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DATATEC LIMITED - Audited provisional results for the year ended 28 February 2017 and renewal of cautionary announcement

Release Date: 22/05/2017 08:00
Code(s): DTC     PDF:  
Wrap Text
Audited provisional results for the year ended 28 February 2017 and renewal of cautionary announcement

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 28 February 2017 and 
renewal of cautionary announcement


Financial results

- Group revenue $6.08 billion (FY16: $6.45 billion)
- EBITDA $118.9 million (FY16: $162.1 million)
- Gross margin 13.7% (FY16: 13.5%)
- Underlying* earnings per share 11.0 US cents (FY16: 32.0 US cents)

Key features

- Strategic value of the Group’s businesses maintained despite poor performance in FY17
- Strong growth in Westcon-Comstor security segment
- Logicalis continued increase in services mix driving higher gross margin
- Final stages of Westcon-Comstor’s SAP/BPO implementation in Europe Middle East and Africa (“EMEA”)
  materially impacted the last few months of FY17

  
Commentary
Jens Montanana, Chief Executive of Datatec, commented:
"The year ended with a very challenging set of circumstances as Westcon-Comstor's SAP and BPO implementation
negatively impacted the results of the EMEA region.
 
"Logicalis' performance was satisfactory with a continuing trend towards a higher margin services business. 

"The strategic value of our businesses is affirmed by the unsolicited approach# for a major share of
Westcon-Comstor’s operations."

#Subject to a cautionary announcement last renewed on 7 April 2017 and renewed in this announcement.


GROUP ACTIVITIES
Datatec is an international ICT solutions and services group operating in more than 70 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 two main divisions:
- Technology distribution - Westcon-Comstor: distribution of security, unified communications, networking and data 
  centre products; and
- Integration and managed services - Logicalis: ICT infrastructure solutions and services.

The specialist activities of Consulting and Datatec Financial Services are included with the corporate head office
functions in the "Corporate, Consulting and Financial Services" segment of the Group.

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.

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 the Group's shared strategy. Datatec executives contribute actively to the
management of the subsidiaries. The key operational imperatives being driven throughout the Group to execute on the
strategy are improving operating margins, increasing return on invested capital, growing managed services and embracing new
and disruptive cloud technologies. 

OVERVIEW
The Group's trading was materially affected in the last quarter by the roll out of the SAP ERP system and business
process outsourcing ("BPO") across Westcon-Comstor’s operations in EMEA and Asia-Pacific which saw revenue decline 
$338 million year on year to $6.08 billion from $6.45 billion and Group EBITDA was $118.9 million (FY16: $162.1 million).  
Underlying* earnings per share ("UEPS") was 11.0 US cents compared to 32.0 US cents for the financial year ending 
29 February 2016 period ("FY16").  

As the Board's stated dividend policy is to maintain a fixed three times cover relative to underlying* earnings when
declaring dividends, no final dividend for FY17 is being declared.

Over the last five years, the Group's focus has been on modernising Westcon-Comstor's operations through the
implementation of a global SAP ERP system and BPO which continued during FY17. 

These two transformation processes are now nearing completion with the final implementation expected in the first half
of FY18. North America, EMEA and Asia-Pacific regions will then be on SAP and BPO.

RENEWAL OF CAUTIONARY ANNOUNCEMENT
Datatec released a cautionary announcement on 25 January 2017, which was renewed on 8 March 2017, advising shareholders 
that negotiations are in progress in relation to a transaction, which, if successfully concluded, may have a material 
effect on the price of Datatec's shares. This was updated on 7 April 2017 when Datatec disclosed the additional information 
that the cautionary announcement relates to a possible sale of a major share of Westcon-Comstor's operations for a 
consideration (current and deferred) of more than $800 million. 

Negotiations are continuing and the proposed transaction is subject to contract and exclusivity provisions. 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 Datatec’s securities.
 
CURRENT TRADING AND OUTLOOK
The Group has been challenged in FY17 by the implementation of BPO and SAP within Westcon-Comstor which has had an adverse
impact on profitability, working capital and cash generation. The Group is in the final phase of this process and expects an 
improved performance in the financial year ahead.

GROUP RESULTS
Revenue
Group revenues for the period were $6.08 billion, down 5.8% compared to FY16. In constant currency** terms, Group revenues 
for FY17 decreased by 4.0% to $6.2 billion with Westcon-Comstor constant currency** revenues down 5.9% and Logicalis constant 
currency** revenues up 2.1%.

