for scrip distributions.
The Group paid $33.2 million (paid during FY15: $33.3 million) to shareholders during the year: a final scrip
distribution with cash dividend alternative in respect of FY15 in July 2015; and an interim scrip distribution with cash
dividend alternative in respect of FY16 in November 2015.
The total value returned to shareholders in the FY15 final distribution was $17.7 million of which $9.0 million
(51.1%) was distributed to shareholders in the form of scrip (1.7 million new shares issued) and $8.7 million (48.9%)
was settled in cash to those shareholders who had elected the cash dividend alternative.
The total value returned to shareholders in the FY16 interim distribution was $15.5 million of which $2.0 million
(12.6%) was distributed to shareholders in the form of scrip (0.4 million new shares issued) and $13.5 million (87.4%)
was settled in cash to those shareholders who had elected the cash dividend alternative.
The Board has maintained a final scrip distribution with cash dividend alternative for FY16 at 9 US cents
(FY15: 9 US cents) details of which are set out below.
Losses of $87.4 million (FY15: losses of $67.8 million) arising on translation to presentation currency are included
in total comprehensive loss of $39.9 million (FY15: income of $17.1 million).
DIVISIONAL REVIEWS
Westcon
Westcon accounted for 75% of the Group’s revenues (FY15: 75%) and 52% of its EBITDA (FY15: 56%).
Westcon is a value added distributor of category-leading security, unified communications, network infrastructure and
data centre solutions with a global network of specialty resellers. The division goes to market under the Westcon and
Comstor brands.
Westcon operates in more than 60 countries and creates unique programmes and provides support to grow the business of
its global partners. Westcon’s portfolio of market-leading vendors includes: Cisco, Avaya, Polycom, Juniper, Check
Point, F5, Palo Alto and Blue Coat.
Westcon revenue: % by geography
FY16 FY15
North America 37% 34%
Latin America 10% 12%
Europe 33% 32%
Asia-Pacific 10% 10%
AME 10% 12%
100% 100%
Westcon revenue: % by technology category
FY16 FY15
Networking 23% 25%
Unified Communications 26% 28%
Security solutions 34% 29%
Data centre and other 17% 18%
100% 100%
Westcon’s revenues were unchanged at $4.9 billion (FY15: $4.9 billion) with revenue growth in North America, Europe
and Asia-Pacific offset by lower results in Latin America and AME. Constant currency** sales increased 7.6% with
higher results across all regions except AME.
Gross margins were 10.2% (FY15: 11.2%) with the decrease in margin partly attributable to the reclassification of
outbound freight costs from operating expense to cost of sales in FY16. Adjusting FY15 in a similar manner results
in a comparable FY15 margin of 10.3%.
Gross profit was $497.1 million (FY15: $542.2 million). Adjusting FY15 for the outbound freight cost reclassification
results in a gross profit decrease of 1.0% (adjusted FY15: $502.2 million).
Operating expenses were $408.6 million (FY15: $417.1 million). Adjusting FY15 for the impact of the freight
reclassification results in an adjusted FY15 operating expense total of $377.1 million. The underlying 8% increase in
operating expenditure is due to a combination of $14.7 million of foreign exchange losses associated with the
devaluation of the Angolan Kwanza; $14.9 million of restructuring costs mainly associated with the EMEA transformation
and BPO; increased provisioning against accounts receivable, particularly in Latin America and Africa; and higher
headcount. Operating expenses as a proportion of revenue increased to 8.4% (FY15: 7.8% after freight reclassification).
EBITDA was $88.5 million (FY15: $125.1 million) with lower results across all regions except North America while
EBITDA margins were 1.8% (FY15: 2.6%), with lower margins in all regions except North America. Operating profit was
$62.2 million (FY15: $100.2 million).
Net working capital days increased to 34 days (FY15: 27 days) driven by higher DSO and lower inventory turns offset
by higher payable days. Higher net working capital days resulted in an increase of $105.8 million in net debt to
$271.0 million.