Contribution to Group revenue
                                         FY17            FY16
Westcon-Comstor                           74%             75%
Logicalis                                 25%             24%
Consulting and Financial Services          1%              1%
                                         100%            100%

Revenue % contribution by geography
                                         FY17            FY16
North America                             35%             35%
Latin America                             15%             14%
Europe                                    33%             34%
Asia-Pacific                              11%              9%
Middle East and Africa (MEA)               6%              8%
                                         100%            100%

Profitability: gross profit % contribution by geography
                                         FY17            FY16
North America                             29%             28%
Latin America                             22%             21%
Europe                                    33%             33%
Asia-Pacific                              12%             11%
Middle East and Africa                     4%              7%
                                         100%            100%

Group gross margins improved to 13.7% (FY16: 13.5%). Gross profit was $833.1 million (FY16: $868.7 million). 

Overall operating costs were $714.2 million  (FY16: $706.6 million). Included in operating costs are total
restructuring costs of $16.6 million. EBITDA was $118.9 million (FY16: $162.1 million) and EBITDA margin was 
2.0% (FY16: 2.5%).
 
Contribution to Group EBITDA 

                                        FY17            FY16
Westcon-Comstor                          40%             52%
Logicalis                                58%             47%
Consulting and Financial Services         2%              1%
                                        100%            100%

Adjusted EBITDA^ (including the same adjustments as used for underlying earnings per share*, where relevant) was
$139.0 million (FY16: $182.1 million). This excludes restructuring costs of $16.6 million, unrealised foreign 
exchange losses of $1.9 million and other items of $1.0 million.
 
Depreciation and amortisation were higher at $58.4 million (FY16: $51.5 million) primarily as a result of
increased capital expenditure and investment in systems in Westcon-Comstor.
 
Operating profit was $60.5 million (FY16: $110.5 million). 

The net interest charge increased slightly to $24.2 million (FY16: $23.9 million).

Profit before tax was $41.7 million (FY16: $88.4 million).

The Group’s reported effective tax rate for FY17 is 74.2% (FY16: 45.2%). 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
effective tax rate in FY17 is abnormally high, reflecting the pattern of taxable profits earned in North America and Latin
America but losses arising in Westcon-Comstor’s Middle East and Africa and Asia-Pacific regions with a lower rate of tax
benefit or no tax benefit at all. As in FY16, limited deferred tax assets have been recognised in respect of losses which
have arisen in Africa and Asia-Pacific.

UEPS* were 11.0 US cents (FY16: 32.0 US cents). Headline earnings per share ("HEPS") were 2.0 US cents (FY16: 19.4 US cents). 

Cash
The Group utilised $37.3 million of cash from operations during FY17 (FY16 cash generated: $129.1 million) and
ended the period with net debt of $396.5 million (FY16: $205.4 million). The increase in net debt is due to reduced
cash earnings and funding of increased working capital and capital expenditure.
 
Acquisitions
The Group made one acquisition during FY17. Effective 1 June 2016, Logicalis acquired 100% of the share capital of
Lantares Europe, S.L. ("Lantares"), a leader in the implementation of strategic solutions for corporate performance
management and information management, in Madrid, Spain. Details of the acquisition are shown in the table below.

Shareholder distributions and dividend policy
The Group paid $28.9 million (paid during FY16: $33.2 million) to shareholders during the year: a final scrip
distribution with cash dividend alternative in respect of FY16 in July 2016; and an interim scrip distribution with cash
dividend alternative in respect of FY17 in November 2016. 

The total value returned to shareholders in the FY16 final distribution was $19.9 million of which $5.2 million
(26.4%) was distributed to shareholders in the form of scrip (1.7 million new shares issued) and $14.7 million (73.6%)
was settled in cash to those shareholders who had elected the cash dividend alternative.

The total value returned to shareholders in the FY17 interim distribution was $9.0 million of which $2.8 million
(30.1%) was distributed to shareholders in the form of scrip (0.8 million new shares issued) and $6.2 million (69.9%)
was settled in cash to those shareholders who had elected the cash dividend alternative. 

The Board has stated that it intends to maintain a fixed three times cover relative to underlying* earnings when
declaring dividends. In accordance with this policy no final dividend for FY17 is declared.

Foreign exchange translation
Gains of $56.9 million (FY16: losses $87.4 million) arising on translation to presentation currency are included
in total comprehensive income of $58.3 million (FY16: loss $39.9 million).