Of the $29.5 million capitalised development expenditure in FY16, the majority is attributable to the SAP ERP system
transition, Cloud development and digital transformation.
Angola, in recent years, has been an important contributor to the AME region within Westcon. In FY15, revenue in the
country totalled $61.1 million. The weakened economic outlook for Angola, mainly as a consequence of the fall in the
price of crude oil, has led to a material decline in the exchange rate of the Kwanza to the US Dollar.
The National Bank of Angola has instituted capital controls that render the timing and quantum of conversion from
Kwanza to the US Dollar unpredictable. This has resulted in foreign exchange losses of $14.7 million in FY16, of
which $10.2 million has been classified as unrealised. Management has implemented a series of actions to control the
exposure and reduce further losses.
The Angolan government bonds are indexed to the US Dollar. The amount of $10.0 million is fixed and the Kwanza equivalent
of this will be repaid at maturity. These were issued in August 2015 and mature in August 2017. The coupon rate on
these bonds is 7.00%. These bonds have been classified as Level 1 financial instruments.
Westcon has successfully implemented a restructuring and BPO transformation of its EMEA operations to deliver future
improvements in operational efficiency. Total costs in FY16 were $13.2 million and a further $1.4 million is expected
to be spent in FY17, as planned.
The success of this project has resulted in similar initiatives contemplated in Asia-Pacific and possibly North
America. In Asia-Pacific, the scope of this project has been finalised and will include elements of the finance and
operations functions. Total costs in FY17 are expected to be approximately $7 million and deliver a payback within
four years. The roll-out of SAP across Westcon will continue in FY17. The remaining few countries in Asia are expected
to go live in H1 FY17, with the EMEA roll-out beginning in H2 FY17.
Logicalis
Logicalis accounted for 24% of the Group’s revenues (FY15: 24%) and 47% of its EBITDA (FY15: 43%).
Logicalis is an international IT solutions and managed services provider with a breadth of knowledge and expertise in
IT infrastructure and networking solutions, communications and collaboration, data centre, cloud solutions and managed
services.
Logicalis revenue % geographic split
FY16 FY15
North America 30% 25%
Latin America 27% 36%
Europe 34% 31%
Asia-Pacific 9% 8%
100% 100%
Revenue was $1.5 billion (FY15: $1.5 billion), including $53.6 million of revenue from the acquisitions made during
the year. Product sales were up 3% with strong growth in HP and Oracle, the latter driven by the full year effect of
the Inforsacom acquisition made in H2 FY15.
Revenue overall was flat with increases in continental Europe, North America and Asia-Pacific offset by Latin America,
which was adversely impacted by weaker trading conditions in Brazil and by a strong US Dollar worsening currency
translation effects across Latin America. In Europe, the UK results were impacted by the completion of a long-term
contract with the Welsh Assembly Government and the subsequent restructuring of the UK operation.
Revenues from services were down 5%, with decreases in both professional and annuity services revenues due to the
completion of the Welsh Assembly Government contract, weakening demand in Brazil and currency translation.
Gross margins were 23.1% (FY15: 24.2%), impacted by a lower services mix as a result of a strong US dollar and lower
product margins.
Gross profit was down 5% to $353.4 million (FY15: $371.6 million) and operating expenses decreased by 1%. EBITDA was
$80.9 million (FY15: $97.0 million), with a corresponding EBITDA margin of 5.3% (FY15: 6.3%). Operating profit was
$56.3 million (FY15: $74.2 million).
Logicalis made four acquisitions during FY16 which are set out in the Group Results section above.
The ICT market is adjusting to a transition to cloud-based infrastructure solutions. Logicalis continues to adapt
its go-to-market model and develop its services to address this change.
Logicalis continues to have a contingent liability in respect of a possible tax liability at its PromonLogicalis
subsidiary in Brazil.
Consulting
The Consulting division accounted for 1% of Group revenues (FY15: 1%).
During the year, the division comprised: Analysys Mason, a provider of strategic, trusted advisory, modelling and
market intelligence services to the telecoms, media and technology industries; Mason Advisory (“Mason”), an independent
and impartial IT consultancy providing related strategic, technical and operational advice to the public and private
sectors; and The Via Group (“Via”), a specialist professional services organisation providing unified communications
and voice solutions.
Effective 1 March 2016, Logicalis US acquired Via from the Consulting division.
Divisional revenues were $51.4 million (FY15: $55.2 million) with growth in Mason offset by a decline in Via. Analysys
Mason had a strong recovery in the second half of FY16. Cost reduction initiatives were undertaken to limit the decline
in EBITDA to $1.9 million (FY15: $3.2 million).
The division is focused on increasing sales and utilisation of its resources in order to improve operating margins.
Corporate
Corporate encompasses the net operating costs of the Datatec head office entities which was $14.3 million
(FY15: $19.6 million). It includes share based payments, a net foreign exchange gain of $4.1 million
(FY15: $0.6 million) and development expenditure of $2.1 million (FY15: $0.9 million) associated with Datatec Financial
Services which is developing financing/leasing solutions for ICT customers.
CURRENT TRADING AND PROSPECTS
Global markets remain uncertain and Datatec has positioned itself well to support its vendors and customers through
scale and broad international coverage. Technology innovation in the sectors in which the Group operates remains high.
The migration to cloud-based infrastructure delivery is a trend that will require increased managed services and
creates demand for networking, security and unified communications solutions, all of which are core activities for
Datatec.
The profitability for FY16 was impacted by foreign exchange losses in Angola, restructuring charges and provisions
against trade receivables. Management have taken actions to reduce or eliminate the impact of these negative events
and charges going forward. As a result, our expectation at this stage is for an improvement in earnings and operating
leverage in FY17.
SCRIP DISTRIBUTION AND CASH DIVIDEND ALTERNATIVE
1. Introduction
Notice is hereby given that the Board has declared a final distribution for the year ended 29 February 2016, by way
of the issue of fully-paid Datatec ordinary shares of one cent each (“the Scrip Distribution”) payable to ordinary
shareholders (“Shareholders”) recorded in the register of the Company at the close of business on the Record Date,
being Friday, 22 July 2016.
Shareholders will be entitled, in respect of all or part of their shareholding, to elect to receive a gross cash
dividend of 136 RSA cents per ordinary share in lieu of the Scrip Distribution, which will be paid only to those
Shareholders who elect to receive the cash dividend, in respect of all or part of their shareholding, on or before
12:00 on Friday, 22 July 2016 (“the Cash Dividend”). The Cash Dividend has been declared from income reserves. A
dividend withholding tax of 15% will be applicable to all shareholders not exempt therefrom after deduction of which
the net Cash Dividend is 115.6 RSA cents per share.
The new ordinary shares will, pursuant to the Scrip Distribution, be settled by way of capitalisation of the
Company’s distributable retained profits.
The Company’s total number of issued ordinary shares as at 11 May 2016 is 209 318 161. Datatec’s income tax reference
number is 9999/493/71/2.
2. Terms of the Scrip Distribution
The number of Scrip Distribution shares to which each of the Shareholders will become entitled pursuant to the Scrip
Distribution (to the extent that such Shareholders have not elected to receive the Cash Dividend) will be determined
by reference to such Shareholder’s ordinary shareholding in Datatec (at the close of business on the Record Date, being
Friday, 22 July 2016) in relation to the ratio that 136 RSA cents bears to the volume weighted average price (“VWAP”)
of an ordinary Datatec share traded on the JSE during the 30-day trading period ending on Monday, 11 July 2016. Where
the application of this ratio gives rise to a fraction of a new ordinary share, such fraction of a new ordinary share
will be rounded down to the nearest whole number, resulting in allocations of whole ordinary shares and a cash payment
for the fraction. The applicable cash payment will be determined with reference to the VWAP of an ordinary Datatec
share traded on the JSE on Wednesday, 20 July 2016, (being the day on which an ordinary Datatec share begins trading
‘ex’ the entitlement to receive the Scrip Distribution or the Cash Dividend alternative), discounted by 10%.