DIVISIONAL REVIEWS
Westcon-Comstor
Westcon-Comstor accounted for 74% of the Group’s revenues (FY16: 75%) and 40% of its EBITDA (FY16: 52%).

Westcon-Comstor is a value-added distributor of category-leading security, unified communications, network
infrastructure and data centre solutions with a global network of specialty resellers. Westcon-Comstor is represented 
across six continents, distributes to 180 plus countries and territories, operates more than 20 logistics/staging 
facilities and transacts with more than 20 000 customers globally. It creates unique programmes and provides support 
to grow the business of its global partners. Westcon-Comstor’s portfolio of market-leading vendors includes: Cisco, 
Avaya, Polycom, Juniper, Check Point, F5, Palo Alto and Symantec.
 
Westcon-Comstor’s revenues declined by 6.9% to $4.5 billion (FY16: $4.9 billion) with lower revenues across all
regions except Latin America and Asia-Pacific. Constant currency** sales were 5.9% lower. Revenue contribution by 
geography is shown below:

Westcon-Comstor revenue % contribution by geography

                                 FY17            FY16
North America                     37%             37%
Latin America                     11%             10%
Europe                            33%             33%
Asia-Pacific                      11%             10%
Middle East and Africa             8%             10%
Total Revenue                    100%            100%

Westcon-Comstor revenue by technology category reflected continuing growth in the security sector:
                                  FY17            FY16
Security                           39%             34%
Unified Communications             21%             26%
Networking                         25%             23%
Data centre and other              15%             17%
                                  100%            100%

Westcon-Comstor’s gross margins were 10.1% (FY16: 10.2%) due to unfavourable geographic mix with lower margins in
Latin America and MEA. Gross profit was $456.0 million (FY16: $497.1 million) as a result of lower revenues. 

Westcon-Comstor gross profit % contribution by geography

                                   FY17            FY16
North America                       27%             26%
Latin America                       18%             17%
Europe                              36%             35%
Asia-Pacific                        12%             11%
Middle East and Africa               7%             11%
Total gross profit                 100%            100%

Operating expenses were reduced to $402.5 million (FY16: $408.6 million). The 1% decrease is due to lower foreign
exchange losses in Africa and a reduction in bad debt expense offset by increased headcount costs. Operating expenses as
a proportion of revenue increased to 8.9% (FY16: 8.4%).
 
Restructuring expenses of $14.1 million (FY16: $14.9 million) were incurred, mainly in North America, Europe and
Asia-Pacific, primarily relating to the BPO transformation.

EBITDA was $53.5 million (FY16: $88.5 million). EBITDA margins were 1.2% (FY16: 1.8%). 

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

                                         FY17       FY16    
                                        $’m      $’m    
Adjusted EBITDA^                           72        109    
Restructuring costs                       (14)       (15)   
Unrealised foreign exchange losses         (3)        (5)   
Other                                      (1)         -    
EBITDA                                     54         89    
^ Adjusted EBITDA includes the same adjustments as used for underlying earnings per share*, where relevant.

There was a notable decline in the financial performance in the EMEA region. Transformation challenges in EMEA led to
a drop in revenues of $262.7 million (12%) in FY17, which constituted 77.9% of the overall year over year revenue
decline for Westcon-Comstor.
 
The drop in revenue resulted in a reduction in gross profit of $31.4 million in EMEA, representing 76.4% 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 BPO implementation 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 revenues were down $111.1 million or 6.7% 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 $24.0 million (4.6%) to $517.8 million, and adjusted EBITDA
increasing by 7.8% to $26.3 million.

In the Asia-Pacific region revenues were up 2.6% 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.

Depreciation and amortisation were $33.2 million (FY16: $26.3 million) resulting in operating profit of $20.3
million (FY16: $62.2 million).

Net working capital days increased to 39 days (FY16: 34 days) due to a combination of extended collection days and lower
inventory turns. The combination of lower cash earning, higher net working capital requirements, $40.0 million of
capital expenditures and the further purchase of $9.2 million Angola government bonds resulted in an increase
of $132.4 million in net debt to $403.4 million.

Of the $27.9 million incurred in capitalised development expenditure during FY17, the majority is attributable to
the SAP ERP system transition, cloud development and digital transformation.

Westcon-Comstor has invested $19.2 million (FY16: $10.0 million) of its cash which is trapped in Angola in US
Dollar-indexed Angolan government bonds, to mitigate the risk of foreign exchange fluctuations. The coupon rate on 
all the bonds is 7.0% and the US Dollar equivalent will be settled in Kwanza. Westcon-Comstor intends to roll the 
bonds into new issues of the same type when they mature until such time as the economic situation in Angola improves. 

The coupon rate on all the bonds is 7.0% and the US Dollar equivalent will be settled in Kwanza and Westcon-Comstor 
intends to roll the bonds into new issues of the same type when they mature until such time as the economic situation 
in Angola improves.

Westcon-Comstor is well positioned to benefit from its global reach, continued growth in security and mobile networks,
investments in its cloud practice as well as improving conditions in emerging markets.

Logicalis 
Logicalis accounted for 25% of the Group’s revenues (FY16: 24%) and 58% of its EBITDA (FY16: 47%). 

Logicalis is an international IT solutions and managed services provider with expertise in IT infrastructure and
networking solutions, communications and collaboration, data centre, cloud solutions and managed services.

Revenues were $1.5 billion (FY16: $1.5 billion), including $2.2 million of revenue from acquisitions made during
the period. Services revenues were up 9.3% with strong growth in both professional services and annuity revenue. Revenue 
contribution by geography is shown below:

Logicalis revenue % contribution by geography 

                        FY17            FY16
North America            30%             30%
Latin America            28%             27%
Europe                   31%             34%
Asia-Pacific             11%              9%
                        100%            100%

Revenue decreases in Europe and North America were offset by increases in Latin America and Asia-Pacific.
 
In Europe, the UK results were impacted by the continuing restructuring of the UK operation. Latin America was
adversely impacted by weak trading conditions in Brazil in the first half and the strong performance of the US 
Dollar which was mitigated by increased performance in Argentina following relaxation of exchange controls and 
the subsequent buoyant trading environment.

Revenues from product were down 6.2%, with decreases in Cisco, HPE and IBM, offset by strong growth in other vendor
categories including Oracle, NetApp, VMware and ServiceNow.

Logicalis’ gross margins were 24.1% (FY16: 23.1%), benefiting from the improved services mix. 

Gross profit was up 2.8% to $363.3 million (FY16: $353.4 million).

Logicalis gross profit % contribution by geography is shown below: 

                        FY17            FY16
North America            33%             31%
Latin America            28%             28%
Europe                   27%             31%
Asia-Pacific             12%             10%
                        100%            100%

Operating expenses in Logicalis increased by 4.3%, due in part to incremental integration costs of acquisitions
incurred during the period.
 
EBITDA was $79.0 million (FY16: $80.9 million), with a corresponding EBITDA margin of 5.2% (FY16: 5.3%). EBITDA
before restructuring charges was $81.2 million. Operating profit was $54.4 million (FY16: $56.3 million).

Logicalis remained in a net cash position of $18.1 million (FY16: 77.6 million). The reduction in net cash was 
caused primarily by significant prepaid expenses in Latin America.  

Logicalis continues to have a contingent liability in respect of a possible tax liability at its PromonLogicalis
subsidiary in Brazil.

The transition to cloud-based infrastructure solutions remains a dominant feature of the ICT market and Logicalis
continues to adapt its go-to-market model and develop its services to address this change. 

The global market for IT products and services remains stable and Logicalis is seeking to build on its position in
higher growth segments such as analytics and security. 

Corporate, Consulting and Financial Services
This segment accounted for 1% of Group revenues (FY16: 1%).

The Consulting unit comprised: Analysys Mason, a provider of strategic, trusted advisory, modelling and market
intelligence services to the telecoms, media and technology industries; and Mason Advisory, an independent and impartial 
IT consultancy providing related strategic, technical and operational advice to the public and private sectors.

Consulting revenues were $39.1 million (FY16: $51.4 million) with growth in EBITDA to $2.3 million 
(FY16: $1.9 million).
 
Effective 1 March 2016, the Via Group was transferred to Logicalis and, effective 1 September 2016, Datatec’s
shareholding in Mason Advisory decreased to 44.7%, from which date Mason Advisory is classified as an associate and 
accordingly equity accounted.

Datatec Financial Services is continuing its development of financing/leasing solutions for ICT customers through
proof of concept to business model and growth prospects. The business recorded revenues of $1.9 million in FY17 
(FY16: $1.0 million) and an EBITDA loss of $1.4 million (FY16: loss $1.1 million).