Details of the ratio will be announced on the Stock Exchange News Service (“SENS”) of the JSE in accordance with the
timetable below.
3. Circular and salient dates
A circular providing shareholders with full information on the Scrip Distribution and the Cash Dividend alternative
including a Form of Election to elect to receive the Cash Dividend alternative will be posted to Shareholders on or
about Friday, 17 June 2016. The salient dates of events thereafter are as follows:
EVENT 2016
Audited financial results of the Datatec Group for the year ended 29 February 2016 and
Scrip Distribution with Cash Dividend alternative released on the SENS on Wednesday, 11 May
Circular and Form of Election posted to Shareholders on Friday, 17 June
Announcement released on SENS in respect of the ratio applicable to the Scrip Distribution,
based on the 30-day volume weighted average price ending on Monday, 11 July 2016 by
11h00 (10h00 UK time) on Tuesday, 12 July
Announcement published in the press of the ratio applicable to the Scrip Distribution,
based on the 30-day volume weighted average price ending on Monday, 11 July 2016 on Wednesday, 13 July
Last day to trade in order to be eligible for the Scrip Distribution and the Cash
Dividend alternative Tuesday, 19 July
Ordinary shares trade “ex” the Scrip Distribution and the Cash Dividend alternative on Wednesday, 20 July
Announcement released on SENS in respect of the cash payment applicable to fractional
entitlements, based on the volume weighted average price on Wednesday, 20 July 2016,
discounted by 10% Thursday, 21 July
Last day to elect to receive the Cash Dividend alternative instead of the Scrip
Distribution, Forms of Election to reach the Transfer Secretaries by 12h00
(11h00 UK time) on Friday, 22 July
Record Date in respect of the Scrip distribution and the Cash Dividend alternative Friday, 22 July
Scrip distribution shares issued to shareholders on the South African register and
Scrip Distribution, certificates posted and Cash Dividend payments made, CSDP/broker
accounts credited/updated, as applicable, on Monday, 25 July
Cash Dividend payments made by BACS (direct credit) to shareholders on the Jersey
register, Scrip Distribution shares and depositary interests issued to shareholders
on the Jersey register, CREST accounts credited with the new Scrip Distribution
shares and depositary interests, as applicable, and AIM listing of ordinary shares
issued in respect of the Scrip Distribution on Monday, 25 July
Announcement relating to the results of the Scrip Distribution and the Cash Dividend
alternative released on SENS on Monday, 25 July
Announcement relating to the results of the Scrip Distribution and the Cash Dividend
alternative published in the press on Tuesday, 26 July
JSE listing of ordinary shares in respect of the Scrip Distribution adjusted to
reflect the actual number of ordinary shares issued in terms of the Scrip Distribution
at the commencement of business on or about Wednesday, 27 July
All times provided are South African local times. The above dates and times are subject to change. Any change will be
announced on SENS.
Share certificates may not be dematerialised or rematerialised, nor may transfers between registers take place,
between Wednesday, 20 July 2016 and Friday, 22 July 2016, both days inclusive.
REPORTING
The provisional summarised consolidated financial statements are prepared in accordance with the framework concepts
and the measurement and recognition requirements of International Financial Reporting Standards (IFRS), the SAICA
Financial Reporting Guides as issued by the Accounting Practices Committee, the Financial Reporting Pronouncements as
issued by the Financial Reporting Standards Council, as well as the requirements of the Companies Act of South Africa
and the JSE Limited’s Listings Requirements applicable for provisional reports. The provisional summarised consolidated
financial statements also contain the minimum requirements of IAS 34 - Interim Financial Reporting.