Corporate includes the net operating costs of the Datatec head office entities which were $11.2 million (FY16:
$12.3 million). These costs include the remuneration of the Board and head office staff, consulting and audit fees. 
In addition, foreign exchange losses of $3.3 million (FY16: $4.1 million gains) are included in this segment.

SUBSEQUENT EVENTS 
There are no material events arising after the Period to report.

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 FY16,
except for the adoption of the revised amendments to accounting standards below in FY17. The adoption of these 
amendments did not have a material impact on the Group annual financial statements.

- Amendments to IAS 1 Presentation of Financial Statements resulting from the Disclosure initiative (effective for
  accounting periods beginning on or after 1 January 2016)
- Amendments to IAS 16 Property, Plant and Equipment (effective for accounting periods beginning on or after 
  1 January 2016)
- Amendments to IAS 27 Equity Method in Separate Financial Statements (effective for periods beginning on or after 
  1 January 2016)
- Amendments to IAS 38 Intangible Assets (effective for accounting periods beginning on or after 1 January 2016)
- Amendments to IFRS 11 Joint Arrangements (effective for accounting periods beginning on or after 1 January 2016)
- Amendments resulting from Annual Improvements 2012 - 2014 Cycle (effective for accounting periods beginning on or
  after 1 January 2016)
  
Following an unsolicited approach, Datatec is considering a proposal for a possible disposal of a major share of
Westcon-Comstor’s operations for a consideration (current and deferred) of more than $800 million. Negotiations are
continuing and any transaction is subject to regulatory and commercial approvals, including those of the Board and
shareholders. There is no certainty that any transaction will be completed, nor is there clarity on the precise terms 
that may be agreed. In preparing the provisional summarised consolidated financial statements, the Group took particular 
care to assess whether the provisions of IFRS 5 should be applied to disclose all or part of Westcon-Comstor as a disposal 
group. The criteria set out in IFRS 5 for applying this disclosure were scrutinised and discussed with the auditors and 
the Board concluded that it was not appropriate to present Westcon-Comstor as a disposal group at the reporting date.

The directors take full responsibility for the preparation of these provisional summarised consolidated financial statements 
and that they have been correctly extracted from the underlying audited consolidated financial statements. The preparation 
of these summarised financial statements for FY17 was supervised by the Chief Financial Officer, Mr Ivan Dittrich, CA(SA).

The provisional summarised consolidated financial statements are not themselves audited however the consolidated financial 
statements from which the provisional 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 and the ISA 810 opinion on the summarised 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 and 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
Chairman   
         
JP Montanana
Chief Executive Officer
 
IP Dittrich
Chief Financial Officer

22 May 2017

DIRECTORS 
SJ Davidson°• (Chairman), JP Montanana• (CEO), IP Dittrich (CFO), O Ighodaro°‡, JF McCartney°†, MJN Njeke°, 
CS Seabrooke°, NJ Temple°• 

°Non-executive •British †American ‡Nigerian

*  Excluding 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 on all of the aforementioned.
** The pro forma constant currency information, which is the responsibility of the directors of Datatec, 
   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, Deloitte & Touche have issued an unmodified reasonable 
   assurance report (ISAE 3420: Reasonable Assurance Engagements to Report on the Compilation of Pro Forma Financial 
   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 material currencies 
   listed below using the average exchange rates against the US Dollar shown:
   
   Average US Dollar exchange rates                FY17           FY16
   British Pound                                   1.32           1.51
   Euro                                            1.10           1.10
   Brazilian Real                                  0.30           0.28
   Australian Dollar                               0.75           0.74
   Canadian Dollar                                 0.76           0.76
   Singapore Dollar                                0.72           0.72
   Mexican Peso                                    0.05           0.05
   South African Rand                             14.17          13.68

   
Summarised consolidated statement of comprehensive income
for the year ended 28 February 2017

$'000                                                                         Audited            Audited  
                                                                             Year ended         Year ended  
                                                                          February 2017      February 2016  
Revenue                                                                       6 083 383          6 454 782  
Continued operations                                                          6 081 167          6 401 171  
Revenue from acquisitions                                                         2 216             53 611  
Cost of sales                                                                (5 250 251)        (5 586 043) 
Gross profit                                                                    833 132            868 739  
Operating costs                                                                (696 842)          (691 673) 
Restructuring costs                                                             (16 559)           (15 285) 
Share-based payments                                                               (861)               329  
Operating profit before interest, tax, 
depreciation and amortisation ("EBITDA")                                        118 870            162 110  
Depreciation                                                                    (31 430)           (28 589) 
Amortisation of capitalised development expenditure                             (13 812)            (7 660) 
Amortisation of acquired intangible assets and software                         (13 087)           (15 255) 
Intangible asset impairment                                                           -                (75) 
Operating profit                                                                 60 541            110 531  
Interest income                                                                   3 994              3 670  
Finance costs                                                                   (28 197)           (27 549) 
Share of equity-accounted investment losses                                        (793)              (252) 
Acquisition-related fair value adjustments                                        5 565              1 768  
Fair value adjustments on put option liabilities                                    658                 22  
Fair value adjustments on deferred and/or contingent 
purchase consideration                                                            4 907              1 746  
Other income                                                                        230                266  
Profit on disposal of associate/loss of control of subsidiary                       319                  -  
Profit before taxation                                                           41 659             88 434  
Taxation                                                                        (30 910)           (39 956) 
Profit for the year                                                              10 749             48 478  
Other comprehensive income/(loss)                                                                           
Items that may be reclassified subsequently to profit or loss                                               
Exchange differences arising on translation to presentation currency             56 947            (87 401) 
Translation of equity loans net of tax effect                                    (9 994)            (1 075) 
Transfers and other items                                                           622                 64  
Total comprehensive income/(loss) for the year                                   58 324            (39 934) 
Profit attributable to:                                                                                     
Owners of the parent                                                              3 038             39 949  
Non-controlling interests                                                         7 711              8 529  
                                                                                 10 749             48 478  
Total comprehensive income/(loss) attributable to:                                                          
Owners of the parent                                                             44 732            (37 505) 
Non-controlling interests                                                        13 592             (2 429) 
                                                                                 58 324            (39 934) 

$'000                                                                         Audited            Audited  
                                                                             Year ended         Year ended  
                                                                          February 2017      February 2016  
Number of shares issued (millions)                                                                          
Issued                                                                              212                209  
Weighted average                                                                    211                206  
Diluted weighted average                                                            212                207  
Earnings per share ("EPS") (US cents)                                                                       
Basic                                                                               1.4               19.3  
Diluted basic                                                                       1.4               19.3  
SALIENT FINANCIAL FEATURES                                                                                  
Headline earnings                                                                 4 293             40 016  
Headline earnings per share (US cents)                                                                      
Headline                                                                            2.0               19.4  
Diluted headline                                                                    2.0               19.3  
Underlying earnings                                                              23 142             66 160  
Underlying earnings per share (US cents)                                                                    
Underlying                                                                         11.0               32.0  
Diluted underlying                                                                 10.9               32.0  
Net asset value per share (US cents)                                              403.5              396.7  
KEY RATIOS                                                                                                  
Gross margin (%)                                                                   13.7               13.5  
EBITDA (%)                                                                          2.0                2.5  
Effective tax rate (%)                                                             74.2               45.2  
Exchange rates                                                                                              
Average Rand/$ exchange rate                                                     14.2               13.7  
Closing Rand/$ exchange rate                                                     13.0               16.2  


Summarised consolidated statement of financial position
as at 28 February 2017

$'000                                                                         Audited            Audited  
                                                                             Year ended         Year ended  
                                                                          February 2017      February 2016  
ASSETS                                                                                                      
Non-current assets                                                              786 361            766 142  
Property, plant and equipment                                                    73 742             76 204  
Goodwill                                                                        461 651            462 577  
Capitalised development expenditure                                              80 843             66 411  
Acquired intangible assets and software                                          48 620             59 798  
Investments                                                                      24 887             16 092  
Deferred tax assets                                                              67 644             51 062  
Finance lease receivables                                                         8 885              7 994  
Other receivables                                                                20 089             26 004  
Current assets                                                                2 698 539          2 616 800  
Inventories                                                                     438 503            434 669  
Trade receivables                                                             1 548 003          1 510 327  
Current tax assets                                                               17 849             12 154  
Prepaid expenses and other receivables                                          340 696            242 744  
Finance lease receivables                                                         7 854              4 052  
Cash resources                                                                  345 634            412 854
Total assets                                                                  3 484 900          3 382 942  
EQUITY AND LIABILITIES                                                                                      
Equity attributable to equity holders of the parent                             854 986            830 366  
Share capital and premium                                                       151 947            115 090  
Non-distributable reserves                                                       63 299             90 727  
Foreign currency translation reserve                                           (141 816)          (182 777) 
Share-based payment reserve                                                       2 681              1 733  
Distributable reserves                                                          778 875            805 593  
Non-controlling interests                                                        51 889             39 054  
Total equity                                                                    906 875            869 420  
Non-current liabilities                                                         127 056            112 645  
Long-term liabilities                                                            31 902             21 252  
Liability for share-based payments                                                2 080              5 174  
Amounts owing to vendors                                                            580              2 762  
Deferred tax liabilities                                                         78 959             73 491  
Provisions                                                                        8 376              9 215  
Other liabilities                                                                 5 159                751  
Current liabilities                                                           2 450 969          2 400 877  
Trade and other payables                                                      1 720 391          1 778 908  
Short-term interest-bearing liabilities                                          64 787             51 461  
Provisions                                                                        8 634              9 307  
Amounts owing to vendors                                                            512              7 742  
Current tax liabilities                                                          11 159              7 920  
Bank overdrafts                                                                 645 486            545 539
Total equity and liabilities                                                  3 484 900          3 382 942  