The accounting policies are in terms of IFRS and consistent with those applied in the financial statements for FY15,
except for the adoption of the revised accounting standard and the amendments to accounting standards in FY16.
The Group adopted the following revised accounting standard and amendments to existing accounting standards. The
adoption of this revised standard and amendments did not have a material impact on the Group annual financial
statements.
• IAS 19 (Revised) Employee Benefits (effective for accounting periods beginning on or after 1 July 2014)
• Amendments resulting from Annual Improvements 2010 - 2012 Cycle (effective for accounting periods beginning on or
after 1 July 2014)
• Amendments resulting from Annual Improvements 2011 - 2013 Cycle (effective for accounting periods beginning on or
after 1 July 2014)
The provisional summarised consolidated financial statements have been correctly extracted from the underlying audited
consolidated financial statements. The preparation of these summarised financial statements for FY16 was supervised by
the Chief Financial Officer, Mr Jurgens Myburgh, CA(SA).
The consolidated financial statements from which the summarised consolidated financial statements have been extracted
have been audited by the Company’s auditors, Deloitte & Touche. The consolidated financial statements and the auditor’s
unmodified report on the consolidated financial statements are available for inspection at the Company’s registered
office.
The auditor’s report does not necessarily report on all of the information contained in this announcement / financial
results. Shareholders are therefore advised that in order to obtain a full understanding of the nature of the
auditor’s engagement they should obtain a copy of that report together with the accompanying financial information from
the issuer’s registered office.
DISCLAIMER
This announcement may contain statements regarding the future financial performance of the Group which may be
considered to be forward-looking statements. By their nature, forward-looking statements involve risk and uncertainty,
and although the Group has taken reasonable care to ensure the accuracy of the information presented, no assurance can
be given that such expectations will prove to have been correct.
The Group has attempted to identify important factors that could cause actual actions, events or results to differ
materially from those described in forward-looking statements, there may be other factors that cause actions, events
or results not to be as anticipated, estimated or intended. It is important to note, that:
(i) unless otherwise indicated, forward-looking statements indicate the Group’s expectations and have not been
reviewed or reported on by the Group’s external auditors;
(ii) actual results may differ materially from the Group’s expectations if known and unknown risks or uncertainties
affect its business, or if estimates or assumptions prove inaccurate;
(iii) the Group cannot guarantee that any forward-looking statement will materialise and, accordingly, readers are
cautioned not to place undue reliance on these forward-looking statements; and
(iv) the Group disclaims any intention and assumes no obligation to update or revise any forward-looking statement
even if new information becomes available, as a result of future events or for any other reason, other than as required
by the JSE Limited Listings Requirements and/or the AIM Rules.
On behalf of the Board:
SJ Davidson JP Montanana PJ Myburgh
Chairman Chief Executive Officer Chief Financial Officer
11 May 2016
Directors
SJ Davidson°• (Chairman), JP Montanana• (CEO), PJ Myburgh (CFO), O Ighodaro°*, JF McCartney°#, LW Nkuhlu°, CS
Seabrooke°, NJ Temple°•
°Non-executive •British #American *Nigerian
* Excluding impairment 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 and the taxation effect on all of the
aforementioned.
** The pro forma constant currency information, which is the responsibility of the Datatec directors, presents the
Group’s revenue for the current year had it been translated at the average foreign currency exchange rates of the prior
year. This information is for illustrative purposes only and because of its nature, may not fairly present the Group’s
revenues. The Group’s auditors have issued a limited assurance report (in terms of ISAE 3000: Assurance Engagements other
than Audits or Reviews of Historical Information) on the pro-forma financial information presented, a copy of which is
available for inspection at the Company’s registered office.
To determine the revenues in constant currency terms, the current financial reporting period’s monthly revenues in
local currency have been converted to US dollars at the average monthly exchange rates prevailing over the same period in
the prior year. The calculation has been prepared for each of the Group’s currencies, materially being that of the
British Pound, Euro, Brazilian Real, Australian Dollar, Canadian Dollar, Singapore Dollar, Mexican Peso and South African
Rand.
Summarised consolidated statement of comprehensive income
for the year ended 29 February 2016
US$’000 Audited Audited
Year ended Year ended
February 2016 February 2015
Revenue 6 454 782 6 443 536
Continued operations 6 401 171 6 421 646
Revenue from acquisitions 53 611 21 890
Cost of sales (5 586 043) (5 510 605)
Gross profit 868 739 932 931
Operating costs (691 673) (716 454)
Restructuring costs (15 285) -
Share-based payments 329 (10 084)
Operating profit before interest, tax, depreciation and amortisation (“EBITDA”) 162 110 206 393
Depreciation (28 589) (26 256)
Amortisation of capitalised development expenditure (7 660) (7 216)
Amortisation of acquired intangible assets and software (15 255) (15 163)
Intangible impairment (75) -
Operating profit 110 531 157 758
Interest income 3 670 4 324
Finance costs (27 549) (21 930)
Share of equity-accounted investment (losses)/earnings (252) 450
Acquisition-related fair value adjustments 1 768 (317)
Fair value movements on put option liabilities 22 (317)
Fair value adjustment on deferred and/or contingent purchase consideration 1 746 -
Other income 266 14
Loss on disposal of investments - (137)
Profit before taxation 88 434 140 162
Taxation (39 956) (51 534)
Profit for the year 48 478 88 628
Other comprehensive (loss)/income
Items that may be reclassified subsequently to profit or loss
Exchange differences arising on translation to presentation currency (87 401) (67 757)
Translation of equity loans (2 123) (5 279)
Tax on translation of equity loans 1 048 1 480
Transfers and other items 64 41
Total comprehensive (loss)/income for the year (39 934) 17 113
Profit attributable to:
Owners of the parent 39 949 73 772
Non-controlling interests 8 529 14 856
48 478 88 628
US$’000 Audited Audited
Year ended Year ended
February 2016 February 2015
Total comprehensive (loss)/income attributable to:
Owners of the parent (37 505) 11 014
Non-controlling interests (2 429) 6 099
(39 934) 17 113
Number of shares issued (millions)
Issued 209 204
Weighted average 206 199
Diluted weighted average 207 200
Earnings per share (“EPS”) (US cents)
Basic 19.3 37.1
Diluted basic 19.3 36.9
SALIENT FINANCIAL FEATURES
Headline earnings 40 016 73 674
Headline earnings per share (US cents)
Headline 19.4 37.0
Diluted headline 19.3 36.9
Underlying earnings 66 160 83 131
Underlying earnings per share (US cents)
Underlying 32.0 41.8
Diluted underlying 32.0 41.6
Net asset value per share (US cents) 396.7 427.8
KEY RATIOS
Gross margin (%) 13.5 14.5
EBITDA (%) 2.5 3.2
Effective tax rate (%) 45.2 36.8
Exchange rates
Average Rand/US$ exchange rate 13.7 11.0
Closing Rand/US$ exchange rate 16.2 11.7
Summarised consolidated statement of financial position
as at 29 February 2016
US$’000 Audited Audited