Summarised consolidated statement of cash flows
for the year ended 28 February 2017

$'000                                                                         Audited            Audited   
                                                                             Year ended         Year ended   
                                                                          February 2017      February 2016   
Operating profit before working capital changes                                 134 535            185 687   
Working capital changes                                                        (184 576)           (59 433)   
(Increase)/decrease in inventories                                              (11 995)                18    
Increase in receivables                                                         (83 753)          (142 708)   
(Decrease)/increase in payables                                                 (88 828)            83 257    
Other working capital changes                                                    12 720              2 816    
Cash (utilised in)/generated from operations                                    (37 321)           129 070    
Net finance costs paid                                                          (25 264)           (21 176)   
Taxation paid                                                                   (43 299)           (39 876)   
Net cash (outflow)/inflow from operating activities                            (105 884)            68 018    
Cash outflow for acquisitions                                                    (1 854)           (46 181)   
Net cash outflow from other investing activities                                (67 819)           (73 108)   
Net cash inflow/(outflow) from other financing activities                        17 422            (29 221)   
Net proceeds from shares issued                                                       -             18 014    
Dividends paid to shareholders                                                  (20 949)           (22 200)   
Net decrease in cash and cash equivalents                                      (179 084)           (84 678)   
Cash and cash equivalents at the beginning of the year                         (132 685)           (22 101)   
Translation differences on cash and cash equivalents                             11 917            (25 906)   
Cash and cash equivalents at the end of the year*                              (299 852)          (132 685)   
*Comprises cash resources, net of bank overdrafts.


Summarised consolidated statement of changes in total equity
for the year ended 28 February 2017

$'000                                                                         Audited            Audited 
                                                                             Year ended         Year ended 
                                                                          February 2017      February 2016 
Balance at the beginning of the year                                            869 420            912 449 
Transactions with equity holders of the parent                                                    
Comprehensive income/(loss)                                                      44 732            (37 505)
New share issues                                                                      -             18 014 
Dividends                                                                       (20 949)           (22 200)
Treasury shares purchased by the share trust                                          -               (352)
Share-based payments                                                                837              1 042 
Acquisitions of additional interests from non-controlling interests                   -                517 
Transactions with non-controlling interests                                                       
Comprehensive income/(loss)                                                      13 592             (2 429)
Acquisitions of additional interests from non-controlling interests                   -               (116)
Disposals of additional interests from non-controlling interests                   (757)                 - 
Balance at the end of the year                                                  906 875            869 420 


Determination of headline and underlying earnings
for the year ended 28 February 2017

$'000                                                                         Audited            Audited 
                                                                             Year ended         Year ended 
                                                                          February 2017      February 2016 
Profit attributable to the equity holders of the parent                           3 038             39 949 
Headline earnings adjustments                                                     1 262                 68 
Intangible asset impairment                                                           -                 75 
Property impairment                                                               1 600                  - 
Profit on disposal of associate/loss of control of subsidiary                      (319)                 - 
Profit on disposal of property, plant and equipment                                 (36)                (9)
Tax effect                                                                           17                  2 
Non-controlling interests                                                            (7)                (1)
Headline earnings                                                                 4 293             40 016 
DETERMINATION OF UNDERLYING EARNINGS                                                         
Underlying earnings adjustments                                                  24 677             32 314 
Unrealised foreign exchange losses                                                1 854              4 679 
Acquisition-related fair value adjustments                                       (5 565)            (1 768)
Restructuring costs                                                              16 559             15 285 
Amortisation of acquired intangible assets                                       11 829             14 118 
Tax effect                                                                       (5 488)            (5 898)
Non-controlling interests                                                          (340)              (272)
Underlying earnings                                                              23 142             66 160 