Year ended Year ended
February 2016 February 2015
ASSETS
Non-current assets 766 142 701 809
Property, plant and equipment 76 204 73 328
Goodwill 462 577 450 884
Capitalised development expenditure 66 411 49 573
Acquired intangible assets and software 59 798 45 854
Investments 16 092 6 342
Deferred tax assets 51 062 54 555
Finance lease receivables 7 994 12 765
Other receivables 26 004 8 508
Current assets 2 616 800 2 572 773
Inventories 434 669 442 612
Trade receivables 1 510 327 1 532 820
Current tax assets 12 154 15 626
Prepaid expenses and other receivables 242 744 215 585
Finance lease receivables 4 052 -
Cash resources 412 854 366 130
Total assets 3 382 942 3 274 582
EQUITY AND LIABILITIES
Equity attributable to equity holders of the parent 830 366 870 850
Share capital and premium 115 090 126 886
Non-distributable reserves 90 727 50 179
Foreign currency translation reserve (182 777) (105 307)
Share-based payment reserve 1 733 739
Distributable reserves 805 593 798 353
Non-controlling interests 39 054 41 599
Total equity 869 420 912 449
Non-current liabilities 112 645 103 710
Long-term liabilities 21 252 21 555
Liability for share-based payments 5 174 9 848
Amounts owing to vendors 2 762 1 842
Deferred tax liabilities 73 491 69 833
Provisions 9 215 -
Other liabilities 751 632
Current liabilities 2 400 877 2 258 423
Trade and other payables 1 778 908 1 795 783
Short-term interest-bearing liabilities 51 461 43 468
Provisions 9 307 13 979
Amounts owing to vendors 7 742 2 750
Current tax liabilities 7 920 14 212
Bank overdrafts 545 539 388 231
Total equity and liabilities 3 382 942 3 274 582
Capital expenditure incurred in the current year
(including capitalised develpoment expenditure) 63 227 51 104
Capital commitments at the end of the year 45 247 33 909
Lease commitments at the end of the year 158 621 153 258
Payable within one year 36 434 34 348
Payable after one year 122 187 118 910
Summarised consolidated statement of cash flows
for the year ended 29 February 2016
US$’000 Audited Audited
Year ended Year ended
February 2016 February 2015
Operating profit before working capital changes 185 687 215 346
Working capital changes (59 433) (29 147)
Decrease/(increase) in inventories 18 (32 038)
Increase in receivables (142 708) (324 540)
Increase in payables 83 257 327 431
Other working capital changes 2 816 -
Cash generated from operations 129 070 186 199
Net finance costs paid (21 176) (17 606)
Taxation paid (39 876) (53 193)
Net cash inflow from operating activities 68 018 115 400
Cash outflows for acquisitions (46 181) (1 979)
Net cash outflow from other investing activities (73 108) (49 498)
Net cash (outflow)/inflow from other financing activities (29 221) 13 418
Net proceeds from shares issued 18 014 82
Capital distributions and dividends paid to shareholders (22 200) (23 459)
Capital distributions and dividends paid to non-controlling interest - (26 066)
Net (decrease)/increase in cash and cash equivalents (84 678) 27 898
Cash and cash equivalents at the beginning of the year (22 101) (41 770)
Translation differences on cash and cash equivalents (25 906) (8 229)
Cash and cash equivalents at the end of the year* (132 685) (22 101)
*Comprises cash resources, net of bank overdrafts.
Summarised consolidated statement of changes in total equity
for the year ended 29 February 2016
US$’000 Audited Audited
Year ended Year ended
February 2016 February 2015
Balance at the beginning of the year 912 449 924 485
Transactions with equity holders of the parent
Comprehensive (loss)/income (37 505) 11 014
New share issues 18 014 31 076
Capital distributions - (17 226)
Dividends (22 200) (16 060)
Treasury shares purchased by the share trust (352) -
Share-based payments 1 042 1 855
Acquisitions of additional interests from non-controlling interests 517 (10 623)
Disposals of additional interests from non-controlling interests - (803)
Transactions with non-controlling interests
Comprehensive (loss)/income (2 429) 6 099
Acquisitions of additional interests from non-controlling interests (116) 9 210
Disposals of additional interests from non-controlling interests - (512)
Dividends - (26 066)
Balance at the end of the year 869 420 912 449
Determination of headline and underlying earnings
for the year ended 29 February 2016
US$’000 Audited Audited
Year ended Year ended
February 2016 February 2015
Profit attributable to the equity holders of the parent 39 949 73 772
Headline earnings adjustments 68 (88)
Intangible impairment 75 -
Loss on disposal of investment - (106)
(Profit)/loss on disposal of property, plant and equipment (9) 36
Tax effect 2 (18)
Non-controlling interests (1) (10)
Headline earnings 40 016 73 674
DETERMINATION OF UNDERLYING EARNINGS
Underlying earnings adjustments 32 314 13 009
Unrealised foreign exchange losses/(gains) 4 679 (1 012)
Acquisition-related fair value adjustments (1 768) 317
Restructuring costs 15 285 -
Amortisation of acquired intangible assets 14 118 13 704
Tax effect (5 898) (3 546)
Non-controlling interests (272) (6)
Underlying earnings 66 160 83 131
Summarised Segmental analysis
for the year ended 29 February 2016
US$’000 Audited Audited
Year ended Year ended
February 2016 February 2015
Revenue
Westcon 4 869 592 4 854 507
Logicalis 1 532 766 1 533 777
Consulting 51 423 55 242
Corporate 1 001 10
Revenue 6 454 782 6 443 536
EBITDA
Westcon 88 538 125 141
Logicalis 80 947 97 039
Consulting 1 883 3 158
Corporate (9 258) (18 945)
EBITDA 162 110 206 393
Operating profit
Westcon 62 212 100 207
Logicalis 56 355 74 165
Consulting 1 245 2 362
Corporate (9 281) (18 976)
Operating profit 110 531 157 758
Total assets
Westcon 2 311 200 2 289 764
Logicalis 958 854 920 295
Consulting 38 206 39 694
Corporate 74 682 24 829
Total assets 3 382 942 3 274 582
Total liabilities
Westcon (1 769 655) (1 690 252)
Logicalis (684 826) (641 932)
Consulting (13 880) (12 702)
Corporate (45 161) (17 247)
Total liabilities (2 513 522) (2 362 133)
Acquisitions made during the year
as at 29 February 2016
The following table sets out the assessment of the fair value of assets and liabilities acquired
across all acquisitions made by the Group during the financial year.
ACQUISITIONS MADE IN FY16 US$’000
Assets acquired
Non-current assets 1 969
Current assets 11 086
Non-current liabilities (1 114)
Current liabilities (10 596)
Net liabilities acquired 1 345
Intangible assets 29 080
Goodwill 28 530
Fair value of acquisitions 58 955
Purchase consideration
Deferred purchase consideration 9 103
Cash 49 852
Total consideration 58 955
Cash outflows for acquisitions
Cash and cash equivalents acquired (3 671)
Cash consideration paid 49 852
Net cash outflow for acquisitions 46 181
Enquiries:
Datatec Limited (www.datatec.com)
Jens Montanana - Chief Executive Officer +44 (0) 1753 797118
Jurgens Myburgh - Chief Financial Officer +27 (0) 11 233 3301
Wilna de Villiers - Investor Relations Manager +27 (0) 11 233 1013
Jefferies International Limited - Nominated Adviser and Broker
Nick Adams/Alex Collins +44 (0) 20 7029 8000
finnCap - Broker
Stuart Andrews +44 (0) 20 7220 0500
Instinctif Partners
Frederic Cornet/Pietman Roos (SA) +27 (0) 11 447 3030
Adrian Duffield/Chantal Woolcock (UK) +44 (0) 20 7457 202
Registered office:
Ground Floor, Sandown Chambers,
Sandown Village, 16 Maude Street,
Sandown
Transfer secretaries:
Computershare Investor Services (Pty) Limited
www.datatec.com
Sponsor:
Rand Merchant Bank (a division of FirstRand Bank Limited),
1 Merchant Place, Corner, Fredman Drive and Rivonia Road,
Sandton
11 May 2016
Date: 11/05/2016 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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