Summarised segmental analysis
for the year ended 28 February 2017
                                                                                                           Corporate, Consulting
                                                       Westcon-Comstor              Logicalis             and Financial Services             Total
$'000                                               2017         2016          2017         2016          2017       2016             2017          2016    
Revenue                                          4 532 083    4 869 592     1 510 299    1 532 766        41 001     52 424        6 083 383     6 454 782    
EBITDA                                              53 503       88 538        79 009       80 947       (13 642)    (7 375)         118 870       162 110    
Reconciliation of operating profit/(loss) to 
profit/(loss) after taxation                                                                                             
Operating profit/(loss)                             20 323       62 212        54 422       56 355       (14 204)    (8 036)          60 541       110 531    
Interest income                                      2 395        1 243         1 273        1 708           326        719            3 994         3 670    
Finance costs                                      (21 042)     (19 882)       (7 112)      (7 132)          (43)      (535)         (28 197)      (27 549)   
Share of equity-accounted investment earnings         (933)        (252)            -            -           140          -             (793)         (252)   
Fair value movements on put option liabilities         658           22             -            -             -          -              658            22    
Fair value adjustments on deferred purchase 
consideration                                            -        1 750         4 907           (4)            -          -            4 907         1 746    
Other income                                             -           13             -            -           230        253              230           266    
Profit on disposal of associate/loss of control of
subsidiary                                               -            -             -            -           319          -              319             -    
Profit/(loss) before taxation                        1 401       45 106        53 490       50 927       (13 232)    (7 599)          41 659        88 434    
Taxation                                           (11 883)     (23 048)      (16 808)     (13 743)       (2 219)    (3 165)         (30 910)      (39 956)   
Profit/(loss) after taxation                       (10 482)      22 058        36 682       37 184       (15 451)   (10 764)          10 749        48 478    
Total assets                                     2 405 604    2 311 200       986 291      958 854        93 005    112 888        3 484 900     3 382 942    
Total liabilities                               (1 861 416)  (1 769 655)     (685 867)    (684 826)      (30 742)   (59 041)      (2 578 025)   (2 513 522)   
Sales and purchases between Group companies are concluded at arm’s length in the ordinary course of business. The inter-group 
sales of goods and provision of services for the year ended 28 February 2017 amounted to $97.5 million (FY16: $105.7 million).


Capital expenditure and commitments
as at 28 February 2017

$'000                                                                         Audited            Audited 
                                                                             Year ended         Year ended 
                                                                          February 2017      February 2016 
Capital expenditure incurred in the current year (including             
capitalised development expenditure)                                             61 453             63 227 
Capital commitments at the end of the year                                       36 155             45 247 
Lease commitments at the end of the year                                        133 202            158 621 
Payable within one year                                                          33 894             36 434 
Payable after one year                                                           99 308            122 187 


Acquisitions made during the year
as at 28 February 2017

ACQUISITIONS MADE IN FY17                   $'000  
Assets acquired                                      
Non-current assets                               45  
Current assets                                1 466    
Current liabilities                          (1 246) 
Net assets acquired                             265
Intangible assets                               110  
Goodwill                                      1 194  
Fair value of acquisition                     1 569  
Purchase consideration                               
Cash                                          1 569  
Total consideration                           1 569  
Cash outflow for acquisitions                        
Net overdraft acquired                          285  
Cash consideration paid                       1 569  
Net cash outflow for acquisition              1 854  


Enquiries

Datatec Limited (www.datatec.com)
Jens Montanana - Chief Executive Officer            +44 (0) 1753 797 118    
Ivan Dittrich - 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/ Simon Hardy                             +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 2020



Registered office: 
Ground Floor, Sandown Chambers, Sandown Village, 16 Maude Street, Sandown

Sponsor: Rand Merchant Bank (a division of FirstRand Bank Limited), 
1 Merchant Place, Corner Fredman Drive and Rivonia Road, Sandton

Transfer secretaries: Computershare Investor Services (Pty) Limited

www.datatec.com

22 May 2017
Date: 22/05/2017 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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